Human resources aim
Aim- To ensure that the firm has the right quality and quantity of labor to meet its overall cooperate objective.
Includes: ⎫ Recruitment ⎫ Training ⎫ Motivation of employees ⎫ Ending the employment of staff
Finance and accounts aim
Role- Ensues that finds are available for a smooth and continuous flow of work.
Role- Marketing department needs to understand and anticipate the needs and wants of its customers. Leads to the design of correct marketing strategies.
Aim - The operations management function is responsible for the production of a firms good and services.
No matter what area the business is in, the objective of the operations function remains the same – to provide the things customers require so that they enjoy their purchases and become loyal customers.
Manufacture of large quantities of a standardized good.
⎫ Involves large amounts of unskilled labor
⎫ Wide research and development
⎫ Selection initiatives to ensure there’s enough staff
small-scale manufacture of a product that is then sold to a specific
section of the market.
- Small number of highly skilled staff.
- HR focuses on motivating and retaining current experienced employees.
Factors of production:
• Land– the actual piece of land or forest, or even the sea, together with all natural resources found on or in it, such as minerals, oil, trees and fish.
• Labour– human effort. The people who produce the product or provide the service: workers, employees, management.
- Capital– can be discussed in two ways: the money needed to open a business; or the tools, machinery and equipment used by a business.
- Entrepreneurship– an entrepreneur is the person who organizes the factors of production to create goods and services. This risk-taking activity creates the enterprise or business.
The role of the operations department
Turn the factors of production into goods and services that customers want to buy.
the output of the operations management department. This could be anything from ahaircut (a service)to a lump of coal (a good).
these are products that are largely tangible (you can touch them). Cars, computers and chocolate bars are examples of goods.
these are products that are largely intangible (you can’t touch them). Examples include watching a movie or renting a car. Once the service is finished, there is little physical evidence of what you consumed.
A pure service
Business is one in which theserviceis the primary entity that is sold.
A pure good
Products that do not include any service element.
-Food from a grocery store with self-checkout.
A business organizes its operations in a way that ensures that actions today do not have a negative impact on the future generations.
Three areas of sustainability that should be taken into account:
1) Ecological sustainability
2) Social sustainability
3) Economic sustainability
Three p’s of sustainability:
Refers to the use of the natural resources and the effect their current consumption will have on future generations. Larger population = Larger consumption of resources.
Economic sustainability –
Focuses on a business making the most efficient use of their resources. Encourages business objectives to focus on long term growth rather than short term.
Ability of a business not only to meet the needs of its current stakeholders, but also to support future needs of future generation of stakeholders. Current stakeholders can be divided into external and internal.
A business can meet the needs of its internal stakeholders, such as workers, employees and managers by adopting Maslow’s pyramid of needs.
Maslow’s pyramid of needs.
- Basic needs– provide a ‘living wage’ so that full-time employees can earn sufficientincome to support their families.
- Security needs– provide contracts to secure the job. Ensure work places and products are safe. Provide insurance for employees.
- Social needs– redesign jobs so that teamwork is possible. Provide facilities and opportunities for employees tosocialise (e.g. a cafeteria).
- Self-esteem needs– have a reward system in place to recognise and reward high-performing employees with promotions, bonuses and fringe benefits. Continually update all employees’ skills with ongoing trainingprogrammes. Offer apprenticeships to young unskilled workers.
- Self-actualisation needs– offeremployees time and resources to meet their personal goals.
Businesses can also affect the social sustainability of external stakeholders, for example:
- Suppliers– offer fair,long-term contracts tosuppliers, aiming to develop mutually beneficial partnerships.
- Local community– attempt to minimize redundancies. Provide sponsorshipfor local community events and charities.
Job production –
Producing unique items that are tailor-made to meet the needs of individual customers
Batch production -
Involvesproducing items in identical groups. Small changes are made in each batch so that a range of customers’ needs can be fulfilled.
A highly automated assembly process of a product.
Flow production / process production
Involves the continuous production of a single product.
The assembly line is split up into teams to complete tasks. Each team member is multi-skilled so each person can do all of the tasks in the cell.(a form of mass production that divides work into teams know as cells)
Looks how well a company can turn its inputs into a useful goods and services.
The two are interconnected.
If waste reduces, efficiency should improve.
Any input that is not transformed into goods and services. Any part of the production process that does not add value to the final consumer.
The two are interconnected.
If waste reduces, efficiency should improve.
Types of waste:
- Energy – raw materials
- Talents -
Lean production –
An umbrella term that covers a range of techniques aimed at reducing waste.
Overall objective – produce high quality output using minimal resources. Objective can never truly be achieved matter how much waste is reduced; potential savings can always be found in the future. Helps companies to cut costs.
