Operations Strategies - created from Mind Map

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Performance Objectives

Quality

D: How well a product is made/how well a service is delivered.

How it's measured: Quality of design, performance and service.

Example: Sony vs Teac

Speed

D: The time it takes to make a product and the time it takes for production and operation processes to respond to changes in market demand

How it's measured: Wait times, lead times, processing times

Example: Hilux lead time - 6 months

Dependability

D: How consistent and reliable a business's products are. Highly durable = dependable

How it's measured: How long the product lasts / warranties help measure this as products are always dependable if they last as long as promises.

Example: McDonald's- same products everywhere (mainly) and a refund if the wait is too long.

Flexibility

D: How quickly the operations sector can adjust to changes in the market.

How it's measured: How well they can change for demand in a period of time.

Example: A sudden increase in demand can cause pressure on capacity.

Customisation

D: Creation of individualised products to meet the specific needs of the customers.

How it's measured: Is it meeting the needs of the customers?

Example: Restaurants customising their meals for specific orders to please customers.

Cost

D: Minimisation of expenses so the process is as cheap as possible.

How it's measured: Cost determines price, higher efficiency means lower costs.

Example: KPI's on product cost and revenue.

New Product or Service Design and Development

Two different approaches that determine product design and development:

-consumer preferences

-changes and innovations in technology

Important functions of this:

-quality

-supply chain management

-capacity management

-cost

Service design and development differs from the design and development of products as service are intangible and 'consumed' as they are produced.

A service can be:

-explicit (the application of time, expertise, skill and effort)

-implicit (the feeling of being 'looked after')

Apple: one of the main reason's for Apple's continued success conducted the power of product design and development. Their reputation is of an innovative company with modern tech products, earning loyalty among consumers.

Supply Chain Management

Supply chain: the whole system of businesses and interactions involved in the creation of a product and its transfers to customers.

Managers are concerned with speed, reliability, and cost of the supply chain.

Three aspects of supply chain management:

1. Global sourcing

2. E-commerce

3. Logistics

Global sourcing: when businesses obtain production inputs from suppliers globally, to take advantage of: lower costs, other features of quality.

Benefits:

-lower cost (due to cheaper suppliers)

-improved quality

-selling products overseas means shorter supply chain

Challenges:

-distance, language, cultural and legal differences may cause delays and unforeseen disruptions

-managers must maintain strong relationships with global suppliers.

E-commerce: the buying and selling of goods and services via the internet

B2B:(business to business) direct access from one business (supplier) to another (the buyer).

-Allowing the supplier to access the needs of the buyer and meet them in a timely manner, thus reducing the delays in supply chain.

B2C: (business to consumer) businesses sell directly to the consumers.

-With a high Aus dollar online purchases from other nations can be half the cost.

Logistics: the management of the movement of goods, resources, and information through the supply chain and delivery of finished goods to consumers.

This involves: planning, coordinating and boosting the efficiency of activities like warehousing, packaging and transport (air, sea, nail, road).

Outsourcing

Outsourcing involves the use of external providers to perform business activities. The providers may specialise in the area that you require them to (such as accounting).

Advantages

-Simplification (reduction of activities needed to be done)

-Efficiency and cost savings (such as access to labour off shore)

-Increased accountable (through service agreements/contracts, the worry of quality is someone else's)

-Able to focus better on core business or key competencies

Disadvantages

-payback periods and cost (how long it takes to repay the cost or organising outsourcing and make the required organisational changes)

-communication and language (issue between the business and outsourcing vendor. Communications about the length of the relationship, agreed service levels and which KPI measures used, must all be clear to avoid misjudgement/misunderstanding.

-loss of control of standards and information security (non-specifics results in the outsourced organisation to make decisions resulting in the product not turning out as desired…)

-hierarchies (a higher sort of hierarchy structure which is further from the desired, modern type of management structure)

-organisational change and redesign (downsizing the business size. Employees may also desire to work for the outsourced company now that they are more trained in the area that you can no longer provide for them as much.)

-loss of corporate memory and vulnerability (information about the process being leaked to other businesses. 'Shadow teams' prevent this.)

