HSC Summary Notes- Operations

10.1    HSC topic: Operations -> is about planning & controlling operations with the aim of minimizing cost, maximizing productivity, improving efficiency and achieving strategic business goals

                                                                                                                   25% of indicative time

The focus of this topic is the strategies for effective operations management in large businesses.

Outcomes 

The student:

H1     critically analyses the role of business in Australia and globally

H2     evaluates management strategies in response to changes in internal and external influences

H3     discusses the social and ethical responsibilities of management

H4     analyses business functions and processes in large and global businesses

H5     explains management strategies and their impact on businesses

H6     evaluates the effectiveness of management in the performance of businesses

H7     plans and conducts investigations into contemporary business issues

H8     organises and evaluates information for actual and hypothetical business situations

H9     communicates business information, issues and concepts in appropriate formats

Content

Students learn to:

examine contemporary business issues to:

·         discuss the balance between cost and quality in operations strategy      

·         examine the impact of globalisation on operations strategy

·         identify the breadth of government policies that affect operations management

·         explain why corporate social responsibility is a key concern in operations management

investigate aspects of business using hypothetical situations and actual business case studies to:

·         describe the features of operations management for businesses in a tertiary industry

·         assess the relationship between operations and the other key business functions in two actual businesses

·         explain how operations strategy can help a business sustain its competitive advantage

·         recommend possible operations strategies for one hypothetical business

Key Words: strategic, value adding, efficiency, transforming, affordability, ecologically sustainable, differentiating, planning, organising, controlling, sequencing, scheduling, quality, social responsibility, outsourcing, interdependence, e-commerce, economies of scale, inertia, JIT, logistics,

Students learn about:

role of operations management

·         strategic role of operations management-improve productivity, efficiency & quality – cost leadership-lowest cost manufacturer, basic products good/service differentiation- through quality, features, delivery, design, technology etc. commanding a higher price

·         goods-physical product require factory/machinery, space and/or services-non-tangible require more people, smaller production space, office centred production in different industries

·         interdependence with other key business functions –human resources, operations, finance, marketing all related –work together to achieve success

influences -> HOW the business can manage these to achieve goals & objectives of the business

·         globalisation -is about ACCESS -reaching new markets/their ifluence on operations, franchising, importing, technology-improve efficiency, improve logistics, reduce reliance on human labor, easier, quality expectations-customer expectations, how well a product is designed/made/functions, cost-based competition-what others are doing and how to manage operations to challenge/compete , government policies-rules/regulations, impact management significant OH&S, legal regulation-similar to Gov., laws, compliance,environmental sustainability-looking after environ., modern, efficient

·         corporate social responsibility –protecting/contributing to resources/interests of customers –charity

–        the difference between legal compliance and ethical responsibility -> doing what is morally ‘right’

-legal compliance is mandatory and of greater importance than ethical responsibility as there are not specific laws the bus. would be breaking, yet un-ethical practices may lose customers

–        environmental sustainability -> present use doesn’t affect future use –looking after the environment –energy efficient and social responsibility –positive effect on the community -protecting interests of customers & wider society –initiatives/charity to community

operations processes (OP=operations process) -> planning, organising, leading & controlling

·         inputs > common direct inputs –labour, energy, raw materials, machinery + technology

–        transformed resources- inputs changed/converted in operations process + those giving OP its purpose/goal (materials-raw materials or intermediate goods, information-influence/inform how inputs are used, where + which supplier –external/internal, customers-their choices shape inputs)

–        transforming resources-inputs that carry out the transformation process (human resources –effectiveness of HR determines success of transformation, facilities-plant/machinery –large or more small?, zoning/restrictions? Energy use/efficiency?)

·         transformation processes –value added –increasing features/worth

–        the influence of volume –should be flexible in relation to demand –overproduce = waste –under stock = lost sales e.g. leapfrog leapster explorer, variety-range of products made –greater variety the more the OP needs to allow for variation, variation in demand-amount of produce desired by customers –predicting demand/seasonal and visibility- amount of feedback –contact shapes transformation process (customer contact)

–        sequencing-order activities occur and scheduling-length of time activities take – Gantt charts-outlines activities performed, order & time taken –plan/track projects, critical path analysis-allows manager to see shortest length of time to complete all tasks

Gantt Chart	Critical Path Analysis
-less complicated	-much more precise in terms of timing
-set out more clearly	-better for short term projects
-better for long term projects	*both show things that can be done at the same time
-shows the ‘when’ (date/month etc.)

