Business Studies- Operations
How can a business differentiate itself?
-Vary product features/sizes/colours/tastes -Vary the product quality -Vary time spent on services -Vary the level of expertise/experience/technology/inputs used- feeds into the quality of what is offered for sale
What are goods?
A manufacturer transforms inputs into tangible products (goods that can be touched). The operations process of a manufacturer tends to be highly automated or mechanised. Manufacturers use machinery, robots and computers to turn inputs into outputs. For example, Samsung takes plastic, metal, glass and electronic parts and transforms them through design, manufacturing and assembly into numerous electronic products.
What is quality improvement?
Quality improvement focuses on two aspects: continuous improvement and total quality management.
What are the 4 influences on the transformation process?
The transformation process is influenced by the volume, variety in demand and visibility.
What is cost leadership?
involves aiming to have the lowest costs or to be the most price-competitive in the market. A key aspect to cost leadership is that although trading with the lowest cost, the overall business should be profitable.
What is e-commerce?
involves the buying and selling of goods and services via the internet. With reference to supply chain management, e-commerce is relevant to particular forms of sourcing.
What is global sourcing?
is a broad term that refers to businesses purchasing supplies or services without being constrained by location. In the supply chain management activity, global sourcing means buying or sourcing from wherever the suppliers are that best meet the sourcing requirements
What is ethical sourcing?
refers to business practices of sourcing from suppliers that engage in ethical conduct such as the payment of fair wages and the use of environmentally friendly practices.
What are examples of established technology?
Barcoding and point-of-sale data for inventory management Robotics for complex and detailed manufacturing Computer-aided design, computer-aided manufacturing, and computer-integrated manufacturing for integration transformation processes
What is deskilling?
In economics, deskilling is the process by which skilled labor within an industry or economy is eliminated by the introduction of technologies operated by semi- or unskilled workers.
What is materials handling and packaging?
Materials handling is an important aspect of the movement and storage of goods, and therefore particular standards and methods of operating need to be applied. For example, glass will need to be transported and stored carefully, and packaged in a way that prevents damage.
What are performance objectives?
Performance objectives are goals that relate to particular aspects of the transformation processes. These objectives or targets will be set so that the business becomes more efficient, productive and profitable. The six main performance objectives that can be allocated to particular KPS are: -Quality -Speed -Dependability -Flexibility -Customisation -Cost
What is product differentiation?
Product differentiation is the conscious activity by a business to make its product appear different from the otherwise similar or identical product of its competitors, to create a competitive advantage.
What is continuous improvement?
The concept of continuous improvement involves an ongoing commitment to achieving perfection. Although the goal of perfection will never be reached, striving for improvement is important to the business culture. The process becomes one of setting higher and higher standards in the continual pursuit of improvement.
What are disadvantages of holding stock?
The costs associated with holding stock, including storage charges, spoilage, insurance, theft and handling expenses The invested capital, labour and energy cannot be used elsewhere as it has been used to create stock The cost of obsolescence, which can occur if stock remains unsold
What is total quality management?
The total quality management concept focuses on managing the total business to deliver quality to customers, and is a 'holistic' approach. This is an ongoing, business-wide commitment to excellence that is applied to every aspect of the business's operations. This approach places an emphasis on employee involvement in the prevention of quality problems. Build the product right in the first place and you avoid the expense of inspection and the waste of rejected products. Improving quality can also help businesses increase their market share (as a result of better quality and lower priced products).
What is the outsourcing decision?
There are a variety of factors that must be considered when assessing whether and when to use outsourcing which include: Whether to outsource or not; this requires assessing whether the use of outsourcing is cheaper and more efficient than performing the work in house If deciding to outsource, the managers must decide which geographical location is desired The managers must also decide which vendors to use
What is Six Sigma?
This is a quality management process. It is used to identify and remove the causes of problems in the operations process, so that a business produces only 3.4 defective parts per million opportunities. This translates into a perfection rate of 99.9997%. It uses statistical tools, empowerment of staff and training, a commitment to improving quality through the whole business and continuous improvement. Qantas and ANZ use Six Sigma processes to identify and remove non-productive or non-value adding processes and activities.
What is transformation?
Transformation is the conversion of inputs (resources) into outputs (goods and services).
What is value-adding?