-Information technology

Technology: the thoughtful application of technology helps a business create a competitive advantage. Two types:

-Leading Edge: -The most advanced or innovative at any point in time; can help businesses to:

-reduce waste

-create products faster and to higher standards

-operate more effectively

-Established:

-that is widely accepted and used- helps to establish basic standards for productivity and speed

Both forms of technology give businesses efficiencies, productivity gains and a capacity to improve operations processes

Inventory management

Advantages and Disadvantages of Holding 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.

Advantages

-having stock on hand means customers' needs can always be met

-if a particular line runs out, an alternative can be offered, thereby generating income instead of a lost sale

-reduces lead times between order and delivery

-generates immediate revenue, as it is hard to generate revenue from partially transformed goods

-demand is always met at every store, as stock can be held at a central distribution centres

-a store of stock allows the business to promote the use of products in non-traditional or even new markets

-older stock can be sold on sale, generating cash flow as it attracts sales of other products

-stocks are assets and reflect on the business's balance sheet

-making products in bulk may reduce cost as there are economies of sale, which could result in being cheaper than the price of holding stock

Disadvantages

The trend is to hold as little stock as possible, the 'make-to-order' approach is adopted.

-the costs on holding stock (storage charges, spoilage, insurance, theft, handling expenses)

-invested capital, labour and energy cannot be used elsewhere as it has been used to create the stock

-cost of obsolescence, can occur is stock remains unsold

LIFO (last-in-first-out)

Method of pricing inventory assumes that the last goods purchased are also the first goods sold and therefore the costs of each unit sold is the last cost recorded. (Mainly for recording less profits, therefore less tax to be payed.)

-May overstate tock cost and understate profit (especially when cost of goods rises over time). It also may undervalue stock on hand at the end of the period

FIFO (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 if the first cost recorded.

-May understate stock costs and overstate profits. Stock at the end of the period may be overvalued.

JIT (just-in-time)

JIT inventory management approaches ensures that the exact amount of material inputs will arrive only as they are needed in the operation process -a lean production process.

Saves money:

-no expensive holding or insurance costs

Requires: -flexible operations processing

-be able to respond quickly to change in demand

-Reliable supplier delivered which must be received at the appropriate time

Quality Management

QM refers to those process that a business undertakes to ensure consistency, reliability, safety and fitness of purpose of product.

Operations managers can implement one of several approaches to quality management.

1. Control (KPI's ensure this)

2. Assurance (standards being met)

3. Improvement

Quality Control: involves the use of inspections at various points in the production process to check for problems and defects. e.g. does a hinge door open and close, in service businesses an inspection of employee performance may be conducted.

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 pre-determined quality standards. e.g. Yakult fermented milk drink meet the international ISO 9000 series.

Improvement

Continuous quality improvement is an ongoing commitment to improving a business's goods or services.

Staff are encouraged to demonstrate initiative and to suggest areas where improvements can be made. This enables a business to gain and maintain a competitive advantage.

Overcoming Resistance to Change

Change is part of continual improvement.

Managers must deal with the following:

-Financial cost: to remain competitive a business must change and this incurs cost

-Purchasing new equipment: latest machinery, computer hardware and software, technology

-Redundancy payouts: downsizing due to outsourcing or quality improvements leads to staff reductions and payouts to them

-Retraining: retained employees need to learn new skills such as knowledge/understanding of software or multi-skilling.

-Reorganising plant layout: improved supply chain or technology mean new processes and new flows between stages.

-Inertia: refers to forces within a business that resist change and prefer the way things were - often middle managers.

http://www.seechangeconsulting.com.au/

Global Factors

Global factors that impact on business include:

-Global sourcing: acquiring raw materials, human resources and supplies from the best/cheapest location around the world http:/www.youtube.com/watch?v=61GfL6ebglE/

-Economies of scale: expanding the scale of operations into countries where the inputs (like labour and raw materials) are cheaper or laws/taxes are less, which makes a cheaper product http://wwwyoutube.com/watch?v=S4KrlMZpwCY

http://www.youtube.com/watch?v=ijMY-LUmzRE

-Scanning and learning: continually checking and changing the business due to global trends in markets and competitors' behaviour

-Research and Development: finding ways to improve existing products or introduce new products.

Intro of strategies:

different strategies are appropriate for different types of products and businesses... there are rarely agreements about which strategies 'are best' because of costs and challenges.

Operations managers must find the best way (strategy) to ensure their objectives are not only met but exceeded; e.g. finding ways to reduce costs and improve quality.

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