CHAPTER 3 - THE OPERATIONS MANAGEMENT FUNCTION

--THE OPERATIONS MANAGEMENT FUNCTION--

Consists of all the activities in which managers engage to produce goods and services Involves the transformation of raw inputs into outputs (products and services) which are provided to customers

OPERATIONS MANAGEMENT

Ethical management is about the application of moral standards to management behaviour. Social responsibility refers to management's awareness of the social and environmental consequences of its actions

NATIONAL AUSTRALIA BANK

Improved the design and operation of its buildings. Replacing all motor vehicles with four cylinder cars and hybrid cars. Created a positive health and safety culture. Provides products for low income earners. Introduction of audio enabled ATM's for the visually impaired, Supply chain management, using only reputable suppliers.

WHAT ARE THE BENEFITS ?

Improves the reputation of the business. Improves efficiency and reduces cost. Motivates employees to work at their optimal level therefore increasing productivity. Reduces staff absenteeism and staff turnover.

MATERIALS MANAGEMENT (5)

Inventory Control ensures that costs are minimised and that the operations system has access to the right amount of inputs when required.

A. EMPLOYEE EMPOWERMENT

It is essential that employees are fully involved in this process. Quality circles are used which are groups of people who meet to solve problems relating to quality. The employees are the best people to ask as to how to solve problems.

MATERIALS MANAGEMENT (6)

It is imperative that an organisation does not run out of inputs used in production. Organisations use computerised systems to alert for the need of reordering. Organisations also use a JIT system of ordering.

INPUTS

Management must be aware of the inputs they are using to make their product. They must source their inputs from reputable suppliers who do not exploit labour. ( Cocoa beans ) The waste from these inputs must be disposed of appropriately. ( pollution and carbon emissions ) Where possible the LSO can use inputs that support the Australian economy. Suppliers who offer special gifts and incentives should not have preferrerd treatment. No nepotism

MATERIALS MANAGEMENT (3)

Master production schedule: (MPS) describes what will produced and when. Toyota may be planning to build 2000 Camry's in 2013. Toyota must therefore plan carefully for this increased production. The MPS is a schedule linked to specific delivery dates in the future. TOYOTA must stick to this schedule carefully.

MATERIALS MANAGEMENT (4)

Materials Requirements planning (MRP) involves developing an itemised list of all materials involved in production to meet the specified orders. This involves considering the ordering of the inputs, the current stock on hand and the exact number of inputs required. Eg workers, windscreens,tyres etc.

MATERIALS MANAGEMENT (1)

Materials mangement is the 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. Organisations must balance between having enough stock on hand with not having too much stock on hand. Many organisations use a JIT system that ensures the exact amount of materials arrive when they are needed, to avoid the need of storing. Every organisation needs relaible , cost effective, quality suppliers to ensure a smooth production process. McDonalds will need reliable suppliers.

OUTPUT

Outputs refer to the end result ie the service or the product that is provided to the consumer. The goods produced must be safe and reliable. If the product fails to meet expected standards then the customer has the right to return the product. All customers have the right to be heard and a process of complaints must be attainable.

OUTPUTS

Outputs refer to the end result of an organisation's efforts- the service or product that is delivered or provided to the consumer. Some LSO's provide a product and a service such as a car manufacturer. Eg TOYOTA The output for a hospital may be a healthy person leaving the hospital.

QUALITY ASSURANCE

Quality assurance involves the use of a system so that an organisation achieves set standards in production. Most organisations adhere to International Organisation for Standardisation. (ISO) standards. These standards are measured by an independent body. Eg Hotel ratings ( 5 star ), Heart health approved products.

QUALITY CONTROL

Quality control involves the use of inspectors at various points in the production process to check for problems and defects. Expected standards are set and then compared to actual performance. Eg metro trains, no of late trains ambulance, response times

THE MANAGEMENT OF QUALITY

Quality refers to the degree of excellence of goods or services and their fitness for a stated purpose. A quality product must be reliable, easy to use, durable, well designed and delivered on time. In some industries, mistakes can be life threatening. Eg ambulance, police force, army

TANGIBLE AND INTANGIBLE PRODUCTS

Some LSO's produce TANGIBLE PRODUCTS (GOODS) whist some LSO's produce INTANGIBLES (SERVICES) Many LSO's today produce a combination of both manufactured goods and services. Products such as cars or electronic equipment often come with a warranty and other services. When a customer enters a contact with an internet provider, they will receive a service (their broadband connection), a modern and other goods necessary to enable the connection EG: cars and warranty

MATERIALS MANAGEMENT (7)

Supply chain is the range of suppliers from which the organisation purchases materials and resources. A reliable supply chain is essential because: A. Production would stop. B. Quality is compromised. C. Unable to meet customer orders.

TOTAL QUALITY MANAGEMENT

TQM is an ongoing, organisation-wide commitment to excellence that is applied to every aspect of the organisation's operation. Every employee must be commited to providing a quality product. The aim is to be defect free and be totally customer focused. " Do it right the first time" because this saves money and time in the long run. TQM involves three major approaches: A. Employee empowerment B. Continuous improvement C. Customer focus

THE OPERATIONS FUNCTION AND THE RELATIONSHIP WITH BUSINESS OBJECTIVES AND BUSINESS STRATEGY

The core objective of all organisations is to efficiently produce goods or services. Operations management is the strategy used to achieve this objective and is pivotal to the success of all organisations. Production involves the skilful bringing together of resources such as, finance equipment, management, technology and people to create finished goods and services through a series of operations. How the operations management function impacts an LSO's competitiveness because it will establish the quality of the good or service, the overall cost of production - The operations management function therefore impacts on whether the LSO is achieving its objectives that is, being profitable, increasing its market share, providing a return for investors and contributing to the wellbeing of the community

C. CUSTOMER FOCUS

The customer must always be served. We should treat each employee as an internal customer. What are new ways we can serve the customer?

