1. Higher Business Management
Unit 2
Learning Outcome 5
Operations
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2. Operations/Production
Three distinct phases
Inputs  Process  Outputs  
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3. Inputs
Raw materials
Labour
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4. Process Converting raw materials into something useful
Use of machinery and other processes
Assembly
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5. Output The finished product! Packaging Storage Distribution Transport
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6. Factors Affecting Production Systems
Nature of the product
Quantity to be produced
Resources available
Labour
Capital
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7. Methods of Production Job Production Batch Production Flow Production
MASS PRODUCTION IN LARGE FACTORY
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8. Job Production A house built to your own design A custom-built boat
A piece of artwork
A hand-turned wooden bowl
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9. Batch Production A number of similar products (repeated jobs)
The same house repeated on a building site
Bakery produce - each batch may differ slightly
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10. Flow Production Mass production of almost identical products Cars
Washing machines
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11. Quality Control ‘Bolting the door after the horse has gone’
Leads to waste and scrap
Can be very “costly”
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12. Quality Assurance Making sure the horse cannot bolt
Getting it right first time
All aspects of the business including the commitment of the workforce
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13. Quality - A Definition
Those features of a product or service that allow it to satisfy customers’ requirements
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14. Measuring Quality Tangible Intangible Appearance Reliability
Durability
Functions
Suitability
After sales service
Maintenance
Intangible
Image and brand (‘street cred’)
Reputation
Exclusivity
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15. Quality Systems Total quality management Benchmarking Quality circles
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16. Total Quality Management (TQM)
Right first time
Consistent, clear message on quality
Staff commitment to ongoing improvement
Partnership with suppliers
Educate and train staff
Supervisors encourage and help
Eliminate fear of failure
Departments integrate and share problems
Set clear, achievable goals
Help employees to take pride in their work
Train and educate
Establish a structure and culture to support these aims
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17. Features of TQM Commitment to customer needs
Close links with the supply chain
Personal responsibility by employees
Company-wide policy for all staff
Emphasis on teamwork
Clear measures of “quality”
Information gathering to support these measures
Well-used 2-way communication systems
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18. Benchmarking - A Definition
Benchmarking is the process of setting competitive standards, based on the achievements of other firms, against which an organisation will monitor its progress.
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.
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19. Types of Benchmarks
Internal - comparison with a function within the organisation
External - comparison with other organisations
Competitive - direct comparison with a competitor
Generic - comparing general business activities (eg recruitment)
Customer - contrasting the level of fulfillment of customer expectation
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20. Quality Circles
Production workers know more about the production process than “managers”
Workers are motivated by being involved and consulted about production problems (empowerment)
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21. Types of Stock Raw materials, components, etc
Work in progress (unfinished work)
Finished goods
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22. The Importance of Stock Control
“Stock out” = lost sales and poor reputation
Excess stock = high storage costs
Excess stock runs risk of damage, obsolescence, “opportunity costs” (alternative use for the money tied up in stock)
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23. Factors Influencing Stock Levels
The level of demand
Unpredictability of demand
Degree of spoilage/perishability
Rental costs for storage
Bulk-buying discounts
Reliability of suppliers
Competition - luxury/necessity
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24. Elements of Stock Control
Maximum stock levels
Minimum stock levels
Rate of consumption
Lead time - ordering to receipt
Re-order level
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25. Just-in-time (Kanban System) Advantages
Stock exactly matches production
Improves cash flow (less tied up)
Savings on purchase and storage costs
Less stock wastage
Production delays prevented
Can respond to changes in demand
Close ties with suppliers established
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26. Just-in-time (Kanban System) Disadvantages
High dependency on suppliers to meet delivery and quality standards
Suppliers must be willing to participate (can be high-risk - ‘all the eggs in one basket’ - M&S suppliers)
Increase in order processing costs
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27. The Purchasing Function
Having sufficient stock available
Avoiding wastage of stock
Having the correct quality
In the factory when needed
Competitive prices paid
Building good relationship with suppliers
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28. The Purchasing Mix Best quality Lowest price
Delivered in correct quantities
Delivered at the correct time
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