2. Lesson objectives
• In this lesson we will look at
1. The AIMS of operations management
2. The main tasks of operations
management
3. Economies & diseconomies of scale
4. Production methods
5. Links to other functions
6. Pros and cons of changing production
methods
3. What does operations
management aim to do?
• To produce the RIGHT
QUALITY of goods and
services
• To produce them as QUICKLY
as possible
• To produce them as CHEAPLY
as possible
4. However……………….
• If you try and get all 3 at
once
• Something has to give
• Because
– Quality
– Speed and
– Cheapness
• Don’t go together well!
5. Operations managers
decide
• Where to produce
– (location)
–
–
–
–
Resources
Human resources
Customers
Markets
• Scale of production
– Achieve
• Economies of scale
– Avoid
• Diseconomies of scale
• Manufacturing
methods
– Methods
• Flow
• Batch
• Job etc
• Supplies of materials
– Where from
– Best price
– Best terms
6. Economies/Diseconomies of
Scale
• Economies
– Large businesses can
• Buy bigger/better
machinery
• Employ more
specialists
• Negotiate better
discounts
• Borrow money
more easily
• Bear risk better
• Diseconomies
• Drawbacks of size
– Harder to manage
– Departmental
coordination more
difficult
– Long chains of
command
– Employee
motivation harder –
reduced feeling of
‘belonging’
7. Production methods
• Job production
• One-off - skilled workers
• Batch production
• Batches of identical
items
• Flow production
• Continuous mass
production
8. So What is Operations
Management REALLY about?
• MANAGING a business
• To produce QUALITY goods
and/or services
• At LOW Costs per unit
• At the RIGHT time
• To meet customer NEEDS
9. Production Ops Planning Link
To Business Operations
• Examples – A corporate objective for GROWTH will be
followed by increased production (if we want
to get bigger we must make more)
– A corporate objective for INCREASING
MARKET SHARE will also mean
• either more production of the same thing
• or, changing to a new product
10. Links To Other Functions
• Finance
– Cash for equipment/wages
– Cost of equipment
justified?
– Worth the cost?
• Marketing
– What customers want
– What they'll pay for it
– High price impact on
demand (price elastic?)
• Human
resources
– How many
employees?
– What skills needed?
– What training
needed?
– If less staff needed
• Redundancies?
• Redeployments?
11. Pros and Cons of Changing
Production Methods
• batch - flow - lean= more efficiency
• Cost per unit lower, more made in same
time
• But…..
– Can be inflexible
– Cannot tailor product to specific need
– Not good for ‘niche’ manufacturer
• Example – Henry Ford – “any colour as
long as it’s black”
12. Overall Aim Of Production
Planning
• A business needs to get output
to levels where economies of
scale make unit costs as low as
possible, without letting it get to
the point where diseconomies
of scale start pushing costs up
again
13. Lesson objectives revisited
• In this lesson we looked at
1. The AIMS of operations management
2. The main tasks of operations
management
3. Economies & diseconomies of scale
4. Production methods
5. Links to other functions
6. Pros and cons of changing production
methods
14. Tasks (prefix your answer
with the question)
• Short questions • Long question
1. What are the aims of
operations
management?
2. What must a
business do before
switching to cell from
flow production?
3. Give an example of
economy of scale
• Analyse the pros
and cons to a food
manufacturer of
operating flow
production on a
large scale
