Operations AS Business

AS text Chapter 23 Lesson Objectives Explain operations management and its targets, specifically unit costs. Assess the importance of quality and how businesses can measure it Leading onto capacity utilisation and its importance

AS text Chapter 23 Efficiency Production decisions involve deciding methods for new production runs and analysis of existing methods. Decisions may include:  Substitute machinery for labour?  Use of new technology?  Organisation of the production layout?  Change of production method?

AS text Chapter 23 Production Methods Title : Day Labourer Harvest Sugar Canes Copyright: Getty Images, Whilst all output can be classed as production, different production methods may be more appropriate for different products or services. Agriculture tends to be very land intensive – efficiency could be measured in terms of output per acre/hectare

AS text Chapter 23 Production Methods Title : TV Factory 1954 Copyright: Getty Images, As technology and analysis of production methodology has improved, methods have changed dramatically – what used to be labour intensive production methods are now capital intensive Title: Electronic Factory Copyright: Getty Images,

AS text Chapter 23 Production Methods Title : California Oil is Source of Wealth and Fear Copyright: Getty Images, Title : Ducati Motorcycle Compa's Profits Surge Copyright: Getty Images, Title : Microsoft Line Copyright: Getty Images, The choice of production method and the factor inputs depends on such things as: the nature of the product factor costs the scale of production

AS text Chapter 23 Resources B …………. & L ……. P ………….. M ……………… C ………… Buildings & Land People Materials Capital

AS text Chapter 23 Obtaining resources. Owners / Managers when business established HR / Departmental Mgrs Operations Owners Buildings & Land People Materials Capital

AS text Chapter 23 Materials. Purchasing of materials is often a task undertaken by the operations function.  Quantity  Quality  Price  Delivery  Display & sell  Use & sell  Monitor  Replenish

AS text Chapter 23 Productive Capacity Productive capacity measures how much a business can produce during a specific period of time Usually measured in production units (e.g. 1,000 cars per month) Productive capacity can change:  E.g. when a machine is having maintenance, capacity is reduced  Capacity is linked to labour: e.g. by working more production shifts, capacity can be increased Capacity needs to take account of seasonal or unexpected changes in demand  E.g. Chocolate factories need capacity to make Easter Eggs in November and December before shipping them to shops after Christmas

AS text Chapter 23 Ways to Measure Productive Efficiency Productivity  Measures the relationship between inputs into the production process and the resultant outputs. Unit costs  Divide total costs by the number of units produced. A falling ratio would indicate that __________________________________  Formula = Total Cost / Output Lower unit cost the better! Increased productivity..

AS text Chapter 23 Unit cost calculations Based on the data above, calculate the unit costs of products A to D. Assuming these products are of the same quality, which product is manufactured most efficiently? Total costs (£) Units of output Unit costs (£) Product A47020 Product B55830 Product C1,06050 Product D1,945100

AS text Chapter 23 What is Meant by Quality? Quality is about meeting the needs and expectations of customers Think about your needs and expectations as a customer when you buy a product or service. These may include  Performance  Appearance  Availability  Delivery  Reliability  Price If a product or service meets all those needs - then it passes the quality test. If it doesn't, then it is sub- standard.

AS text Chapter 23 Key aspects of quality for the customer include: Good design – looks and style Good functionality – it does the job well Reliable – acceptable levels of breakdown Consistency Durable – lasts as long as it should Good after sales service Value for money

AS text Chapter 23 Toyota Prius recall Activity In pairs, discuss why quality is important and identify as many reasons as you can. 1/hi/business/ stm 1/hi/business/ stm 1/hi/ stm 1/hi/ stm

AS text Chapter 23 Quality helps determine a firm’s success in a number of ways: Customer loyalty Strong brand reputation Retailers want to stock the product If perceived to be better value for money, it may command a premium Fewer returns and replacements lead to reduced costs Attracting and retaining good staff Why is quality important?

AS text Chapter 23 How is quality measured? Standards eg BSI (more later….) Failure of reject rates Level of product returns Customer complaints Customer satisfaction Customer loyalty

AS text Chapter 23 Capacity Utilisation Maximising your productive capacity is important for businesses operations management

AS text Chapter 23 Lesson Objectives Explain operations management and its targets, specifically unit costs. Assess the importance of quality and how businesses can measure it Leading onto capacity utilisation and its importance