Business AS level unit 4 -Operations management

Research and develop new products

Advantages New products will replace existing products and make the business more competitive. • If introduced quickly enough, new products might prevent rationalisation and associated problems. Disadvantages • This may be expensive. • It may take too long to prevent cutbacks in capacity and rationalisation. • Without long-term planning, new products are introduced too quickly, without a clear market strategy, and may be unsuccessful.

• IT equipment is needed for JIT

Accurate data-based records of sales, sales trends, re-order levels and lead times will allow very low or zero inventories to be held. Communication with suppliers should use the latest electronic data exchanges. Automatic and immediate ordering can take place when it is recorded that more components will shortly be required.

• Freeing up internal resources for use in other areas

For example, if the HR department of an insurance company is closed and HR functions are bought in, then the office space and computer facilities previously used by HR could be made available to improve customer service.

supply chain management

handling the entire production flow of a product (from raw materials to finished product) to minimise costs but improve customer service

capital intensive

involving a high quantity of capital equipment compared with labour input

• Production employees must be multi-skilled and flexible:

It is wasteful for a worker to produce the same item all the time if this leads to inventories building up. Workers must be able to switch to making different items at very short notice so that no excess supplies of any one product are made. For example, if a worker in a clothing factory usually makes men's denim jeans, but demand is falling, then the worker should be able to switch to making other garments that are still in demand.

What options does a business have if the demand for its products exceeds current output capacity?

The business has a capacity shortage, which is the opposite situation to excess capacity. To consider the management options it is essential to analyse the cause of the excess demand and the time period it is likely to last. For instance, if excess demand results from a reduction in output caused by a faulty machine that will be repaired next month, then action to raise capacity is unnecessary. If, however, the firm has been producing at near 100% capacity for some time and there seems to be no sign of demand falling, then long-term options need to be considered.

Capacity utilisation

The proportion of maximum output capacity currently being achieved.

capacity shortage

When the demand for a business's products exceeds production capacity.

Maximum (full) capacity

the highest level of sustained output that can be achieved

reorder level

the level of inventory that triggers new order to be sent to suppliers

supply chain

the network of all the businesses and activities involved in creating a product for sale, starting with the delivery of raw materials and finishing with the delivery of the finished product

• Storage costs:

Inventories have to be held in secure warehouses. They often require special conditions, such as refrigeration. Employees will be needed to guard and transport the goods. Insurance of inventories is recommended in case they are stolen or damaged by fire or flood. If finance has to be borrowed to buy the goods held in storage, then this will incur interest charges.

Capacity utilisation is calculated by the formula

(Current output level / Max. output level ) x 100

Optimum order size

-Purchasing the right level of inventories is not easy. The purchasing manager must ensure that supplies of the right quality are delivered at the right time and in sufficient quantities to allow continuous production.

The following factors influence which production method is used:

-Size of market -The capital available -other resources -Customers demand products adapted to specific requirements

methods for reducing long-term capacity shortages

-Use subcontractors or outsourcing of supplies, components or even finished goods -Invest capital in the expansion of production facilities

Why are businesses making operations more sustainable?

-comply with stricter laws on environmental issues -Pressure group activity -corporate responsibility -positive publicity good for public relations -more sales are likely

benefits of increasing sustainability

-reducing energy can reduce energy costs -reducing plastic and non biodegradable materials can attract more green consumers -making recyclable products reduces the cost of waste disposal

Invest capital in the expansion of production facilities

Advantages • It increases capacity for the long term. • The business is in control of quality and final delivery times. • The new facilities should be able to use the latest equipment and methods. • Other economies of scale should be possible too. Disadvantages • The capital cost may be high. • There may be problems with raising capital. • It increases total capacity, but problems could occur if demand should fall for a long period. • It takes time to build and equip a new facility and customers may not wait.

Operations

Operations or operations management is concerned with the use of resources called inputs (factors of production) - land, labour and capital - to provide outputs in the form of goods and services.

