1. Management of Marketing and Operations 2.2 – Operations
Business Management (National 5)
Management of Marketing and Operations 2.2 – Operations
N5 Bus Man – 2.2: Operations © BEST Ltd 1

2. What is Operations all about?
The role of OPERATIONS in a business is to PRODUCE goods and services to a SUITABLE STANDARD as EFFICIENTLY (minimum in – maximum out) as possible.
Benefits of effective operations management include the following:
DECREASED COSTS
INCREASED QUALITY
DECREASE PRICES FOR CONSUMERS
INCREASED SATISFACTION AND LOYALTY
INCREASED PROFITS AND PERFORMANCE
INCREASED SATISFACTION AND SALES
PREVENTS BANKRUPTCY AND CLOSURE
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3. Stock Management
Businesses can have the following types of STOCKS (ie unused parts or unsold items):
RAW MATERIALS
WORK IN PROGRESS
FINISHED GOODS
Having stocks can mean the following ADVANTAGES from preventing UNDERSTOCKING:
PROVIDES IMMEDIATE SUPPLIES
PREVENTS STOCK OUTS
LARGE ORDERS CAN MEAN DISCOUNTS
Having stocks can mean the following DISADVANTAGES from OVERSTOCKING:
COST (ie labour, storage, insurance)
RISK
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4. Stock Management (continued)
The amount of stock held to try and prevent OVER or UNDERSTOCKING will be affected by the following factors.
DEMAND
SEASONAL FACTORS
STOCK TYPE
LEAD TIME
To make sure that stock levels are maintained at the correct amounts a business will use a STOCK CONTROL SYSTEM.
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5. Choosing a Supplier
Choosing a supplier deals with deciding WHO the business should buy STOCK from.
The main things that must be considered when choosing a supplier are:
PRICE
QUALITY
CONTINUITY OF SUPPLY
RELIABILITY
LOCATION
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6. Factors of Production
To make sure that things are made EFFICIENTLY and CORRECTLY, a business must think about its’ use of the FACTORS OF PRODUCTION:
LAND
LABOUR
CAPITAL
ENTERPRISE
The main things that must be considered about the use of FACTORS OF PRODUCTION are:
PURCHASE PRICE
QUALITY
CONTINUITY OF SUPPLY
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7. Production Methods
The main PRODUCTION METHODS (ie ways of making goods and services) are:
JOB (PROJECT) PRODUCTION
BATCH PRODUCTION
LINE (FLOW) PRODUCTION
The choice about which one to use will depend on:
THE NATURE OF THE PRODUCT
NUMBER OF SALES EXPECTED
TECHNOLOGY AVAILABLE
LABOUR v CAPITAL INTENSIVE
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8. JOB Production The main features of Job Production are as follows.
ONE PRODUCT IS MADE AT A TIME
PRODUCTS ARE ALL INDIVIDUAL
LABOUR INTENSIVE
ADVANTAGES of Job Production include the following.
VERY FLEXIBLE METHOD OF PRODUCTION
HIGH LEVELS OF BUYER SATISFACTION
SATISFACTION CAN MEAN HIGH PRICES
VARIETY IN WORK CAN BE MOTIVATING
DISADVANTAGES of Job Production include the following.
COSTLY DUE TO LACK OF ECONOMIES OF SCALE
COSTLY DUE TO STAFF SKILLS AND EQUIPMENT
PRODUCTION CAN TAKE TIME
LOW LEVELS OF OUTPUT
Examples of Job Production include custom jewellery, roads and buildings.
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9. BATCH Production The main features of Batch Production are as follows.
BATCH (or group) OF IDENTICAL PRODUCT MADE TOGETHER
DIFFERENT BATCHES CAN BE MODIFIED SLIGHTLY
ALL PRODUCTS BROADLY SIMILAR
SIMILARITY IN MOST STAGES OF PRODUCTION
ADVANTAGES of Batch Production include the following.
