Operations Flashcards
The strategic role of operations management – cost leadership
SQELS
Aiming to have the lowest costs or being the most price competitive in the market/flexible.
- economies of scale - Producing a product on mass → buying inputs in bulk or tech
- lean production - No wastage with short lead times
- quality control - Setting standards, high expectations → minimize returns, reliability
- standardized products - Mass production, mass customization
- supply chain management - global input - cheaper inputs, spread risks
The strategic role of operations management - good/service product differentiation
Product differentiation is a marketing strategy to distinguish products and increase customer differences to increase sales and profits. Profit differentiation occurs in operations, as it is implemented to increase profit by increasing sales.
Goods are differentiated by:
- quality
- varying feature
- additional features
Service are differentiated by:
- amount of time
- level of expertise
- qualifications
- quality of technology
Goods and/or services in different industries
Dependent on whether the business is producing standardised or customised products.
Perishable goods:
- High standard of quality, safety and cleanliness e.g. rockmelons and berries
- Very short lead times and quick distribution
- Appropriate and robust packaging and cold storage processes
Non-perishable goods:
- Manage all aspects from sourcing to production and distribution
- Implement effective inventory control(managing stock)
- Be highly responsive(flexible) to market changes/demand
Intermediate goods:
- Sometimes a completed good forms an input for another good. For example screws for manufacturing, tyres for cars. These items go through two information processes.
Services:
- Standardisation can minimize costs for example the standardization of customer service in fast-food restaurants.
- Self-service - encourage customers to use self-service features allowing them to focus on customers wanting customization. For example, the financial sector, travel
Interdependence of operations
Marketing:
- Develops market research to determine the product consumers need and want e.g. features, design, therefore operations will produce that product.
- Marketing mix(7 p’s) will sell the products to consumers therefore it is a revenue centre
- The strategic role of the business which is profit
- Cost leader means the business can have price flexibility therefore price
- Quality of inputs relates to pricing(high quality input - the good will have an increased price)
Finance:
- Finance provides the source of funds for production e.g. to update technology and leases
Human resources:
- Selection of employees(skills/expertise)
- Training - equipment/technology, increased confidence - motivation ….
- Training reduces accidents/faulty products and returns therefore decreased wastage and increases efficiency
- Maintenance increases motivation which leads to increased productivity - sales - profit, increased customer service
Influences - globalisation
- Globalisation allows for trading between different nations/countries
- National economies become integrated Eg: American economy and the Australian economy work together
- Businesses are producing for a global market therefore global branding and standardised products.
- Needs to be near supplier → linked to logistics/inventory management. (e.g - Bonds - moved factories to China but design clothes in Australia)
- Quality management: needs to be higher due to the global market
Supply chain management and the global web - The range of suppliers a business has and the nature of its relationship with those suppliers.
- A business needs a very predictable and reliable supply chain that is highly responsive to changes in demand as experienced by the business.
- Global web refers to the network of suppliers a business has chosen on the basis of lowest overall cost, lowest risk, and maximum certainty in quality and timing of supplies.
Influences - technology
- Technology is the design construction and application of innovative ideas, devices and machinery used in the operations process, to meet the needs of customers
- provides competitive advantage/updated constantly
- lead times
- ordering(website is easy to navigate)
Influences - quality expectations
- Quality is how well designed, made and functional goods are and the degree to which services are conducted
- Quality and expectations cannot be separated as consumers’ expectations being met determine quality.
- Some quality expectations for goods include design, purpose, and durability
- Services include professionalism, reliability, and level of customization
Influence - Cost-based competitions
- Derived from determining break-even points and then applying strategies to create cost advantages over competitors
- Recognizes that prices cannot keep increasing, ∴ reducing costs is a way to maximize profits when revenues are fixed.
- They focus on reducing costs to a minimum while maintaining profit margins.
Influence - Government policies
Operate in a political-local environment, policies change according to social expectations (e.g - carbon pricing: the term used for putting a price on carbon), taxation rates, WHS, public health policies, all impact on business operations.
Influence - Legal regulations
The range of laws with which a business must comply is collectively termed ‘compliance’. Particular laws influence how practices and processes are conducted. WHS, Training and Development, Fair Work, and anti-discrimination laws, apply rules to public health.
Influence - Environmental sustainability
The business operations should be shaped around practices that consume resources today without compromising access to those resources for future generations. Aspects of this are renewable resources and a reduction in the use of non-renewable resources
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.
CSR - The difference between legal compliance and ethical responsibility
- Demonstrating ethical responsibility is going beyond the minimum requirements set out by the law (e.g - window airbags not just driver and passenger).
- Areas of compliance: labor laws, award wages, business licenses, zoning, human rights, anti-discrimination.
- A business can decrease compliance by outsourcing different areas of operations (e.g - manufacturing offshore (decrease labor law worries)
CSR - environmental sustainability and social responsibility
- Economic growth should not occur with pollution, loss of forest, degrading air, water, or forests.
- Balance between economic concerns and environmental concerns.
- Businesses need to be responsible for the protection of the environment (e.g - decreased carbon output)
Inputs
Transformed resources:
- Materials; basic elements
- Information; knowledge from research, investigation, finance, can be external or internal
- Customers; their choices shape inputs
Transforming resources:
- Human resources: considered job design, targeted and appropriate training, flexible work practices and open communication
- Facilities: plant/factory/office and machinery used - determine the best design/layout(efficiency) of the facilities
