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Management of Marketing and Operations 2.2 – OperationsBusiness Management (National 5) Management of Marketing and Operations 2.2 – Operations N5 Bus Man – 2.2: Operations © BEST Ltd 1
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 N5 Bus Man – 2.2: Operations © BEST Ltd 2
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 N5 Bus Man – 2.2: Operations © BEST Ltd 3
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. N5 Bus Man – 2.2: Operations © BEST Ltd 4
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 N5 Bus Man – 2.2: Operations © BEST Ltd 5
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 N5 Bus Man – 2.2: Operations © BEST Ltd 6
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 N5 Bus Man – 2.2: Operations © BEST Ltd 7
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. N5 Bus Man – 2.2: Operations © BEST Ltd 8
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. N5 Bus Man – 2.2: Operations © BEST Ltd 9
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. N5 Bus Man – 2.2: Operations © BEST Ltd 10
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 N5 Bus Man – 2.2: Operations © BEST Ltd 11
Ethical and Environmental OperationsETHICAL 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 N5 Bus Man – 2.2: Operations © BEST Ltd 12
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 N5 Bus Man – 2.2: Operations © BEST Ltd 13
Method of DistributionThe 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 N5 Bus Man – 2.2: Operations © BEST Ltd 14
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 N5 Bus Man – 2.2: Operations © BEST Ltd 15
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