OPERATIONS

OPERATIONS

1. OBJECTIVES

   • RECUCE UNIT COSTS
   • QUALITY
     • MEASURED THROUGH: customer satisfaction rating, customer complaints, returned products, scrap rate (items rejected during production)
   • SPEED OF RESPONSE: time between a customer request and fulfilment of that request
   • FLEXIBILITY
     • PRODUCT: switching production between one item to the next
     • VOLUME: adjustin to the level of consumer demand
     • MIX: wide range of products to reach more market segments
     • DELIVERY: ensuring a firm can adapt to changes in quantity and type of deliviers required by customers
   • DEPENDABILITY: consistency of a product and service
   • ENVIROMENTAL: reducing externalities and wastage that occurs from production and using renewable resources

2. MEASURING OPERATIONAL PERFROMANCE

   • LABOUR PRODUCTIVITY = OUTPUT PER PERIOD/NUMBER OF EMPLOYEES PER PERIOD
   • UNIT COSTS= TOTAL COSTS/NUMBER OF OUTPUT
   • CAPACITY UTILISATION= ACTUAL OUPUT LEVEL/POSSIBLE MAXIMUM CAPACITY X 100
     • Capacity itself should be great enough to meet maximum demand whilst being cost-effective; the extent to which actual capacity could rise is called Spare capacity
     • at 100% capacity utilisation the firm is most cost-effective yet there is no scope for maintenance and repair BUT anything under full capacity utilisation suggests unused resources and therefore not cost-effective (fixed costs per unit rise)

3. INCREASING LABOUR PRODUCTIVITY AND EFFICIENCY (getting more output from a given level of input)

   • BENEFITS: reduced costs as a whole and as labour costs per unit (less workers to achieve same output level), increased output, less wastage, increased profit
   • METHODS
     • MOTIVATIONAL METHODS AND REWARDS
     • BETTERING LEADERSHIP AND MANAGEMENT TO INSPIRE AND DIRECT
     • IMPLEMENTING NEW PROCESS AND TECHNOLOGY
       • LEAN PRODUCTION: reduces time, stock and improves inventory control
         • JUST-IN-TIME: supply and production is triggered by demand which increases stock control and costs and ensures short lead times
         • KAIZEN
         • LEAN ORGANISATION: becoming entirely lean - reducing and redesigning ineffictient processes from meetings and structure to production
       • TYPES OF TECHNOLOGY
         • ROBITCS
         • AUTOMATION (CAPITAL INTENSIVE)
         • COMMUNICATION SYSTEMS: increase coordination and collaboration of information and understanding
         • STOCK CONTROL: ordering systems that link with stock management
     • TRAINING STAFF TO IMPROVE SKILLS
     • ADAPT SCALE OF PRODUCTION TO MEET DEMAND MORE EFFECTIVELY
   • DIFFICULTIES: as productivity increases and is focused on quality decreases, diseconomies of scale kick in and there becomes a lack of creativity and innovation

4. IMPROVING QUALITY: the extent to which a product or service meet customer wants and needs

   • METHODS: staff training in ALL proccesses (consumer communication, production means, internal processes), new technology, increased marketing and product development, high quality materials
     • QUALITY CONTROL: reviewing quality at the end of production to identify faults through a specialised role therefore more focused and detailed
     • QUALITY ASSURANCE: ensuring all workers continually check their and others - TOTAL QUALITY MANAGEMENT - work throughout each step of the process to allow for early identification of mistakes and emphasise continuous quality but this is highly dependant on delegation and type of workers
   • DIFFICULTIES: costly and time consuming, deters attention away from production, hard to measure due to subjectiveness, must be continuous, employee resistance

5. IMPROVING FLEXIBILITY, SPEED OF RESPONSE AND DEPENDABILITY

   • FLEXIBILITY: PVMD - increases customisation in the sense that a business will increase its ability to adapt to different consumer wants and needs
     • MASS CUSTOMISATION: producing to the masses with variations of products produced due to specific demands - can be achieved through just-in-time production which improves efficiency or a consumer can select from a range of previously produced products
   • INVENTORY AND SUPPLY CHAIN MANAGEMENT
     • MATCHING SUPPLY TO DEMAND
       • implementing just-in-time production
       • employing flexible workers (part-time and temporary workers) to meet demand changes cost-effectively
       • out-source production so a third-party organisation manages certain elements and sub-contracting another business to produce parts of products or complete specific elements (plumbing)
     • INVENTORY CONTROL: management of levels of inventory
       • INVENTORY CONTROL CHARTS: enable planning, analysis and prediction of stock levels including when to reorder and the timings of stock inflows and outflows BUT is only a prediction therefore does not plan for unexpected changes in demand or management of levels
       • ISSUES OF MANAGING INVENTORY: costs of holding stock, risk of holding stock, issues of meeting demand
     • SUPPLY-CHAIN MANAGEMENT
       • TRADITIONAL SUPPLY CHAIN MANAGEMENT: huge quantities from one supplier to achieve lower costs
       • MODERN SUPPLY CHAIN MANAGEMENT: purchasing supplies from numerous suppliers in smaller amounts to reduce supplier power and increase flexibility
       • EFFECTIVE MANAGEMENT INVOLVES: deciding on a long-term or short-term strategy of agreement, agreeing favourable and mutually beneficial credit terms, building a strong relationship through repeat and continuous purchases, considering backward vertical integration, deciding on the right supplier who is dependable, flexible, ethical, provides high quality supplies at a cost-effective price