Chapter 3 the operations management function

Process layout

(Functional layout). Equipment and machinery that perform a similar function are arranged together. Suited to organisations that deal with a variety of products.

Productivity

A measure of efficiency — the amount of output produced compared to the amount of input required in production.

Materials management: Inventory control

A system used to ensure that costs associated with maintaining an inventory of materials are kept to a minimum and the operations system has access to the right amount of inputs when required. Reduces storage costs and minimises wastage.

Product layout: ADV and DISADV

ADV - Cost is reduced because of the use of technology, and staff only complete specialised tasks DISADV - Expensive to set up a capital-intensive, automated assembly line and staff can become bored with repetitive, low-skilled activities.

Process layout: ADV and DISADV

ADV - Productivity improves, because the whole factory does not need to be shut down if there are defects or problems in one section DISADV - Work can be monotonous for staff, if they are involved only in one stage of the process.

Fixed position layout: ADV and DISADV

ADV - more efficient to bring materials to the site; workers and equipment come to the one work area. DISADV - storage; materials needs change constantly, and it can be hard to find space to store them safely.

Competing on cost

Achieve economies of scale, bulk buy inputs, eliminate waste, produced standardised products for larger markets, product high volume output or use automated production systems.

Total quality management (TQM): Customer focus

All employees are focusing on what the customer wants.

Ethics and social responsibility: Managing inputs appropriately

An operations manager should attempt to use inputs that do not have a serious impact on the environment. The inputs used in a production process also create waste.

Materials management: Supply chain management - tasks

Assess location in terms of distance to suppliers and consider the efficiency of delivery,

Office technology ADV

Businesses can reach more customers around the world, employees can do more work in less time and employees can work from locations outside of the office.

Intangible goods

Cannot be touched. e.g. if you attend a training course, you cannot physically touch it, but you benefit from gaining knowledge and learning new skills. Services cannot be stored and the customer may actually need to be present when the service is being delivered. e.g. the customer must be present when receiving a haircut.

Total quality management (TQM)

Commitment to excellence that emphasises continuous improvement in all aspects of an organisation's operation by sharing responsibility among all the members of the organisation. Includes employee empowerment, continuous improvement and customer focus.

Computer aided design (CAD)

Computerised design software that generates three-dimensional diagrams from a set of given input data. Once the design has been created, it can be viewed from multiple angles, assisting both the designer and the end user to visualise what will be produced. Faster and more accurate than normal drafting processes.

Computer integrated manufacturing (CIM)

Computerised system to combine CAD and CAM to manage the entire production process. Product design, analysis, planning, purchasing, costing, inventory control and distribution can be controlled by computer.

Operations management

Consists of all the activities in which managers engage to produce goods or services.

Fixed position layout

Deals with large-scale processes, such as the construction of bridges, ships, aircraft or buildings. Used when it would be too difficult to move the product.

Materials management (planning): Master production scheduling (MPS)

Details what is to be produced and when. Linked to specific delivery dates or contracts for delivery in the future.

Materials management (planning): Materials requirements planning (MRP)

Developing an itemised list of all materials involved in production to meet the specified orders. Must consider bulk purchasing discounts and times required by suppliers to deliver the inputs (e.g. months).

Office layout

Efficient movement of information and proximity to resources (such as the photocopier, computers, printers and storage areas) are priorities for the layout of an office.

Facilities design and layout: Considerations

Enough physical space for the anticipated volume of production, effective use of production equipment and technology, an adequate location of stock and warehousing requirements, an efficient flow of the goods or services through the system and conformity with legal regulations (e.g. OH&S).

Ethics and social responsibility: Managing the customer relationship appropriately

Ensure that the goods produced are of the required quality, that they are safe and reliable. Dangerously defective or harmful products can result in the injury or death of consumers.

Ethics and social responsibility: Managing staff appropriately

Ensure that the organisation's facilities and technology contribute to the health and welfare of staff. Toxic production processes can threaten the health of employees, as has been the case with asbestos mining and manufacturing.

Materials management: Inventory control - Just in time (JIT)

Ensures that the exact amount of material inputs will arrive only as they are needed in the operations process.

Retail layout

Exposure is a critical consideration to the layout of retail stores. Customers are exposed to other aisles or sections as they move from one point to another. It can be difficult to move efficiently from one part of the store to another, because barriers are established to 'showcase' or 'display' items for sale.

Inventory

Goods and materials held as stock by an organisation.

