BM Unit 2 - L051 Higher Business Management Unit 2 Learning Outcome 5 Operations

BM Unit 2 - L052 Operations/Production Three distinct phases Inputs  Process  Outputs  

BM Unit 2 - L053 Inputs n Raw materials n Labour

BM Unit 2 - L054 Process n Converting raw materials into something useful n Use of machinery and other processes n Assembly

BM Unit 2 - L055 Output n The finished product! n Packaging n Storage n Distribution n Transport

BM Unit 2 - L056 Factors Affecting Production Systems n Nature of the product n Quantity to be produced n Resources available n Labour n Capital

BM Unit 2 - L057 Methods of Production n Job Production n Batch Production n Flow Production MASS PRODUCTION IN LARGE FACTORY

BM Unit 2 - L058 Job Production n A house built to your own design n A custom-built boat n A piece of artwork n A hand-turned wooden bowl

BM Unit 2 - L059 Batch Production n A number of similar products (repeated jobs) n The same house repeated on a building site n Bakery produce - each batch may differ slightly

BM Unit 2 - L0510 Flow Production n Mass production of almost identical products n Cars n Washing machines

BM Unit 2 - L0511 Quality Control n ‘Bolting the door after the horse has gone’ n Leads to waste and scrap n Can be very “costly”

BM Unit 2 - L0512 Quality Assurance n Making sure the horse cannot bolt n Getting it right first time n All aspects of the business including the commitment of the workforce

BM Unit 2 - L0513 Quality - A Definition n Those features of a product or service that allow it to satisfy customers’ requirements

BM Unit 2 - L0514 Measuring Quality Tangible n Appearance n Reliability n Durability n Functions n Suitability n After sales service n Maintenance Intangible n Image and brand (‘street cred’) n Reputation n Exclusivity

BM Unit 2 - L0515 Quality Systems n Total quality management n Benchmarking n Quality circles

BM Unit 2 - L0516 n Right first time n Consistent, clear message on quality n Staff commitment to ongoing improvement n Partnership with suppliers n Educate and train staff n Supervisors encourage and help n Eliminate fear of failure n Departments integrate and share problems n Set clear, achievable goals n Help employees to take pride in their work n Train and educate n Establish a structure and culture to support these aims Total Quality Management (TQM)

BM Unit 2 - L0517 Features of TQM n Commitment to customer needs n Close links with the supply chain n Personal responsibility by employees n Company-wide policy for all staff n Emphasis on teamwork n Clear measures of “quality” n Information gathering to support these measures n Well-used 2-way communication systems

BM Unit 2 - L0518 Benchmarking - A Definition n Benchmarking is the process of setting competitive standards, based on the achievements of other firms, against which an organisation will monitor its progress. n Benchmarking tends to focus on the “best in class” companies, but for specific functions a company may compare itself to an organisation in a different industry.

BM Unit 2 - L0519 Types of Benchmarks n Internal - comparison with a function within the organisation n External - comparison with other organisations n Competitive - direct comparison with a competitor n Generic - comparing general business activities (eg recruitment) n Customer - contrasting the level of fulfillment of customer expectation

BM Unit 2 - L0520 Quality Circles n Production workers know more about the production process than “managers” n Workers are motivated by being involved and consulted about production problems (empowerment)

BM Unit 2 - L0521 Types of Stock n Raw materials, components, etc n Work in progress (unfinished work) n Finished goods

BM Unit 2 - L0522 The Importance of Stock Control n “Stock out” = lost sales and poor reputation n Excess stock = high storage costs n Excess stock runs risk of damage, obsolescence, “opportunity costs” (alternative use for the money tied up in stock)

BM Unit 2 - L0523 Factors Influencing Stock Levels n The level of demand n Unpredictability of demand n Degree of spoilage/perishability n Rental costs for storage n Bulk-buying discounts n Reliability of suppliers n Competition - luxury/necessity

BM Unit 2 - L0524 Elements of Stock Control n Maximum stock levels n Minimum stock levels n Rate of consumption n Lead time - ordering to receipt n Re-order level

BM Unit 2 - L0525 Just-in-time (Kanban System) Advantages n Stock exactly matches production n Improves cash flow (less tied up) n Savings on purchase and storage costs n Less stock wastage n Production delays prevented n Can respond to changes in demand n Close ties with suppliers established

BM Unit 2 - L0526 n High dependency on suppliers to meet delivery and quality standards n Suppliers must be willing to participate (can be high-risk - ‘all the eggs in one basket’ - M&S suppliers) n Increase in order processing costs Just-in-time (Kanban System) Disadvantages

BM Unit 2 - L0527 The Purchasing Function n Having sufficient stock available n Avoiding wastage of stock n Having the correct quality n In the factory when needed n Competitive prices paid n Building good relationship with suppliers

BM Unit 2 - L0528 n Best quality n Lowest price n Delivered in correct quantities n Delivered at the correct time The Purchasing Mix