Just-in-time (JIT) inventory management

aims to avoid holding inventories by requiring supplies to arrive just as they are needed in production and completed products are produced to order

Just in case (JIC) inventory management

aims to reduce the risk of running out of inventory to the minimum by holding high buffer inventory levels

transformational process

an activity or group of activities that transforms one or more inputs, adds value to them, and produces outputs for customers

sustainability of operations

business operations that can be maintained in the long term, for example, by protecting the environment and not damaging the quality of life for future generations

4 factors of production

land, labor, capital, enterprise

inventory

materials and goods held by a business and required to allow for the production of products and their supply to the customer

Effectiveness

meeting the objectives of the business by using inputs productively to meet customers' needs

• Buffer inventory

minimum inventory level that should be held to ensure that continous production is possible should delivery delays occur or output increase

Efficiency

producing output at the highest ratio of output to input

rationalisation

reducing capacity by closing factories/production units

Mass customisation requires:

• advanced and flexible capital equipment • skilled and well-trained workers to operate this machinery • product designs that have many standardised parts but some interchangeable ones • suppliers able to supply variations on parts and components.

The advantages of capital-intensive production are:

• economies of scale • consistent quality • low unit costs of production • the ability to supply the mass market

Operations managers can increase added value by effectively managing:

• efficiency of production: keeping costs as low as possible will help to give competitive advantage • quality: the goods or services must be suitable for the purpose intended • flexibility and innovation: the need to develop and adapt to new processes and new products is increasingly important in today's dynamic business environment.

However, the limitations of labour intensive production include:

• low output levels • skilled, high-paid workers required • product quality depends greatly on the skill and experience of each worker

limitations of inc sustainability

-might require capital investment (eg- solar panels) -More environmentally friendly materials could cost more and not protect and preserve goods as effectively as plastic -recycled materials may need to be cleaned or processed before use -development of recyclable products can be expensive and time consuming

Operating at over maximum capacity

. It might be possible, during emergency situations, to achieve higher output levels for very short time periods. This could be done by using machines beyond their safe working limits and by asking labour to work longer than the contractually permitted hours. Obviously, this situation is not sustainable or recommended. It could result both in machines breaking down, and in workers being too stressed to sustain high levels of output in future.

• Work in progress

: At any one time, the production process will be converting raw materials and components into finished goods. During this process there will be work in progress and for some businesses, such as building and construction businesses, this will be the main form of inventories held. The value of work in progress depends on the length of time needed to complete production and on the method of production. Batch production tends to have high work-in-progress levels.

• Increased flexibility

: By removing departments altogether and buying in services when needed, the fixed costs of office and factory space and salaried employees are converted into variable costs. Additional capacity can be obtained from outsourcing just when needed. It demand falls, contracts can be cancelled much more quickly than the rationalisation of existing production units owned by the business.

• Large orders of new supplies reduce costs:

: To keep inventory levels low, goods and supplies may be ordered in small quantities. The larger the size of each delivery, the higher will be the average level of inventories held. By ordering in large quantities and keeping inventory levels high, a business may gain from bulk discounts while transport costs could be lower since fewer deliveries have to be made

• Excellent employee-employer relationships:

Any industrial relations problem could lead to a break in supplies and the entire production system could grind to a halt. It is no coincidence that many of the businesses that have adopted JIT in Japan and in Europe have a no-strike deal with the major trade unions.

Use subcontractors or outsourcing of supplies, components or even finished goods

Advantages • No major capital investment is required. • It should be quite quick to arrange. • It offers much greater flexibility than expansion of facilities - if demand falls back, then contracts with other firms can be ended. Disadvantages • It gives less control over the quality of output. • It may add to administration and transport costs. • There may be uncertainty over delivery times and reliability of delivery. • Unit cost may be higher than inhouse production due to the supplier's profit margin.

Rationalisation - closing factories or other production units

Advantages: • This reduces overheads. • It results in higher capacity utilisation from the remaining production units. Disadvantages • Redundancy payments might have to be paid. • Workers may worry about job security. • Industrial action may be a risk. • Capacity may be needed later if the economy picks up or if the business develops new products. • The business may be criticised for not fulfilling its social responsibilities.

Quality must be everyone's priority:

As there are no spare inventories to fall back on, it is essential that each component and product must be right first time. Any poor-quality goods that cannot be used will mean that a customer will not receive goods on time.

• Improved company focus:

By outsourcing peripheral activities, the management can concentrate on the main objectives and tasks of the business. These are called the core parts of the business. So, a small hotel might use management time to improve customer service and outsource the accounting function completely.