BATCH FLEXIBILITY ALLOWS VARIETY IN PRODUCT RANGE
VARIETY IN THE PRODUCT RANGE CAN INCREASE SALES
CAN PRODUCE LARGE AMOUNTS OF PRODUCTS QUITE QUICKLY
RUNNING COSTS CAN BE LOW DUE TO USE OF CAPITAL
RUNNING COSTS CAN BE LOW DUE TO UNSKILLED STAFF
OVERALL SIMILARITY OF BATCHES ALLOWS ECONOMIES
DISADVANTAGES of Batch Production include the following.
SIMPLE SIMILAR PROCESSES CAN BE DEMOTIVATING
CAPITAL PROBLEMS CAN HALT PRODUCTION AND RUIN A BATCH
DELAYS FROM CHANGES IN BATCHES CAN SLOW PRODUCTION
Examples of Batch Production include pizza, soup, etc.
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10. FLOW Production The main features of Flow Production are as follows.
IDENTICAL PRODUCTS
PRODUCTION LINE BASED MANUFACTURING (ie stage by stage)
HIGH LEVELS OF OUTPUT
CAPITAL INTENSIVE
ADVANTAGES of Flow Production are as follows.
QUALITY CAN BE IMPROVED
RUNNING COSTS CAN BE LOW DUE TO CAPITAL AND FEW STAFF
LOWER UNIT COSTS AND PRICE
LOWER PRICES AND QUALITY CAN RESULT IN MORE SALES
DISADVANTAGES of Flow Production include the following.
START UP COSTS TEND TO BE HIGH DUE TO CAPITAL INVOLVED
STANDARD PRODUCT MAY NOT SUIT ALL AND SO LIMIT SALES
WORK CAN BE REPETITIVE, BORING AND DEMOTIVATED
INDIVIDUAL SYSTEM FAILURES CAN HALT ALL OF PRODUCTION
Examples of Flow Production include televisions, fridges, newspapers, etc.
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11. Quality
QUALITY is about making sure that its products are of an ACCEPTABLE STANDARD for the following reasons:
CUSTOMERS CONTINUE TO USE THE BUSINESS
NO QUALITY STANDARD LAWS ARE BROKEN
The main ways that quality can be created and maintained are:
HIGH QUALITY RAW MATERIALS
HIGH QUALITY RESOURCES
QUALITY CONTROL
QUALITY ASSURANCE
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12. Ethical and Environmental Operations
ETHICAL AND ENVIRONMENTAL OPERATIONS deals with making sure that the production process is FAIR and MINIMISES NEGATIVE IMPACTS that could cause problems and put customers off the business.
The main ways that ethical and environmental operations can be created and maintained are:
FAIR TREATMENT OF STAFF
RECYCLING
REDUCING PACKAGING
REDUCING WASTAGE
EFFICIENT PRODUCTION
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13. Customer Service
CUSTOMER SERVICE deals with making sure that consumers are happy with the way they are treated by the business and so continue to use it.
The main ways that positive customer service can be created and maintained are:
SERVICE STANDARDS
COMPLAINTS PROCEDURES
LOYALTY SCHEMES
PRODUCT SUPPORT
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14. Method of Distribution
The METHOD OF DISTRIBUTION is the way a business transports its’ goods and services.
The main METHODS OF DISTRIBUTION are:
ROAD
RAIL
AIR
BOAT
PIPELINE
The METHOD OF DISTRIBUTION used depends on:
MARKET SIZE
PRODUCT NATURE
METHOD COST
INFRASTRUCTURE AVAILABLE
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15. Which factors affect the work of Operations?
The effectiveness of Operations activities undertaken by a business will be affected by the following factors.
INTERNAL FACTORS
Finance
Human Resources
Capital
EXTERNAL FACTORS
Political Factors
Economic Factors
Social Factors
Technological Factors
Environmental Factors
Competitive Factors
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