Principal methods of lean production:
- Kaizen (continuous improvement)
- Just in time (JIT)
- Cell improvement
- Kaizen (continuous improvement)
Japanese phrase meaning “change for the better” it’s both a process and a philosophy.
Involves business holding regular, scheduled meetings where staff are invited to give their options and suggest improvements.
According to Toyota in a typical year 3,000 suggestions are made at each factory.
These meetings can reduce costs and drive up product quality. They can also make staff feel respected because their ideas are taken seriously, can lead to a boost in motivation and further gains in productivity
Just-in-time (JIT) –
Production aims to minimize costs by reducing or even eliminating the cost being help by a firm.
JIT works on placing smaller regular orders that are delivered just in time for them to be used. As a result stores receive deliveries 24/7 meaning shelves are empty or understocked.
Regulates the supply of components in a factory through the use of card system/signal.
Kanbanis astock control system that uses signals or cards to ensure supplies arrive at the production linejust when they are needed.Ithas a similar aim to JIT, which is to reducestocks. However, while JIT can be applied to almost any business, kanban is focused on manufacturing and production. Kanban has the additional advantage ofcontrolling the transfer of materials between different stages of production at the exact time they are needed.
A notification system that alerts workers to potential problems in the manufacturing
(when you go to the fridge you take all products to make the sandwich instead of one at a time, to save time)
2) Straighten - make a place for everything
4) Standardize - develop rules to get repeat positive results
Toyota case study
–> International presence –> in 170 countries worldwide.
Second greatest car manufacturing in the world
Reasons for success:
⎫ Successful brand – developed a trusted brand based on quality
⎫ Innovation – first factory to embrace lean innovation (known as Toyota Production System) which is a faster, more efficient process which leads to less waste compared to the traditional batch and queue method of manufacturing. It also applied JIT (Just in
⎫ Time manufacturing) and smart automation. (uses all innovation above)
- People - 2,500 people mainly capital intensive
- Jidoka – automation with a human touch
- Transport - Burnaston plant located on the junction of A50 and A38 roads. Both roads have connections to the rest of the country (M1, M6 and M42).
- Burnaston plant located close to the East Midlands International Airport with rail links to all parts of the UK.
- Transport makes it easy to receive supplies and deliver the finished goods.
• Labour - Derby is a traditional manufacturing location.
There are already Rolls Royce and Bombardier factories so naturally there is skilled labour available.
• Universities - Burnaston is near Derby, Leicester and Nottingham universities, all of which can provide skilled graduates and research facilities.
• Market - The UK has a population of 65 million and the EU has a population of 500+ million.
There is a huge potential market for Toyota to sell their products to.
• European Union - The UK is in the EU. Toyota can easily export their cars to countries within the EU as it is located in the UK.
• Energy - National electricity grid in the UK that all countries and areas are connected to, therefore Burnaston has a reliable supply of electricity.
Also, the Burnaston plant uses solar panels, which adds to the electricity supply and sustainability of the factory, which people value nowadays.
• Communications - The UK has a good broadband internet coverage and a comprehensive mobile and landline network.
Post is fast and reliable, therefore communications are quick and efficient.
- Recreation - Derby has a major football club (Derby Country), and also various recreation centres (e.g. David Lloyd Sports Centre), golf courses, cinemas and shopping centres (e.g. Westfield).
- Location - Burnaston is located close to the Peak District National Park, which is a relaxing place for workers.
- Production line - Cars that are being assembled travel along a conveyor belt, starting from the shell (body) of the car and having things added to it, until it is ready to drive off at the end of the belt.
Advantages of lean production:
80% reduction in waste production.
50% reduction in cost production.
50% of decrease in the manufacturing cycles.
50% reduction in Labor in the process.
The customer services are increased due to the inventory reduction by 80%.
Increase in the current amenities by 50%.
Advanced system flexibility to accommodate the changes and improving the requirements.
Further tactical strategies
Increasing the shipping and billing and thus improving the cash flow.
Disadvantages of lean production: Executive issues Cultural issues Management issues Implementation issues Technical issues.
Just in time (JIT) –
Stocks delivered as and when they are needed in a production process. Stocks are delivered just before they are used so buffer stocks are not needed.
Examples- Pharmacies. The bar codes on products keep the stock. They you buy them and they are scanned it will deduct the item from the stock. A message gets sent to the supplier with other purchases items. These items will be restocked all together the next day.
Just in case (JIC) –
A large buffer stock (minimum amount of stock) is held by the business in storage.
Cradle to cradle cycle
A model of designing and creating products so as to minimize negative effects on the environment and all stakeholders. It focuses on sustainability.
Bio gradable raw materials are used. These products are naturally broken down.
Focuses on the ideas of reuse and recycling.
Companies can apply the cradle-to-cradle ethos:
- Material safety–using non-toxic, safe materials to create products.
- Material reuse–maximizing the use of both recycled and recyclable materials.
