What is Operations? Operations is the process of using resources and adding value to them, to make a product or provide a service that consumers will want to buy. It is also known as Production . When producing a good or providing a service, production involves transforming inputs (Factors of Production) into finished goods: INPUT PROCESS OUTPUT
PRODUCTION DECISIONS <ul><li>Managers in charge of producing goods or services need to make decisions about: </li></ul><ul><li>What to produce </li></ul><ul><li>How to produce it </li></ul><ul><li>Where to produce it </li></ul><ul><li>Suppliers of Raw Materials </li></ul>
The production managers will find out from the marketing department what the consumers want, and what their competitors are producing. WHAT TO PRODUCE?
<ul><li>Depending on the type of organisation there will be a different mix of labour and machinery used in production. </li></ul><ul><li>The production system used may be: </li></ul><ul><li>Capital Intensive – where mostly machines are used </li></ul><ul><li>Labour Intensive – one which </li></ul><ul><li>uses mainly people </li></ul><ul><li>Automated – where operations are controlled </li></ul><ul><li>by a computer </li></ul>HOW TO PRODUCE IT
Production managers must choose the best methods to use in producing their goods. There are 3 main production methods: <ul><li>Produce each item individually ( job production ) </li></ul><ul><li>Produce items in batches ( batch production ) </li></ul><ul><li>Produce items continuously ( flow production ) </li></ul><ul><li>In choosing between them, the manager will consider: </li></ul><ul><li> </li></ul><ul><li>The cost of production for each method </li></ul><ul><li>How many products the business wants to make </li></ul><ul><li>Which method produces the best-quality product . </li></ul>
JOB PRODUCTION Job production is when each product is made individually, to meet each customer’s specific order. Each order is likely to be different. This is an expensive method of production due to the high skill of the staff required – high wages. EXAMPLES wedding cakes, custom made jewellery, designer dresses
BATCH PRODUCTION Batch production is used to produce a number of similar products – a batch. When that order has been completed, another batch is produced. Batches can be changed to meet specific customer requirements, however machinery and workers may sit idle between stages unless there is careful planning. EXAMPLES newspapers, cakes, bread, sweets, chocolates, light bulbs etc
FLOW PRODUCTION Flow production involves products moving continuously along a production line through different stages of production. For example, production of a car will start with the shell at the beginning with various parts being added as the shell moves along the production line. Huge quantities can be produced and the process is often automated. However, worker motivation can be low due to the repetitive nature of the job. EXAMPLES Cars, mobile phones, TV’s etc
WHERE TO PRODUCE IT <ul><li>Production Managers must take into consideration the following when deciding where their operations will take place: </li></ul><ul><li>Closeness to suppliers of raw materials </li></ul><ul><li>Closeness to market </li></ul><ul><li>Their current facilities – are they big enough? Too big? </li></ul><ul><li>Costs – wages etc. Would they be cheaper in the UK or abroad? </li></ul>
SUPPLIERS OF RAW MATERIALS <ul><li>When deciding on which supplier(s) to deal with, Production Managers must consider the following: </li></ul><ul><li>Is the supplier’s quality acceptable and consistent? </li></ul><ul><li>Can the supplier deliver the correct quantities ? </li></ul><ul><li>Can the supplier deliver on time ? </li></ul><ul><li>Is the supplier dependable ? Are they respectable and likely to stay in business? Is delivery reliable ? </li></ul><ul><li>Is it the lowest price ? Are discounts available for regular custom and bulk orders? Are credit terms available? </li></ul><ul><li>Is it value for money ? </li></ul><ul><li>Location of supplier and delivery charges. </li></ul>
All businesses must control their stock levels to make sure that there is the right amount of stock to meet the needs of their customers. The business must also make sure that there is not too much stock on the premises: if there is, it may deteriorate or be damaged. <ul><li>cannot cope with changes in demand </li></ul><ul><li>lost revenue – customers go elsewhere </li></ul><ul><li>high storage costs </li></ul><ul><li>high security costs </li></ul><ul><li>possibility of stock being stolen </li></ul><ul><li>stock can become damaged and obsolete </li></ul>Problems with Understocking Problems with Overstocking
Effective Stock Control To prevent too little stock being held, the production manager will set a minimum stock level , re-order level and a maximum stock level for each item of stock. MINIMUM STOCK LEVEL – the level that stock must not fall below RE-ORDER LEVEL – since it is not wise to let the stock reach the minimum level and then place an order, it is usual for businesses to set a re-order level. When stock reaches this level an order will be placed. The time taken between placing an order and it being delivered is known as the LEAD TIME .
MAXIMUM STOCK LEVEL – this stock level is set to keep the costs of holding stocks as low as possible. MANAGING STOCK LEVELS
Alternative Stock Control Systems <ul><li>Computerisation – Many organisations hold their stock details on a computer database. Some are programmed to order more stock automatically as the re-order level is reached. The Electronic Point of Sales (EPOS) system used by most retailers helps with stock control – as each item is scanned at the checkout, one is deducted form the recorded stock level. </li></ul><ul><li>Just-In-Time – A Japanese approach to production that minimises the amount of stock held – in pure systems the stock arrives just as it is needed. </li></ul><ul><ul><li>JIT – relies on excellent relationships with suppliers </li></ul></ul><ul><ul><li>JIT – requires excellent communication and infrastructure links between suppliers and businesses </li></ul></ul><ul><ul><li>JIT – requires a reliable workforce and methods of production </li></ul></ul>
<ul><li>provides a competitive advantage </li></ul><ul><li>keeps customers happy and encourages return purchases </li></ul><ul><li>provides customer with information and builds consumer confidence in the brand </li></ul><ul><li>reduces costs incurred in solving post sales problems </li></ul>Businesses are increasingly aware of the importance of producing high quality goods and services. Quality…
<ul><li>QUALITY CONTROL </li></ul><ul><li>QUALITY CIRCLES </li></ul><ul><li>QUALITY ASSURANCE </li></ul><ul><li>TOTAL QUALITY MANAGEMENT </li></ul>There are many techniques used by businesses to check the quality of their products:
QUALITY CONTROL At certain points in the production process, products are checked to ensure that they meet agreed quality standards. Any unacceptable products are then discarded as waste or sent back for reworking. QUALITY CIRCLES Groups of employees meet regularly to discuss areas where improvements can be made. By involving the employees in the process they can take ownership of the improvements – increasing motivation and productivity.
QUALITY ASSURANCE Quality Assurance is provided when a business guarantees the quality of their products. Examples of some common quality assurance indicators are shown below: British Standards Institution kitemark Lion Mark found on Eggs Association of British Travel Agents Using the Internet, see what you can find out about these and other marks used to assure quality.
TOTAL QUALITY MANAGEMENT (TQM) Quality Circles is an important part of TQM – employees must take a pride in their work and not accept substandard work. TQM requires everyone in the business to think about quality – not only production teams. It is a system of doing things right first time and no errors are tolerated. TQM also relies upon good relationships with suppliers – all materials received should be subject to the same high quality standards.