Value adding is the creation of extra or added value as inputs are transformed into outputs. Costs are incurred when something created by manufacturing is processed or when a service is created. The addition of cost in transforming the inputs into a process, which will turn them into outputs, adds value. Thus, cost is often related to value. For example, the value of apple pies is greater than the cost of the inputs used to create those pies. As inputs are added and processed into final goods for consumption, value is added. In the servicing sector, value adding occurs through knowledge, skills and expertise.
What is variation?
Variation: this refers to the amount of a product desired by customers. An increase in demand will require increased inputs from suppliers, increased human resources, increased energy use and increased use of machinery and technology. A decrease in demand will also require operational flexibility as staff may need to have their hours reduced, production may need to slow to avoid inventory build up and suppliers may put on pressure due to contractual agreements.
What is variety?
Variety: this refers to the range of products made. Mix flexibility is the mix of products made, or services delivered through an information process. The greater the variety made, the more the operations process needs to allow for variation.
What is visibility?
Visibility: this refers to the nature and amount of customer contact (feedback). This can affect a business as customers and their preferences can shape what businesses make. As businesses seek to maximise sales, customer contact is essential and ultimately shapes the transformation processes.
What is volume?
Volume: this refers to how much of a product is made. Volume flexibility refers to how quickly the transformation process can adjust to increases or decreases in demand. Lead time is the time it takes an order to be fulfilled from the moment it is made. If a business cannot quickly adjust changes in market demand, they can over produce, which may lead to wastage and increased inventory costs.
What is a critical path analysis?
a scheduling method that shows what tasks need to be done, how long they will take and what order is necessary to complete the tasks.
What is a Gantt chart?
a type of bar chart that shows both the scheduled and completed work over a period of time
What are warranties?
a warranty is a promise made by a business that they will correct any defects in the goods they produce or services they deliver. A good way to assess the effectiveness of operations processes is to measure the number of warranty claims.
What is intellectual property?
addresses issues related to moral rights such as copyright, patents, trademarks, designs and other original ideas and artistic works.
What is lean production?
aims to eliminate waste at every stage of production. It involves analysing each stage of the production process, detecting where inefficiencies are and correcting them. Waste is non-value adding, though it does add cost. If waste can be minimised then production processes are most efficient.
What are the 4 elements to achieve TQM?
benchmarking, employee empowerment, a focus on the customer, and continuous improvement.
What are inventory valuation methods?
businesses that buy stock need to decide how much to carry in inventories. The main inventory valuation techniques include: LIFO FIFO
What are operational decisions?
purchasing, dispatching, inventory control, planning and scheduling, maintenance and quality control involving planning, developing, and the use of established and leading edge technology
What is sequencing?
refers to the order in which activities in the operations process occurs.
What is inspection and quality control?
to ensure output meets required standards, many businesses carry out inspections of all or part of the total volume of production. When an inspection is conducted, the goods or services under inspection can be passed as 'okay' or 'defective'.
What are services?
A service organisation transforms inputs into intangible products (services that cannot be touched but that have effects that can be felt). Service providers rely heavily on interaction with the customer and their processes tend to be more labour-intensive; that is, staff are crucial to the operations. For example, school takes its main inputs-students, the syllabus, staff and buildings and produces educated, employable graduates.
What are advantages of holding stock?
Consumer demand can be met when stock is available. This prevents the consumer from seeking to buy from an alternative business and is a risk-reduction strategy. If a particular product line runs out, an alternative can be offered, thereby generating income for the business instead of a lost sale. It reduces lead time between order and delivery. Stocks give the opportunity for a business to generate immediate revenue Older stock can be sold at reduced prices and thereby encourage cash flow and also attract sales of other products Stocks are an asset and are of value to the business, reflecting well on the balance sheet Making products in bulk may reduce costs as there are economies of scale
What are the advantages of product differentiation?
Creation of consumer loyalty for the product and repeat customers The capacity to increase price as consumers are committed to the product and see it as in some way superior Target a different market segment Increase sales and therefore profits Increase market share Build a brand
What is established technology?
Established technology is technology that has been developed and widely used and is simply accepted without question. Established technologies are functionally sound and help to establish basic standards for productivity and speed.
What are examples of leading edge technology?
Examples of leading edge technology: Nanotechnology; allows water to be purified when scooped into water bottles. This is revolutionising the cosmetics industry and has medical applications. Fintech and robo-advisors; used by banks to assist customers make financial and investment decisions through smartphones or computer enabled access.