–        technology-makes task more effective & efficient –high-tech or low-tech –increasingly important –cost is also relevant *office technology-more work in less time –telecommute (working electronically –work delivered via email/internet) *Machinery/Manufacturing technology –robotics (highly specialized-engineering/assembly line –high quality/standard –expensive) –CAD Computer aided design (design tool –create prototypes etc. ) –CAM Computer aided manufacturing (software controlling manufacturing processes)

Task design –classifying job activities –what needs to be done –making it easy for an employee to successfully complete tasks –job analysis, can be done after a skills audit is conducted  

Process layout- arrangement of machines –grouped together by function/process they perform

–        monitoring-measuring actual performance against planned performance –key performance indicators, control-corrective action –when there is a discrepancy between performance and goals changes/improvements can be made -crucial and improvement-reduction of inefficiency, wastage & poor work processes –elimination of bottlenecks –improvements are typically sought in time, costs, quality, efficiency & process flow –concept of continuous improvement

·         outputs –good or service provided/delivered to the customer

–        customer service –how a business meets and exceeds the expectations of customers in all aspects of its operations –key in developing long term relationships

–        warranties –agreement to fix defects in products –an assessment of warranty claims can help a business to adjust transformations processes to be more effective

operations strategies -> HOW to achieve business goals

·         performance objectives-key performance indicators – quality –quality of service/conformity/design *can be measured by rate of returns/feedback, speed –time it takes for production/operations process to respond to changes in market demand *test by analysing wait time/production speed, dependability –consistency/reliability of products *measure warranty claims/complaints, flexibility-how quickly processes can adapt to market change –technology/change is design can impact, customisation –creation of individualised products to meet specific customer needs -, cost-minimisation of expenses so that operations processes are conducted as cheaply as possible *measure by sales figures/internally

·         new product-design/development/launch/sale of new products allows a business to grow and maintain competitive advantage –differnet approaches –customer approach/changes or innovation in technology  or service design and development-more complex –adding to the service offered to customer –can be adding to variety/increase of choice –develop within cost structure

·         supply chain management-intergrating & managing the flow of supplies throughout the inputs/transformation process/outputs to best meet the needs of customers –supplier rationalism/backwards vertical integration/cost minimalisation/flexible responsive supply chain procces (<-strategies)– logistics-distribution,including transportation, use of storage, warehousing and distribution centres, materials handling and packaging –computerisation can make the task faster/more efficient, e-commerce-buying/selling of goods/services via the internet –alter operations process –e-procurement, managing supplies in an organised way –makes trading simpler, global sourcing-business seeks to find the most cost effective location for manufacturing a product, even if the location is overseas –may be cheaper to purchase inputs overseas than create them –keep control over complex supply chains

·         outsourcing-use of external providers to perform business activities  – advantages-external provider specialised –lower cost –greater effetiveness and disadvantages –if ineffective may be more expencive –not in control –if competiotors are doing the same less competitive

·         technology – leading edge-most advanced or innovative, established-developed and widely used

·         inventory management-Inventory control has 3 aims -> determine max and min stock, provide details of changes in inventory to trigger management decisions to reorder -strategies applied impact transformation process – advantages –consumer demand can be met –reduces lead times between order/delivery –store of stock allows bus. To promote products in non-traditional/new markets –stock adds value to bus. –making products in bulk can reduce costs and disadvantages of holding stock-costs w/ holding –invested capital/labour/energy can’t be used elsewhere –cost of absolesence if stock is unsold, LIFO (last-in-first-out)-last goods produced are the first out or used and therefore each unit sold/used is the last one recoded*, FIFO (first-in-first-out)-first goods purchased are the first ones used therefore the the cost of each unit sold/used is the first recorded* -can be used if price of supplies/goods remain relatively stable if not –WAC-(weighted average cost) –takes into account variety of cost, JIT (just-in-time)-ensures exact amount of material inputs arrive only as they are needed –can save money but require flexible operations/reliable suppliers

·         quality management –ensure consistency/reliability/safety and fitness of purpose of product

–        control –use of inspection at various points in the production process –failure to meet pre-determined targets = corrective action

–        assurance –assures set standards are met –pre-determined (universal) quality standards e.g. 150 900 quality certification

–        improvement-continuous improvement-ongoing commitment to improving goods/service and total quality management-quality is a commitment/responsibility of all staff

·         overcoming resistance to change-major reasons for resisting change include: – financial costs, purchasing new equipment-high cost –recouped through advantages/transformation, redundancy payments –high cost to pay out no longer required staff, retraining-necessary to to ever-changing bus. Can be on/off job, reorganising plant layout-major changes may require extensive re-organising –costs from transporting/loss in productivity, inertia-psychological resistance –fear of uncertainty

-Overcoming resistance to change –managers must manage change effectively –identify source of change, asses need to accommodate change by adjusting bus. Process –lower resistance by communicating with employees –may need a change agent, create a culture of change –apply change models is necessary –lewins -> unfreeze, change, re-freeze –management skills e.g. communication

·         global factors – global sourcing, economies of scale –cost advantages gained by producing on a larger scale, scanning and learning –learning from other bus. –helps managers to adapt, research and development –helps bus. to create leading edge/innovative production –quality + competitive advantage of business