A presentation covering A-levels Business topic; operations management; giving a quick review of quality aspects, capacity utilization, types of lean production methods and concepts of outsourcing and benchmarking.

1. OPERATIONS
MANAGEMENT

2. CAPACITY UTILIZATION
“Proportion of maximum capacity/output currently being
achieved”
Current output
x 100
Maximum output
BENEFITS OF FULL
CAPACITY UTILIZATION
• Job security
• Better business image
• Economies of scale
• Better quality product
DRAWBACKS OF FULL
CAPACITY UTILIZATION
• Planning and scheduling costs
• Stress on workforce
• Supply increase – price
decrease – profits
compromised over productivity
• Lose orders from new
customers

3. How to cope up?
SPARE CAPACITY – LONG
TERM
• Enter new markets
• Rationalization
CAPACITY SHORTAGE –
LONG TERM
• Capital investment in
new production facilities
• Outsourcing
CAPACITY SHORTAGE –
SHORT TERM
• Outsourcing
SPARE CAPACITY – SHORT
TERM
• Price
• Promotion
• Deals

4. OUTSOURCING
“Using another business or any third party to undertake part of a production process
rather than doing it within the business”
BENEFITS
• Reduction in operating
costs
• Increased flexibility
• Improved company focus
• Access to quality service
or resources
• Freed-up internal
resources
DRAWBACKS
• Loss of jobs within the
business
• Quality issues
• Customer resistance
• Security risk

5. QUALITY
“Relates to features of a product or service that allow it to satisfy
customer wants”

6. Quality control
“Process of checking, usually the finished good or service as it is being provided
to customers”
STAGES
1. Prevention
2. Inspection
3. Correction
and
improvement
BENEFITS
• Quality
consciousness in
employees
• Customer
satisfaction
DRAWBACKS
• Monotonousness
• Low employee
morale

7. QUALITY ASSURANCE
“Process of checking whether a product or service meets particular quality
standards through inspection of each stage of production”
BENEFITS OVER QUALITY CONTROL:
• Job enrichment  Herzberg’s theory
• Reworking possible
• Improved quality
• Improved communication
• Increased motivation
• Time-saving
DRAWBACKS:
• Inspection costs
• May mentally exhaust workers as
extra attention needed on each
unit

8. QUALITY ASSURANCE – how does it work?
PURCHASING
DEPARTMENT
RETAILERS
PRODUCTION
DEPARTMENT
OUTBOUND
LOGISTICS
INBOUND
LOGISTICS
SUPPLIERS
input, process, output
order raw materials
handling, storing and
distribution of finished
goods
handling, storing and
distribution of raw
materials

9. TOTAL QUALITY MANAGEMENT (TQM)
“A system that appreciates that everyone within an organization contributes to
overall quality of the product/service”
FEATURES
• Quality chains
• Company policy
and accountability
• Zero defects
BENEFITS
• Improved focus on
customer needs
• Potential wastage
reduction
• Encourages team
approach
• Better
communication
DRAWBACKS
• Training costs
• Strong commitment
of workforce
• Regular audits
required
• Product may be
ignored while
enforcing the
process

10. Quality circles
“Refers to involving staff to improve quality, where employees in small groups
discuss quality issues”
ENCOURAGES
• Team-working
• Worker
participation
• Full use of
employees’
knowledge and
experience

11. BENCHMARKING
“Process of identifying best processes by which products are created and
delivered”
BENEFITS
• Faster and cheaper
• Increase internal
competitiveness
• Ideas for
improvement if
workforce involved in
business discussion
DRAWBACKS
• Ideas can be copied
• Difficult to recover
costs incurred to
improve
benchmarking system

12. Benchmarking - implementation
Research on areas of improvement in the business
Deciding how improvements can be made to those areas
Amend the existing procedures to improve performance
Compare best practice to existing processes
Keep up to the exchange of info with other businesses
Identify best practice in other businesses
Evaluate how beneficial the changes have been.

13. Lean production
Methods of lean production
“The philosophy of “reducing wastage” whilst ensuring quality to
be maintained”
JUST IN TIME
FLEXIBLE
SPECIALISMS
KAIZEN CELL PRODUCTION
SIMULTANEOUS
ENGINEERING

14. JUST IN TIME
“An inventory management system, that lines up raw material orders from
suppliers according to production schedules”
BENEFITS
• Lower holding costs
• Improved cash flow
• Increase efficiency
DRAWBACKS
• Less/no room for errors
• Training costs
• Machine maintenance
costs may rise as
company may be unable
to afford machine
breakdowns

15. KAIZEN
“A philosophy that states, ‘improvement in workers productivity arise from
continual increases in productivity rather than one-off increases through
technology”
Japanese word meaning “improvement”
Production
Time
One-off improvement

16. kaizen
BENEFITS
• Feeling of
responsibility and
ownership in
workers
• Team-working
REQUIREMENTS
• Theory Y
• Work experience
is as important as
theoretical
knowledge
DRAWBACKS
• Training costs
• May be seen as
greater work
rather than an
opportunity for
development

17. Cell production
“Production is reorganized into separate identifiable units known as ‘cells’ where
workers are required to undertake a complete unit of work”
BENEFITS
• Reduce worker
alienation
• Feeling of
responsibility
• Team-working
• Motivation
• Improved
communication
DRAWBACKS
• Training costs
• Invest in
technology

18. Simultaneous engineering
“A time based management strategy, implemented by rearranging the sequence of
activities required before a product launch, in a simultaneous order rather than on a
sequential basis”
BENEFITS
• Reduce the need of
modifying products,
post launch
• First mover advantages

19. Project Management – Critical path analysis
“A modern management technique used to determine the minimum time it will
take for a project to be completed whilst achieving preset targets of quality, time
and cost”
BENEFITS
• Earliest start time – plan
resources accordingly
• Latest finish time – ensure
timely completion of project
• Critical activities – allow steps to
ensure these are not delayed
DRAWBACKS
• Transfer of resources from non-
critical activities to critical
activities - difficult?
• Accuracy of duration estimates
• External influences accounted
for?

20. CRITICAL PATH ANALYSIS – KEY TERMS
LATEST FINISH TIME
CRITICAL PATH
EARLIEST START TIME
MINIMUM DURATION
CRITICAL ACTIVITIES
NON-CRITICAL
ACTIVITIES
TOTAL FLOAT
FREE FLOAT
LOGICAL
DEPENDANCE
DUMMY ACTIVITY