• Finished goods

Having been through the complete production process, goods may then be held in storage until sold and dispatched to the customer. These inventories can be displayed to potential customers and increase the chances of sales. They are also held to cope with sudden unpredicted increases in demand, so that customers can be satisfied without delay. Firms will also stockpile completed goods to meet anticipated increases in demand, for example seasonal goods or products such as toys or fireworks at festival times.

JIC inventory management disadvantages

High capital cost of finance invested in inventories. • High storage, insurance and other costs are associated with inventory holdings. • Inventories could lose value if fashion or technology changes while they are being held.

• Reduces risk of lost sales:

If a business cannot supply customers from goods held in storage, then sales could be lost to businesses with higher inventory levels. This is a form of poor customer service. Holding high inventories not only gives customers more choice but reduces the risk of losing sales because no products are available.

• Avoids the need for special orders from suppliers:

If a business runs out of inventory, an urgent order may have to be given to a supplier to deliver additional materials. This incurs extra costs because of the administration of the order and possibly also special delivery charges

• Risk of wastage and obsolescence:

If inventories are not used or sold as rapidly as expected, then there is a danger of goods deteriorating or becoming outdated. This will lower the value of such inventories. Goods often become damaged while held in storage or when moved. They can then only be sold for a much lower price.

• Allows for continuous production:

If inventories of raw materials and components run out, then production will have to stop. This will leave expensive equipment idle and labour with nothing to do. The costs of lost output and wasted resources could be considerable and can be avoided by holding inventories.

• Accurate demand forecasts:

If it is difficult for a firm to predict likely future sales levels, then keeping zero inventories of materials, parts and finished goods could be a risky strategy. Demand forecasts can be converted into production schedules that allow calculation of the number of components of each type needed over a certain time period.

• Reduction and control of operating costs

Instead of employing expensive specialists who might not be required at all times, it could be cheaper to buy in specialist services as and when they are needed. These specialist service providers may be cheaper because they benefit from economies of scale, as they provide similar services to other businesses as well. Much outsourcing involves offshoring, i.e. buying in services, components or completed products from low-wage economies.

Equipment and machinery must be flexible:

Old-fashioned manufacturing equipment was designed to produce products which were very similar. It often took days to adapt the equipment to making other types of products. The machinery would have to produce large batches of one type of product before being converted to making another. Large inventories of each product would be needed to meet demand while equipment was producing other products. This equipment would be most unsuitable for JIT. Modern, computer-controlled equipment is more flexible. It is able to quickly switch to making another type of product with no more than a different software program. Very small batches of each item can be produced, which keeps inventory levels to an absolute minimum. However, such equipment is expensive, so JIT may not be appropriate for small or underfinanced firms.

• Excellent supplier relationships:

Suppliers must be prepared and able to deliver additional supplies at very short notice (i.e. on a short lead time). Suppliers have to see that being reliable and consistent is of great long-term benefit to them as well as to the business adopting JIT. This often means that a business might have only one supplier for each component, so that a relationship of mutual benefit can be built up.

Outsourcing evaluation

The global trend towards outsourcing will continue as businesses look for further ways of improving operational efficiency, and as more opportunities arise due to globalisation. The process is not without its risks, however. Before any substantial business process outsourcing (BPO) of complete functions is undertaken or before any stage of the production process is outsourced, the company must undertake a substantial cost-benefit analysis of the decision. Having closed or run down a whole department to outsource its functions, it would be time-consuming and expensive to reopen and re-establish the department if the outsourcing fails to deliver.

• Quality issues:

The quality levels of the goods or services being outsourced will be difficult to check on. A clear contract with minimum service level agreements or product quality standards will be needed. The company outsourcing the functions may have to send the employees responsible for quality control to the business used for outsourcing, in order to ensure that product quality and customer service standards will be met.

Without effective inventory management serious problems can arise:

There might be insufficient inventories to meet unforeseen changes in demand. • Out-of-date or obsolete inventories might be held if an effective rotation system is not used, for example, for fresh foods or for fast-changing technological products. • Inventory wastage might occur due to mishandling or incorrect storage conditions. • High inventory levels have high storage costs and a high opportunity cost. • Poor management of the supply purchasing function can result in late deliveries, low discounts from suppliers or a delivery too large for the warehouse to cope with.

• Raw materials and components:

These will have been purchased from outside suppliers. They will be held in storage until they are used in the production process. These inventories can be sent to the production line quickly. The business can meet increases in demand by increasing the rate of production quickly.

