TOPIC ONE - OPERATIONS INFLUENCES OF OPERATIONS
MANAGEMENT
ROLE OF OPERATIONS MANAGEMENT
● globalisation, technology, quality
● Strategic role of operations management expectations, cost-based competition,
- cost leadership, good/service government policies, legal regulation,
differentiation environmental sustainability
STRATEGIC ROLE = Achieving a competitive GLOBALISATION = Removal of trade barriers
advantage by maximising profits for the between nations (transfer of capital, labour, ideas,
long-term. technology and resources, requires a more reliable
and flexible supply chain manag.
COST LEADERSHIP = Having the lowest operations
costs to be the most price-competitive in the industry TECHNOLOGY = The design, construction and
(economies of scale, use of standard components, application of new devices, methods and machines
lean production) used in the operations process (^ flexibility,
communication, efficient processes)
GOOD/SERVICE DIFFERENTIATION = Having a
product/service that is uniquely different from its QUALITY EXPECTATIONS = Determines how
competitors (better quality, faster delivery, products are designed, manufactured and delivered.
customer-designed products, technology)
Quality expectations with Goods = Quality of design,
● Goods and/or services in different fitness for purpose, durability
industries
Quality expectations with Services =
Professionalism of the service provider, reliability of
TYPES OF GOODS = Standardised goods,
the service-provider, level of customisation
customised goods, perishable goods, non-perishable
goods, intermediate goods
COST-BASED COMPETITION = Reduce operational
costs in order to gain a price advantage (outsourcing,
TYPES OF SERVICES = Self-service, standardised,
using cheaper inputs, updating technology, reducing
customised
quality, relocating operations to a cheaper location)
EXAMPLES OF INDUSTRIES:
GOVERNMENT POLICIES = Methods used by
- Manufacturing industry (tangible, stories,
governments to encourage businesses to be more
capital intensive)
competitive and innovative (Taxation rates, WHS,
- Service industry (intangible, labour intensive,
Environmental policies, Employment relations, Trade
customizable, customer interaction)
and industry practices)
● Interdependence with other key business LEGAL REGULATIONS = Laws that affect operations
functions of Australian businesses include: Environmental
protection, Consumer protection, Anti-discrimination,
INTERDEPENDANCE = Mutual reliance that the Taxation
4KBF have on one another
ENVIRONMENTAL SUSTAINABILITY = Regards the
use of resources in a sustainable
manner in order to preserve resources + the
environment for future generations (Reduction of use
of non-renewable resources, sustainable use of
renewable resources)
, ● corporate social responsibility PROCESSES OF OPERATIONS MANAGEMENT
CSR = The relationship between busines, society ● Inputs
(stakeholders) and environment, (doing more than
just legal compliance) ○ transformed resources (materials,
- Ensuring inputs and transforming resources information, customers)
are sourced ethically:
- Minimising environmental damage and waste TRANSFORMED RESOURCES = resources that will
during processes be changed into finished products by operations
- Ensuring recruitment practices are diverse processes > transformation adds greater value to
and inclusive these resources
- Ensuring transparency regarding products
○ transforming resources (human
○ the difference between legal resources, facilities)
compliance and ethical
TRANSFORMING RESOURCES = The inputs
responsibility
(resources) that cause the transformation process.
ETHICAL COMPLANCE = one step more than legal
● transformation processes
and can determine a business’ integrity and good
intentions → which in turn can lead to a positive
Transformation and valute adding differs between
reputation and repeated sales.
manufacturing (highly automated) vs. service
businesses which are more customer-orientated and
LEGAL COMPLIANCE = Requires businesses to
labour intensive.
follow the law (prescribed standards of behaviour)
(minimum wages, working conditions, no misleading
○ the influence of volume, variety,
advertising, no child labour)
variation in demand and visibility
(customer contact)
○ environmental sustainability and
social responsibility VOLUME = How much is produced
ENVIRONMENTAL SUSTAINABILITY = Protection of VARIETY = The range of g/s
the environment and resources - no waste, minimises
environmental damage) VARIATION in demand = The amount of product
desired by customers
SOCIALLY RESPONSIBLE = Involves taking actions
or making decisions that are morally and ethically VISIBILITY = Nature of customer contact or
correct and are in the best interest of the community. ‘feedback’
(Expanding the business while providing for the
greater good of society) ○ sequencing and scheduling – Gantt
charts, critical path analysis
SEQUENCING = The order in which activities occur
SCHEDULING = The length of time activities take to
complete
- GANTT CHARTS = Bar graph outlines what
needs to be performed, establishes order and
how long activities are expected to take
(forces planning and guidees time
management, actual progress is easily
compared to planned progress - doesn't show
relationship between tasks.
, - Answering questions and providing
- CRITICAL PATH ANALYSIS = The critical information
path is the shortest length of time it takes to Technology has changed the way customr services
complete all necessary tasks (establishes are delivered (cuts costs + alienation)
firm and specific order, increase efficiency,
aids decision making and better allocation of ○ warranties
resources)
WARRANTY = A promise made by business that they
○ technology, task design and process will correct any defects in the goods they produce or
layout services they deliver. The amount of warranties:
indicates the effectiveness of business processes.