What are inputs?
Inputs are the resources used in the transformation (production) process. Business inputs include tangible things such as raw materials, land, human resources, capital in the form of facilities and technology, as well as intangible inputs such as ideas and information. There are four common direct inputs used by most businesses, including: -Labour -Energy -Raw materials -Machinery and technology (capital equipment)
How does supply chain management work?
Inputs: sourcing from multiple suppliers (domestic, global), E-commerce, raw materials, other inputs (energy) ---> Transformation processes: throughput, value adding, change of inputs using facilities and human resources ---> Outputs: finished or semi-finished goods or services, logistics, distribution Sourcing E-commerce Logistics
What is inventory or stock?
Inventory or stock refers to the amount of raw materials, work-in-progress and finished goods that a business has on hand at any particular point in time. Inventory management is another crucial facet of operations management, and the strategies applied to the management of inventory will have a significant impact on transformation processes.
What is business technology?
Involves the use of machinery and systems that enable businesses to undertake the transformation process more effectively and efficiently. Increasingly, businesses are feeling the need to acquire up-to-date technology in order to compete effectively, In the manufacturing sector, technology can be used to speed up processes and enable fuller utilisation of raw materials. This makes the operations processes more cost effective. In the services sector, smart devices and office and communications technology have enabled whole markets to open up and allow for a small to medium business to trade globally.
What is leading edge technology?
Leading edge technology is the technology that is the most advanced or innovative at any point in time. Operation managers can distinguish their operations processes by utilising the best available technologies. This can help a business to create products more quickly and to higher standards, with less waste, and also help a business to operate more effectively.
What are disadvantages of outsourcing?
Payback periods and cost. This refers to how long it takes to repay the cost of organising outsourcing and make the required organisational changes. Overtime businesses will experience cost savings; however, it could take two or three years. Loss of control of standards and information security. When a business opts to outsource, it can feel a loss of control over standards and also over how information is used. Recent issues have occurred where a Chinese manufacturer of toys for the Mattel brand did not adhere to the design specifications outlined in the SLA and used too much lead in toys. Organisation change and redesign. Outsourcing may be accompanied by a high level of business change and organisational design. There may be downsizing, causing the loss of domestic employment.
What are some examples of manufacturing technology?
Robotics: a programmable machine capable of doing several different tasks Computer-aided design (CAD): a computerised design tool that creates products from a series of input parameters Computer-aided manufacturing (CAM): software that controls manufacturing processes 3D printing: allows a digital design to make an actual product through the use of polymers and other materials
What is scheduling?
Scheduling refers to the length of time activities take within the operations process. These are two very important aspects that assist with structuring and ordering the transformation process. Operation managers must have an understanding of these two aspects for operations. An operations manager can use either a gantt chart or a critical path analysis as part of sequencing and scheduling.
What are scheduling techniques?
Scheduling techniques to ensure materials are in the right place at the right time (e.g. just-in-time, total quality management).
What is continuous improvement?
is an ongoing commitment to improving a business's goods or services. The basis of successful improvements in quality is the inclusion of staff into improvement processes. That is, all staff are encouraged to demonstrate initiative and to suggest areas where improvement can be made.
What is warehousing?
is defined as the use of warehouses for the storage, protection and, later, distribution of stock. These are places for holding inventories and therefore particular costs are associated with warehousing including the cost of: The premises Insurance and security for the stock Stacking and moving the stock Carrying excess stock or redundant stock if not sold Shrinkage costs and losses from theft or reasons not accounted for Stock subject to damage if not correctly stored Although there is a management trend to lower costs through lean production and reducing inventories, warehousing can actually save costs if used well. Warehousing can be very useful as a storage point for durable items that may need to be transported with little notice.
What is technology?
is the application of science or knowledge that enables people to do new things or perform established tasks in new and better ways.
What is monitoring?
is the process of measuring actual performance against planned performance. Monitoring involves the measuring of all aspects of operations, from supply chain management and the use of inputs, through to transformation processes and outputs. Monitoring typically is arranged around the needs to measure KPIs. KPIs are predetermined variables that are measured so that appropriate controls to operations processes can be made. There are a variety of KPIs that a business may make, like the following: IT and maintenance costs Capacity and volume rates Defect rates, repair rates and warranty claims Direct and indirect cost analysis Process flow rates Lead times
What is control?
occurs when KPIs are assessed against predetermined targets and corrective action is taken if required. This means controlling compares what was intended to happen with what has actually occurred. If there is a discrepancy between performance and goals, changes and improvements can be made. The regular performance review is crucial because it should indicate any issues and, where possible, intervention or corrective action may need to be taken.