• Loss of jobs within the business:

This can have a negative impact on employee motivation. Workers who remain directly employed may experience a loss of job security. Bad publicity may result from redundancies too, especially if the business is accused of employing very low-wage employees in other countries in place of the jobs lost. This could lead to the firm's ethical standards being questioned

• Customer resistance

This could take several forms. Overseas telephone call centres have led to criticism from customers about their inability to understand foreign operators. Customers may object to dealing with overseas outsourced operations. Bought-in components and functions may raise doubts in customers' minds about quality and reliability

• Security

Using outside businesses to perform important IT functions may be a security risk. If important data were lost by the business, who would take responsibility for this?

• Corporate social responsibility (CSR):

Using outsourced contracts, especially in low-wage economies, means that the business is less able to ensure that its CSR policy towards workers or the environment is being upheld.

Operating at under maximum capacity

When a business is operating at less than full capacity it means that there is excess capacity. Low levels of capacity utilisation lead to high unit fixed costs. What options do businesses have when trying to improve capacity utilisation? Options for improving capacity utilisation depend on whether the excess capacity is a short-term or long-term problem.

• Opportunity cost:

Working capital tied up in goods in storage could be put to other uses. It might be used to pay off loans, buy new equipment or pay suppliers early to gain an early payment discount. The capital could be left in the bank to earn interest. The most favourable alternative use of the capital tied up in inventories is called its opportunity cost. The higher the value of inventories held and the more capital used to finance them, then the greater will be this opportunity cost. During periods of high interest rates, the opportunity cost of inventory holding increases.

labour intensive

involving a high level of labour input compared with capital equipment

reorder quantity

the number of units ordered each time

level of production

the number of units produced during a time period

economic order quantity

the optimum or least cost quantity of stock to re-order taking into account delivery costs and stock-holding costs

inventory management

the process of ordering,storing and using a company's inventory

production

the process that transforms inputs into outputs

batch production

the production of a limited number of identical products- each item in the batch passes through one stage of production before passing on to the next stage -Batch production allows firms to use division of labour. It enables some economies of scale if the batch is large enough. -tends to have high levels of work-in-progress inventory at each stage of the production process. The work may well be boring and demotivating for the workers. If batches are small, then unit costs are likely to remain high. There is often a need to clean and adjust machinery after each batch has passed through.

job production

the production of a one-off item specially designed for the customer -often expensive. It can take a long time to complete each unit. It is usually labour intensive. The labour force also needs to be highly skilled and this is not always easy to achieve.

flow production

the production of items in a continually moving process -Flow production systems are capable of producing large quantities of output in a relatively short time. It suits industries where the demand for the product is high and consistent. It also suits the production of large numbers of a standardised item. This is why it is often referred to as mass production. -Labour costs are low because much of the process is mechanised. There is little physical handling of the products. The constant output rate should make the planning of inputs relatively simple. This makes inventory control easier and minimises inventory levels. Quality tends to be consistent and high. It is easy to check the quality of products at various points throughout the process. -high initial set-up cost of high-technology production line equipment. This cost cannot be justified if demand is low. In addition, the work involved tends to be boring, demotivating and repetitive.

Productivity

the ratio of outputs to inputs during production

lead time

the time between ordering new supplies and their delivery

mass customisation

the use of flexible computer-aided technology to production lines to make products that meet individual customers' requirements for customised products

excess capacity

this exists when the current levels of output are less than the full-capacity output of a business; also known as spare capacity

labour productivity (number of units per worker) =

total output in a given time period/total workers employed

outsourcing

using another business (a 'third party') to undertake a part of the production process rather than doing it within the business using the firm's own employees

• Access to quality service or resources

• Access to quality service or resources that are not available internally. Many outsourcing firms employ quality specialists that small to medium-sized businesses could not afford to employ directly

JIT approach Disadvantages

• Any failure to receive supplies of materials or components in time, caused by, for example, a strike at the supplier's factory, transport problems or IT failure, will lead to expensive production delays. • Delivery costs will increase as frequent small deliveries are an essential feature of JIT. • Order administration costs may rise because so many small orders need to be processed. • There could be a reduction in the bulk discounts offered by suppliers because each order is likely to be very small. • The reputation of the business depends significantly on outside factors such as the reliability of suppliers and traffic delays.