The role (of the operations manager) is complicated and involves

The organising and ordering of inputs The smooth flow of production The quality of all goods and services And the implementation of technology to produce those goods and services

ROLE OF THE OPERATIONS MANAGER

The role of the operations manager is to ensure the most efficient means of producing those goods and services, whether the LSO can meet customer demand for the production or service.

TRANSFORMATION

The transformation process is the conversion of inputs into output ( goods and services ) Management has the responsibility to provide a safe workplace. Employers must provide employees with appropriate conditions and pay which meet minimal legislative standards. Equal opportunity legislation ensures the LSO's employment practices are based on merit and not discriminatory.

B. CONTINUOUS IMPROVEMENT

This involves an ongoing commitment to achieving perfection. There is a continual pursuit of improvement. How can we do things better? What can we do to minimise waste? How can we contribute to the community? How can we improve the conditions for our employees? What are other organisations doing? What is best practice?

TRANSFORMATION

This is the conversion of inputs ( resources) into outputs ( goods and services ) Ford motor company, for example take all the parts such as a windscreen, tyres, motor, steering wheel and transform them through design, manufacturing and assembly into a new motor vehicle. Transformation is different for a manufacturing business than for a service business. A manufacturer produces a tangible product but a service business provides an intangible product. A manufacturer would use machinery, robots and computers to transform inputs into outputs. Services rely heavily on customer relations.

INPUTS

Inputs are the resources used in the process of production. materials including raw materials and parts converted in the transformation process capital equipment, EG plant machinery, equipment and property labour, refers to the people involved in the operations function information, from a variety of sources time and its efficient use money which is flexible so it can be converted into materials, labour or capital

MATERIALS MANAGEMENT (2)

PRODUCTION PLAN: is an outline of the activities undertaken to combine resources to create goods and services. This plan must include What to produce? How to produce it? What quantity to produce?

--THE MANAGEMENT OF QUALITY--

Strategy 3 in optimizing operations

--USE OF TECHNOLOGY--

Up to date technology is an important strategy in operations management

TANGIBLES

are goods that can be touched. They are the physical products that can be handed and stored before they are sold to the customer. There is little customer involvement in production

INTANGIBLES

include services, which cannot be touched EG seeing a finical advisor or specialist. Services cannot be stored and the customer may need to be present when the service is being delivered EG getting a hair cut

AREAS OF OPERATIONAL COMPETITIVENESS

• Competitive advantage is when an organisation is able to produce goods and services better than its competitor. • Organisations will attempt to compete on cost in their operations eg eliminating waste, use automated production systems, bulk buy inputs, produce standardised products for larger markets. • Organisations compete on quality that is they aim to produce the best product or service available. They can do this as a marketing strategy, immediately respond to customer needs and tailor products to customers. • Organisations can compete on speed of delivery. Managers make decisions about ensuring faster transformation processes. They do this by creating work teams that require minimal supervision, have flatter management structures and promote a sense of urgency within the organization, identify and act on trends quickly.

COMPUTER AIDED DESIGN CAD), COMPUTER AIDED MANUFACTURE (CAM), COMPUTER INTEGRATED MANUFACTURING (CIM)

• Computer aided design (CAD) software generates three-dimensional diagrams from a set of given input data (parameters); 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. • Computer aided manufacture (CAM) is software used to allow the manufacturing process to become computer directed by designing and controlling the process. • Computer integrated manufacturing (CIM) uses a 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.

OFFICE TECHNOLOGY

• Developments in business technologies have created the opportunity for people to do more work in less time, which means a greater range of tasks can be completed in their working time. • Technologies used in business today include: computers, videoconferencing, databases, mobile telephones, Web 2.0 (including web sites such as YouTube, MySpace and Facebook), paging services, personal organisers, printers, EFT and EFTPOS, photocopiers.

IMPROVING PRODUCTIVITY

• Every LSO is looking to have an edge over their competition. One way to achieve this edge is to improve the productivity. ie the amount of output produced compared to the input required in production • Productivity can be improved by reducing the amount of input required to obtain the same level of output or increased output. • Alternatively, productivity may rise if input remains the same but output increases, therefore getting more out of the input.

TECHNOLOGY

• LSOs need to have up to date technology in order to compete effectively. • The use of technology can speed up processes and maximise the use of raw materials in both the service and manufacturing sectors. • Technology can improve quality, leading to increased profitability.

CUSTOMER RELATIONSHIP MANAGEMENT

• Refers to the systems that organisations are introducing to maintain customer contact. • CRM software can be used to improve customer service and increase competitiveness as it stores information about existing and potential customers.

MANUFACTURING TECHNOLOGY

• Robots are used in engineering and specialised areas of research, as well as on assembly lines where a programmable machine capable of doing several different tasks is required. • Robotics allows a degree of precision and accuracy generally unmatched by human labour. • Robots and robotics are very high cost items that are unaffordable for most small and medium-scale manufacturers.