- Use of renewable energy–reducing a company’scarbon footprint.
- Water conservation–reducing the amount of water that is usedin the production process and reducing water pollution.
- Social fairness–ensuring that no stakeholders are damaged as a result of production or use of aproduct.
Meets or exceeds the needs of the target market
1) Quality control - Occurs at the end of the production process where goods are inspected either in samples or all by inspectors.
2) Quality assurance - emphasis is placed on staff checking their work, rather than the final exceptions. Could include:
- Product design
- Production process
- Component delivery
- Regular inspections
3) Quality improvement - continuous process where it is always possible to improve product quality.
The methods of managing quality
1) Total quality management - every employee is responsible for the quality of the product
2) Quality circles - regular meeting held to discuss potential improvements
3) Benchmarking - process of comparing yourself with the best and seeing what you can learn from their techniques.
- identify the best company in the market
- Work out how they do things and copy them
Factors that affect location:
- Labour cost
- Land costs
- External economies of scale
- Government assistance - grants when moving to locations with high employment
- Company history
- Internal factors
External economies of scale
External economies of scale are those factors that lead to a lower average cost of production because of similar industries clustering together.
- skilled labour
- shared infrastructure
- access to suppliers
- improved image
External company that is hired to carry out a task on behalf of another company.
Hiring a party outside a company to preform services and create goods that were traditionally preformed in house the company.
Ending contracts with external suppliers to undertake previously outsourced business function.
Relocating a business function to another company
Outsourcing refers to an organization contracting work out to a third party, while offshoring refers to getting work done in a different country.
a place where the firm decides to site its operations
The movement of s business from one region or location to another.
Clustering infrastructure facilitate business activity-
having all resources in one area due to the businesses their
Industry that makes something that gains volume or weight during production. (finished product weighs more than the raw materials)
An industry in which the inputs (materials, etc.) weighs more than the final product. (raw materials weigh more than the final product)
When a company will have lots of stores in the same place (starbucks)
A situation that occurs when the volume of a product or service in a market place has been maximized
amount of people available to work in a certain region
Refers to all the stages of production in which the product passes through.
Supply chain management
The process of working with all the suppliers is an attempt to maximize efficiency and deliver the maximum possible value to the final consumer.
Supply chain factors
- product quality
- lead times
Stock control chart
An easy way to monitor and analyze stock levels. These charts record when stocks are delivered and sold.
Maximum stock level
The total amount of inventory a firm wishes to hold, using current storage facilities
Buffer stock level / minimum stock
Stock that is held just incase there is unexpected orders or late delivery.
How long it takes for a supplier to make a delivery
The point when new stock is ordered from a supplier. Takes into account lead time and buffer stock.
The amount of stock that is ordered from a supplier
Unit cost definition + formula
Is the average cost of making one unit of output.
Calculation: total cost / output
Productivity rate definition + formula
Is a measure of the efficiency of resources used in the production process.
Calculation: total output / total input x 100 = __ units of production
Labour productivity definition + formula
Is the average output per worker for a given time period.
Total output / total numbers of workers = __ units of production
How to increase productivity levels:
- improve training and staff motivation
- Improve management techniques
- increase use of technology
is the % of the firms total capacity that is currently being used
Actual output / productivity capacity x 100 = __ %
Cost to buy definition + formula
is the total cost of subcontracting production to a supplier
Price x Quantity = $__
Cost to make
is the total cost of production if manufacturing is kept in-house.
Fixed costs + (Variable costs x Quality) = $___
Research and development –
is the systematic process of developing new ideas and processes that may be turned into future products.
the process of coming up with new ideas
commercial use of those ideas
the process of creating something completely new. Product development are unique and often create entirely new markets for themselves.
Is changing or improving something that already exists. We see it every day.
Innovation can begrouped into four different areas:
1) product innovation
2) positioning innovation
3) process innovation
4) paradigm innovation.
is the process of developing and improving existing products. Examples include wearable technology such as the Apple Watch or hybrid cars such as the Toyota Prius
occurs when a product is marketed to a new target audience.
can be defined as developing new methods of production or product delivery. Online retailer, Amazon, is investing millions of dollars in developing the new drone distribution service.
can change an entire industry. in particular, is the change in the underlying mental models which frame what the organization does or alternatively how the company frames what it does.
Contingency planning -
outlines the immediate actions a company should take in the event of a crisis
In the event of a major incident, contingency plans ensure the aftermath is less chaotic. With a detailed contingency plan, people know what to do, where to go and where to seek help if they need it.
concerns the steps a company can take to limit the damage caused by an unpredicted event or crisis.
Aim- For it to return to normal business operations as swiftly as possible.
Effective crisis management depends on four things:
Factors that affect crisis management
Advantages an disadvantage air contingency planning
Adapting something that already exists
Creating something new
Manufacturing and reducing waste
How much of the capacity is being used