What are strategic operational decisions?
planning, developing and controlling the activities required to create a product and supply a service. Strategic decisions and planning for the use of established and leading edge technology
What is quality?
quality is often determined by consumer expectations, which are used to inform the production standards applied by the business. Quality performance objectives include: Quality of design Quality of conformance Quality of service
What are outputs?
refer to the end result of the business efforts- the good or service that is provided or delivered to the customer. Output must always be responsive to customer demand. The outputs of transformations processes include: The goods made or services provided Customer service Warranties
What is customer service?
refers to how well a business meets and exceeds the expectations of customers in all aspects of its operations. Operations processes will need a review if a customer expresses dissatisfaction with a product on account of it being defective, not meeting quality expectations, finds wait times/lead times too long or returns the product or makes a warranty claim. Market research has shown that businesses that provide superior customer service can: Charge an average of 10% more for the same goods and services Grow twice as fast as their competitors Increase their market share and profits
What is corporate social responsibility?
refers to open and accountable business actions based on respect for people, community/society and the broader environment. It involves businesses doing more than just complying with the laws and regulations.
What is improvement?
refers to systematic reduction of inefficiencies and wastage, poor work processes and the elimination of any bottlenecks. A bottleneck is any aspect of the transformation process that slows down the overall processing speed. Improvement typically is sought in time, process flows, quality, cost and efficiency.
What is sourcing?
refers to the purchasing of inputs for the transformation processes. Sources or inputs are drawn from a range of suppliers. There are a variety of factors which influence the choice of suppliers, which include: Consumer demand Quality of inputs required Flexibility and timeliness of supply Cost of supplier
What is distribution?
refers to the way of getting the goods or services to the customer. A business may use different forms of physical distribution. E.g -producer -> wholesaler -> retailer -> consumer -producer -> agent -> retailer -> consumer -producer->retailer -> consumer -producer->consumer
What is quality management?
refers to those processes that a business undertakes to ensure consistency, reliability, safety and fitness of purpose of product. There are numerous approaches to achieving quality within businesses, but many of the more common approaches include: Quality control- inspection, measurement and intervention Quality assurance- application of international quality standards Quality improvement- total quality management and continuous improvement
What is office technology?
technology that includes a range of computer, communications devices and software applications, like a USB.
What is FIFO?
the first in first out method of pricing inventory assumes that the first goods purchased are also the first goods sold and therefore the cost of each unit sold is the first cost recorded.
What is LIFO?
the last in first out method of pricing inventory assumes that the last goods purchased are also the first goods sold and there the cost of each unit sold is the last cost recorded.
What is transformation and distribution?
this aspect of logistics is concerned with the physical movement of inventories. Various models of transportation can be used and each has its own strengths and weaknesses. Different modes of transport can include motorbike courier, van, truck, train, aeroplane and ship. The type of product and the cost of transportation will determine the mode of transportation selected.
What are the advantages of outsourcing?
Simplification. This arises from reducing the number of activities performed within the business. Efficiency and cost savings. Access to cheaper labour, regulatory differences and skilled labour in offshore locations all lead to cost savings for business. Increased process capability. This comes from access to improved technologies and highly skilled labour. Improved process capability means products are produced and delivered to the market with improved levels of service. Access to skills/resources lacking within the business. A business outsourcing to a nation such as India may well find that there is access to highly skilled and disciplined labour at low cost. Capacity to focus on core business or key competencies. The use of outsourcing enables a business to focus on that which it cannot outsource: its vision, purpose, sustainable advantage through innovation and so on.
What is supply chain management?
Supply chain management involves integrating and managing the flow of supplies throughout the inputs, transformation processes (throughput and value adding) and outputs in order to best meet the needs of customers. The supply chain goes beyond just sourcing. Since the supply chain is also influenced by what is sold and what is returned, supply chain management involves both sourcing (supply-side) as well as logistics and distribution.
What are operations strategies?