Manufacturing technology: Robotics

Highly specialised forms of technology capable of complex tasks. ADV - high precision and accuracy and can work in difficult conditions. DISADV - high initial purchase cost

Competing on speed of delivery

Identify and act on trends quickly, respond quickly to changes in demand, have flatter management structures or by establishing supply chains which work efficiently between the supplier and the organisation.

Inputs: Materials

Includes raw materials, components and parts consumed or converted by the transformation process.

Inputs: Capital equipment

Includes the plant, machinery, equipment and property necessary to conduct operations.

Inputs: Information

Information from a variety of sources contributes to the transformation process. Organisations do not always account for the value of this resource, because it cannot be easily quantified as a business asset.

Facilities design and layout

Involves planning the layout of workspace to streamline the production process.

Total quality management (TQM): Employee empowerment

Involving employees in decision making e.g. quality circles. This refers to groups of workers meeting to solve problems relating to quality.

Product layout

Machinery and equipment are arranged in line and components are added to the product in a sequence of steps. Best suited to the manufacture of high-volume, standardised goods.

Inputs: Money

Money is generally considered to be the most flexible of all resources, because it can easily be converted into any quantity or combination of materials, capital or labour.

Materials management (planning): Production plan

Outline of the activities necessary to combine various resources (inputs) to create goods or services (outputs).

Materials management: Materials handling

Physical handling of goods in warehouses and at distribution points. Adequate materials handling procedures and techniques can result in a more efficient production process and cost savings. Proper handling can also reduce accidents, breakage and spoilage.

Tangible goods

Physical products that can be handled and stored before they are sold to the consumer, e.g. bread, clothing or a car. The production process and consumption are not linked. little customer involvement in production.

Business ethics

Process of abiding by moral standards and doing the 'right' thing in the interests of all stakeholders.

Total quality management (TQM): Continuous improvement

Process that involves a constant evaluation of, and improvement in, the way things are done in an LSO. Higher and higher standards are set in the continual pursuit of improvement.

Productivity: How to improve

Producing more outputs from the same input or by reducing the level of inputs for the same output, automating work processes to reduce the labour required to perform a task or improving the design and layout of facilities in a workplace.

Social responsibility

Protecting and enhancing the welfare of society. The obligations a business has over and above its legal responsibilities to the wellbeing of employees and customers, shareholders and the community as well as the environment.

Competing on quality

Reduce defect rates in the production process, immediately respond to customer needs or market themselves as a quality business.

Inputs: Labour

Refers to people involved in the operations function.

Computer aided manufacture (CAM)

Software used to allow the manufacturing process to become computer directed by designing and controlling the process. The CAD software can be linked to CAM software to manufacture designs that are accepted by clients.

Materials management

Strategy that manages the use, storage and delivery of materials to ensure the right amount of inputs is available when required in the operations system.

Business competitiveness

The ability of an organisation to sell products in a market.

Transformation

The conversion of inputs (resources) into outputs (goods or services).

Quality

The degree of excellence of goods or services and their fitness for a stated purpose. Minimise waste and defects, strictly conform to standards or reduce variance in final output.

Outputs

The end result of an organisation's efforts — the service or product that is delivered or provided to the consumer.

Supply chain

The range of suppliers from which the organisation purchases materials and resources.

Inputs

The resources used in the process of production. There are 6 categories of inputs; materials, capital equipment, labour, information, time and money. MCLITM.

Materials management: Supply chain management - Importance

The supply chain needs to be well managed because an operations system depends on the inputs. If materials are not on hand, nothing can be produced, If materials are of inferior quality, it is difficult or costly to produce quality product and If the right quantity of materials is not available, the organisation cannot meet demand.

Customer relationship management (CRM)

The systems that organisations are introducing to maintain customer contact. CRM software can be used to improve customer service and increase competitiveness, because it stores information about existing and potential customers.

Quality assurance

The use of a system so that an organisation achieves set standards in production.

Quality control

The use of inspections at various points in the production process to check for problems and defects.

Inputs: Time

Time and its efficient use are critical to all organisations. Coordinating resources within appropriate time frames limits costs and wastage. Operational planning may involve achieving production tasks ranging in duration from one year to merely hours.

Ethics and social responsibility: Managing suppliers appropriately

Working with suppliers to ensure that they follow guidelines on ethical and socially responsible behaviour. Not appropriate for organisations to provide preferential treatment to suppliers that offer gifts or to select suppliers based on personal friendships.