A typical inventory control chart has certain key features

• Buffer inventories: The greater the degree of uncertainty about delivery times or production levels, then the higher this buffer level will have to be. Also, the greater the cost involved in shutting production down and restarting, the greater the potential cost savings from holding high buffer levels of inventories. • Maximum inventory level: This may be limited by space or by the financial costs of holding even higher inventories. One way to calculate this maximum level is to add the economic order quantity of each component to the buffer level for that item. • Re-order quantity: This will be influenced by the economic order quantity. • Lead time: The longer this period of time, the higher will be the re-order inventory level. If suppliers are unreliable and the lead time is long, the buffer inventory level will have to be relatively high. • Re-order level: This depends on how long it takes suppliers to deliver new supplies and the rate of usage of inventories. Most businesses use computers to keep a record of every sale and every delivery of stock. The re-order quantity and re-order stock level can be programmed into the computer. It can then re-order automatically from the supplier when inventories fall to the re-order level. The inventory control chart can also be computerised.

JIT approach Advantages

• Capital invested in inventory is reduced and the opportunity cost of inventory holding is reduced. • Costs of storage and inventory holding are reduced. Space released from holding inventories can be used for a more productive purpose. • There is much less chance of inventories becoming outdated or obsolete. Fewer goods held in storage also reduces the risk of damage or wastage. • The greater flexibility needed for JIT leads to quicker response times to changes in consumer demand or tastes. • The multi-skilled and adaptable staff required for JIT to work may gain improved motivation.

potential drawbacks to working at full capacity for a considerable period of time:

• Employees may feel under pressure due to the workload and this could raise stress levels. Operations managers cannot afford to make any production scheduling mistakes, as there is no slack time to make up for lost output. • Regular customers who wish to increase their orders will have to be turned away or kept waiting for long periods. This could encourage them to use other suppliers, with the danger that they might be lost as long-term clients. • Machinery will be working continuously and there may be insufficient time for maintenance and repairs. This lack of servicing may store up trouble in the form of increased unreliability in the future.

Raising productivity does not guarantee success

• If the product is unpopular with consumers, it may not sell profitably no matter how efficiently it is made. • Greater effort from workers to increase productivity could lead to demands for higher wages. This will lead to higher costs, which may cancel out the impact of productivity gains. • Workers may resist measures to raise productivity. A 20% increase in labour productivity may lead to job losses if sales do not increase too. There could be industrial disputes. • The quality of the management determines the success of a policy to increase productivity. If the culture of management is to involve the workforce and seek their views, then productivity improvements are likely to be greater and accepted by workers. • There is a difference between efficiency, as measured by productivity, and effectiveness.

There are four main ways in which productivity could be increased:

• Improve the training of employees to raise skill levels: Employees with higher skill levels and more flexible skills should be more productive. However, training can be expensive and timeconsuming, and highly qualified workers could leave to join another business. • Improve worker motivation: Using appropriate financial and non-financial methods of motivation should encourage employees to work more efficiently. Non-financial methods in particular could be used as they will not increase labour costs. Therefore, any resulting increase in labour productivity will lead to lower average costs of production. • Purchase technologically advanced equipment: Modern machinery - from office computers to robot-controlled production machines - should allow increased output with fewer workers. High-cost investment will only be worthwhile if high output levels can be maintained. In addition, workers may need to be retrained and there may be genuine fear about lost jobs and reduced security of employment. • More effective management: Ineffective management can reduce the overall productivity of a business. Failure to purchase the correct materials, poor maintenance schedules for machines or demotivating methods of employee management are just some examples of this. More efficient operations and people management could go a long way towards improving productivity levels.

Benefits of effective supply chain management

• Improves customer service: Customers expect products to be delivered quickly and on time. Good supply chain management ensures that customers receive products more quickly and of the appropriate quality. This increases customer satisfaction. • Reduces operating costs: Effective supply chain management allows a business to reduce costs. In particular, purchasing costs and inventory costs should fall. Also, production costs are cut as time is saved in converting raw materials into finished products. • Improves profitability: By reducing wasted time, improving inventory management and creating a low-cost but efficient supply chain, business profits should increase.