To achieve operations goals and broader business goals, operations managers can apply numerous operations strategies. The variety of operations strategies include: Performance objectives New product or service design and development Supply chain management Outsourcing Technology Inventory management Quality management Overcoming resistance to change Global factors
What are transformed resources?
Transformed Resources; are those inputs that are changed or converted in the operations process. Transformed resources are also considered the resources that give the operations process its purpose or goal. The transformed resources are: Materials Information Customers Materials: are the basic elements used in the production process and consist of two types; raw materials and intermediate goods. Raw materials: are the essential substances in their unprocessed state Intermediate goods: are goods manufactured and used in further manufacturing or processing Information: is the knowledge gained from research, investigation and instruction, which results in an increase in understanding. Customers: their desires and preferences are the starting point to production processes.
What are transforming resources?
Transforming Resources; are those inputs that carry out the transformation process. They enable the change and value adding to occur. There are two main transforming resources: Human Resources Facilities Human resources: they coordinate and combine other resources to produce goods and services. Facilities: refer to the plant (factory or office) and machinery used in the operations processes.
What are distribution centres?
a distribution centre is not intended for long-term storage. Rather, distribution centres are strategically located so as to minimise the time it takes to supply stock to retail outlets. The use of distribution centres is an important operations strategy and requires managers to balance the cost of such centres with the time saved in logistics. The main purpose of distribution centres is the short-term storing, handling and wholesale distribution of goods.
What is task design?
involves classifying job activities in ways that make it easy for an employee to successfully perform and complete the task. It starts with the operations manager asking, "what needs to be done?" In the context of the business goals, task design is breaking down the work into a series of jobs in which each contributes to the final goal.
What is storage?
involves finding a secure place to hold stock until it is required. Storage for inventory is necessary when there are numerous outlets through which stock is sold and when demand is variable and needs a responsive supply chain.
What is offshore sourcing?
involves taking activities to a provider in another country. This means that compliance requirements are different between the nations chosen as there are regulatory differences.
What is quality assurance?
involves the use of a system to ensure that set standards are achieved in production. This is done through taking a series of measurements and assessing them against predetermined quality standards. Quality assurance causes a business to emphasise quality in the design of a product and brings it to the market with a level of quality that provides comfort to prospective buyers. A series of quality assurance standards has been developed in response to the impact of globalisation and the international emphasis on quality. A widely used international standard is the ISO 9000 series of quality certifications. ISO standards are voluntary but many businesses comply with their requirements (e.g. meet stakeholder needs) to enhance their domestic and international competitiveness.
What is outsourcing?
involves the use of external providers to perform business activities. The theory behind outsourcing is that when a service is performed by an external provider that specialises in a particular business function, it will do so at a lower cost and with a greater effectiveness than the same task done within the business hierarchy. This can include: Operations such as manufacturing, value-adding manufactures, design, merchandising, sourcing, distribution and logistics Human resources including training and development and employee counselling Administrative work Finance and accounting outsourcing Information technology Legal process outsourcing
What is quality control?
involves the use of inspections at various points in the production process to check for problems and defects. A business needs to have defined quality standards and parameters. These standards need to be broadly applied across the range of products and processes. Once the standards have been set, a range of tests needs to be designed to assess the quality of products and processes against the standards. Predetermined quality targets would be set, and any failure to meet the targets would need to be assessed and appropriate action taken to correct any issue that has caused quality standards to fail below expectation. Quality control management may require that labour is appropriately trained to apply quality standards throughout working processes.
What is skill audit?
is a formal process used to determine the present level of skilling and any skill shortfalls that need to be made up either through recruitment or training.
What are logistics?
is a term broadly referring to distribution but includes transportation, the use of storage, warehousing and distribution centres, materials handling and packaging.
What is just in time?
is an inventory management approach which ensures that the exact amount of material inputs will arrive only as they are needed in the operation process. By making just enough products to meet consumer demand, it is considered a lean production method as it aims to overcome the problem of end-of-period stock valuation. A JIT approach also allows retailers to display a wider range of products as they need to store less and can order in response to consumer demand. This, therefore, saves money as there are no expensive holding and insurance costs. However, a JIT processing requires a very flexible operations function with flexible processing. It requires a very high ability to respond quickly to changes in market demand as well as reliable supplier deliveries which must be received at the appropriate time. This is a method of managing the flow and storage of stock.
