Introduction Operations Management Intermediate Business Management

2 The Role and Importance of Operations Role of Operations Purchasing of Raw Materials to meet Production requirements Managing Stock Using quality techniques to ensure maximum quality output is achieved from minimum inputs Warehousing and distribution of finished products Ensuring appropriate methods of production are used

3 The Role and Importance of Operations Operations is important because : it is one of the CORE activities of any business It produces the products and services which enable the business to make a profit

September 7, 2015R Alexander March Role & Importance of OPERATIONS  Operations is the name given to the process of transforming INPUTS into FINISHED GOODS.  An organisation’s product is the goods or services it supplies to customers.  One of the main aims of an organisation is to ensure that they satisfy their customers by providing them with a high quality good or service.

September 7, 2015R Alexander March Production Systems  An organisation will use a mix of labour and machinery to produce their good or service – the Production System  The nature of the good/service will determine what type of production system is used:  Capital intensive: mostly machines are used in production  Labour intensive: mainly people are involved in production  Automation: production is controlled by a computer

September 7, 2015R Alexander March Questions 1.Describe the role and importance of operations in an organisation. (2 marks) 2.Distinguish between a capital intensive production system and a labour intensive production system. (1 mark) 3.For each of the following businesses, identify whether they are capital intensive, labour intensive or automated and outline why. (8 marks) Coca Cola bottling factory Wedding dress maker Car manufacturing plant Olive picking in Tuscany 4.Describe an automated production system. (1 mark)

September 7, 2015R Alexander March Solutions 2.Mostly machines are used in capital production whereas mainly people are involved in labour intensive production.

September 7, 2015R Alexander March Solutions For each of the following businesses, identify whether they are capital intensive, labour intensive or automated and outline why. (8 marks) Coca Cola bottling factory - AUTOMATED Wedding dress maker – LABOUR INTENSIVE Car manufacturing plant – CAPITAL INTENSIVE Olive picking in Tuscany – LABOUR INTENSIVE

September 7, 2015R Alexander March Operating System  In order to ensure that a product is produced efficiently, the organisation must organise its raw materials, labour and machinery.  The method of organising these resources to get a desired outcome is known as an Operating system. COPY THE DIAGRAM ON THE NEXT SLIDE INTO YOUR JOTTER

InputProcessOutput Raw Materials + Labour Using different amounts of different resources to produce a different end product The actual goods or service

September 7, 2015R Alexander March The Operations Department’s Interaction with other Departments In order to work efficiently it is important that the Operations department communicates with other key functional areas in the organisation.

September 7, 2015R Alexander March OPERATIONS LINKING WITH …… MARKETING DEPARTMENT  Inform where to distribute products  What type of packaging to use  Carry out research and development of products FINANCE DEPARTMENT  Departmental budgeting  Determine methods of payment to be used for employees  Suggest which supplier to use HUMAN RESOURCE DEPARTMENT  Responsible for recruiting the right people  Provide training for staff Don’t copy this yet!

September 7, 2015R Alexander March Task Create a mind map in your jotter showing how the Operations Department links with each of the following departments:  Marketing Department  Finance Department  Human Resources Department Use page 69 of your notes to help

September 7, 2015R Alexander March Elements of the operations function The work of the Operations Department in a business consists of a number of different elements.  Purchasing  System design  System operations

September 7, 2015R Alexander March Purchasing  Responsible for buying materials and resources used in production  Important to buy the right quantity and quality of materials and resources at the right time.  A very important role of Purchasing is to choose a suitable supplier. They must ensure that the supplier:  Is reliable  Can deliver the correct quantity  Can deliver on time

September 7, 2015R Alexander March Purchasing  The Finance department will work with Purchasing to make sure that they are buying at the best price and getting the best terms e.g. discounts, credit  Often a firm will buy in bulk to get better discounts.  Important to get good value for money.

September 7, 2015R Alexander March THE PURCHASING MIX – THE FACTORS THAT SHOULD BE CONSIDERED WHEN PURCHASING STOCK OR NEW EQUIPMENT Alternative suppliers  Are suppliers dependable? Local or national suppliers? Extra costs? Delivery time  Lead times long or short? Reliability and keeping promises. Price  Cash discounts, trade discounts, bulk buying, credit terms Quality  Supplier guarantee of consistent quality materials Quantity  Can supplier guarantee required quantities. Cost of extra storage for bulk buying. Storage Facilities  How much storage space is available? Safety and security. COPY THIS SLIDE TO YOUR NOTES

September 7, 2015R Alexander March System design The Operations department must decide on the best operating system:  Most suitable factory layout?  Flow of work?  How to distribute finished goods?  Labour requirements?  Best combination of machinery and people?  Best to invest in machines or humans in the long term?

September 7, 2015R Alexander March Elements of Operations System Operation  The Operations department must control the flow of stocks to ensure that the correct quantity is available at all times to keep production going. Developing New Products  The Operations department must develop and design new products to allow production to take place.  In order to achieve this is, it is important for them to communicate with the marketing department.

September 7, 2015R Alexander March Questions Explain the importance of the purchasing mix. (6 marks) Describe 4 things a business must consider when deciding on an operating system (4 marks) Outline why the Operations Department must control the flow of stocks. (1 mark)

September 7, 2015J Whiteley March Solutions - Explain the importance of the purchasing mix. (6 marks)  Price – this is important because the firm must get value for money. They will want to receive discounts for bulk buying.  Quality – if the quality of the supplier is not good they the finished product will also be poor.  Quantity – the supplier must be able to supply the necessary quantities to allow the business to continue trading.  Location of supplier – a local supplier is less likely to have delivery problems due to weather etc  Reliability of supplier – will they deliver on time/ correct amount  Storage facilities available – does the firm have enough storage space to buy in bulk.

September 7, 2015J Whiteley March Describe 4 things a business must consider when deciding on an operating system. (4 marks) 4 things a business must consider when deciding on an operating system are:  The most suitable factory layout so that the stages of the production process are in a logical order.  Distribution of finished goods – will the firm be able to distribute itself or will it outsource distribution?  Labour requirements – how many workers are needed where and when?  The organisation will need to consider the combination of machinery and people that best meets its needs.  Is it best to invest in machines or humans in the long term?

September 7, 2015J Whiteley March Outline why the Operations Department must control the flow of stocks. (1 mark)  The Operations department must control the flow of stocks to ensure that the correct quantity is available at all times to keep production going. Running out of stock means that production will come to a halt.