There are also potential drawbacks to outsourcing:

• Loss of jobs within the business: • Quality issues • Customer resistance • Security • Corporate social responsibility (CSR)

This might be caused by low seasonal demand. Options for improving capacity utilisation in the short term include:

• Maintaining high output levels. This strategy adds to inventories and could be expensive and risky if sales do not recover. • Adopting a more flexible production system, allowing other products to be made that could be sold at other times of the year. This needs a flexible workforce and production resources. • Insisting on flexible employment contracts so that, during periods of low demand and excess capacity, workers work fewer hours to reduce capacity and costs. This may have a negative impact on employee morale and motivation.

The growth of outsourcing in recent years is not just driven by shortage of capacity. There are various other reasons for outsourcing:

• Reduction and control of operating costs • Increased flexibility • Improved company focus • Access to quality service or resources • Freeing up internal resources

The problems that result from changing from job or batch to flow production include:

• The cost of capital equipment needed for flow production may be too high. • Employee training needs to be flexible and multi-skilled. If this approach is not adopted, then workers may end up on one boring repetitive task and become demotivated. • Accurate estimates of future demand are needed to ensure that output matches demand.

The problems that result from changing from job to batch production include:

• The cost of equipment needed to handle large numbers in each batch may be too high. • Additional working capital is needed to finance work-in-progress inventory. • There is a risk of worker demotivation as there is less need for an individual's craft skills.

The amount of value added to the inputs will depend on a number of factors. Not all of these factors are operations management issues:

• The design of the product: Does this allow for economic manufacture, while appearing to have quality features that will enable a high price to be charged? • The efficiency of operations: By reducing waste, the operations department will increase the value added by the production process. Increasing productivity will reduce costs per unit and this will increase added value if customer prices remain unchanged. • Branding to encourage consumers to pay more for the product than the cost of the inputs: A good example is the market for luxury ice creams. Effective branding leads consumers to pay prices much greater than the input costs.

JIC inventory management advantages

• There is very little chance of running out of inventory. Production levels can be maintained even if there are major delays in the supply of materials/components. • There is much less need for accurate sales forecasting than with JIT. • Economies of scale from very large orders of supplies/components are possible.

JIT may not, however, be suitable for all businesses at all times:

• There may be limits to the use of JIT, if the costs resulting from production being halted when supplies are delayed, far exceed the costs of holding buffer inventories of key components. • Small businesses may not be able to finance the expensive IT systems needed to operate JIT. • Global inflation could make holding inventories of raw materials more beneficial. It may be cheaper to buy a large quantity now, rather than smaller quantities in the future when prices have risen. High oil prices will make the transport of frequent and small deliveries of materials and components more expensive. • Tertiary-sector businesses, such as hotels and hairdressers, may decide to hold buffer inventories to avoid running out. Zero inventories mean they cannot meet customer service expectations, which will damage their reputation

Businesses of any size will benefit from reducing the time it takes to convert raw materials into completed products available for sale. Supply chain management aims to reduce this time period by:

• establishing excellent communications with supplier companies, which helps to ensure the right number of goods of the right quality are received exactly when needed • cutting the time taken to deliver all materials required for production by improving transport systems • speeding up the new product development process to improve the competitiveness of the business • speeding up the production process with technology and flexible workforces • minimising waste at all production stages to cut costs.

Capital intensity brings its own limitations, including:

• high fixed costs • cost of financing the equipment • high maintenance costs and the need for skilled workers to do repairs • the quick pace of technological change, which can make the latest production equipment and computer systems obsolete and relatively inefficient.

Should the business:

• increase its scale of operation by acquiring more production resources? • keep existing capacity but outsource or subcontract more work to other businesses? • keep working at full capacity and not expand, perhaps because of the danger that demand might fall back in the near future?

Labour intensive production is still commonly used in small businesses that produce specialist, customised products to meet particular customers, needs. The advantages include:

• interesting and varied work • low machine costs • one-off designs meet customer requirements such as exclusive furniture.

Businesses are becoming increasingly focused on achieving sustainability of operations. They can do this in a number of ways, by:

• reducing energy use and carbon emissions • reducing the use of plastic and other non-biodegradable materials • using recycled materials • manufacturing products that are recyclable

Operations makes a considerable contribution to adding value by

• reducing production costs through increased efficiency • producing quality goods that meet customer expectations • ensuring production is flexible so that changing consumer tastes can be satisfied.