TECHNOLOGY = The application of science or - Warranty claims lead the business to improve
knowledge that enables people to do new things or the transformation process relating to cost
perform established tasks in new or better ways leadership.
(flexible, volume, efficient, comp. adv.)
STRATEGIES OF OPERATIONS
TASK DESIGN = How a task is classified and how it MANAGEMENT
is to be performed by breaking it down into a series of
steps to contribute to the final goal. (improved skills
● Performance objectives – quality, speed,
and knowledge, increased output and quality control,
dependability, flexibility, customisation,
decreased errors and costs)
cost
PROCESS LAYOUT = the physical layout of
machinery or equipment by their function. It deals with PO = Goals that relate to particular aspects of the
high-variety, low volume production (flexibility, transformation processes.
customisation, efficiency)
QUALITY = Often determined by consumer
○ monitoring, control and improvement expectations, which are used to inform production
standards - quality of design, conformance and
MONITORING = Measuring actual performance service
against planned performance (continuous)
SPEED = The time it takes for the production and the
CONTROL = The corrective action phase (intention operations processes to respond to changes in
compared to what actually happened). market demand (productivity).
IMPROVEMENT = The systematic reduction of DEPENDABILITY = How consistent and reliable
inefficiencies and wastage, poor processes and products/services are, how well designed and made
elimination of bottlenecks. (Kaizen - continuous they are and whether they meet expected consumer
improvement) standards.
● Outputs FLEXIBILITY = How quickly operations processes
can adjust to changes in the market. Time and
The purpose of the operations function is to produce flexibility are related, thus faster processes = greater
outputs that have a value to customers that is greater flexibility
than the cost of its inputs.
CUSTOMISATION = The creation of individualised
○ customer service products to meet specific needs of the customer.
CUSTOMER SERVICE = How well a business meets COST = The minimisation of expenses in processes
and exceeds the expectations of customers in all to increase profit margins.
aspects of its operations. Involves: Businesses seek to become more efficient and thus
- Handling customer returns promptly allocate costs better
- Anticipating customer needs
, - The possible relocation of aspects of
operations, the increased cost of logistics,
● New product or service design and storage, and distribution, managing different
development regulatory conditions between nations. the
increasing complexity of overall operations
when sourcing from diverse locations.
PRODUCT DESIGN AND DEVELOPMENT = The
use of innovation to create or renew products
enabling businesses to grow and remain competitive. ● Outsourcing – advantages and
- SPECIFIC APPROACH > the preferences disadvantages
and desires of consumers, as identified by
market research, determine which products OUTSOURCING = When a service is performed by
are designed and developed. an external provider that specialises in a particular
- INNOVATION APPROACH > changes and business function, it will do so at a lower cost and with
innovations in technology allow new, more greater effectiveness than the same task done within
advanced products to be made with greater the business hierarchy.
functionality.
Advantages
SERVICE DESIGN AND DEVELOPMENT = When - Simplification
designing services, a business must determine both - Efficiency and cost-savings
the explicit and implicit services, as well as cost and - Increased process capability
any goods that may be required to deliver the service. - Access to skills/resources lacking within the
- EXPLICIT SERVICE > tangible aspects of the business
service, such as application of time,
expertise, skill and effort. Disadvantages
- IMPLICIT SERVICE > intangible aspect, - Decrease in quality
based on a feeling of being cared for e.g. - Payback periods and cost
massage. - Communication and language - cultural
differences
● Supply chain management – logistics, - Loss of control standards and information
e-commerce, global sourcing security.
SCM = Involves integrating and managing the flow of ● Technology – leading edge, established
supplies through inputs, transformation processes
(throughput and value adding) and outputs to best TECHNOLOGY = Applies to and improves inputs,
meet the needs of the consumer. transformation processes and outputs, or whether it
makes the managerial and administrative functions
LOGISTICS = Includes distribution, transportation. smoother.
Storage, packaging…
E-COMMERCE = Involves buying and selling of - LEADING EDGE = The technology that is the
goods and services via the Internet that is, business’ most advanced or innovated at any point in
conducted on the internet) time. (create products more quickly and to
higher standards, reduce waste, operate
- E - PROCUREMENT = The use of online more effectively and efficiently)
systems to manage supply, allow supplies. - BLEEDING EDGE = Technology that is so
Direct access to the businesses level of new it has a greater degree of risk in terms of
supplies (B2B) unreliability for those who adopt it.
- ESTABLISHED = Technology that has been
GLOBAL SOURCING = Business purchasing developed and widely used and is simply
supplies or services without being constrained by accepted without question. (e.g CAD, CAM,
location. Robotics)
- Cost and expertise advantages, access to
new technologies and resources ● Inventory management – advantages and
disadvantages of holding stock, LIFO
