3A Operations management

Operations management
Involves coordinating and organising the activities involved in producing the goods or
services that a business sells to customers.

Efficiency
Is how productively a business uses its resources when producing a good or service.

Effectiveness
Is the extent to which a business achieves its stated objectives.

To make a profit - Implementing technology into the production process.

How
- Reduces the number of employees required in the operations system, which can
reduce expenses associated with labour and therefore increase profit

To increase market share - Checking that products produced are not faulty.
How
- Can improve the quality of a business’s product, increasing customer satisfaction and the
business’s proportion of sales within its industry.

To meet shareholder expectations - Creating a website for customers to purchase goods and
services online.
How
- Increases online sales, which can lead to higher levels of profit and increase dividends for
shareholders.

To fulfil a market need - Using technology to design new products.

How
- Can design innovative products to fulfil customer needs that are currently unmet or
underserved in the market.

To fulfil a social need - Ensuring that any waste is recycled in the production process.
How
- Reduces the amount of waste produced by a business, allowing it to meet the social need of
environmental preservation.

To improve efficiency - Using technology to automate the production process.

How
- Can increase a business’s productivity in terms of production speed, as well as reducing the
amount of resources discarded in the production process.

To improve effectiveness - Implement strategies that improve the quality of the business’s product.
How
- Can improve levels of customer satisfaction, which may increase the business’s sales and
revenue. Increased financial performance can assist the business in achieving its objectives.
3B Key elements of an operations system
Inputs
are the resources used by a business to produce goods and services.
ADD THESE FOR EXAMPLES
- labour resources (employees)
- raw materials, such as flour and iron
- capital resources, such as equipment and machinery
- time
- utilities, such as electricity, water, and gas
- information.

Processes
are the actions performed by a business to transform inputs into outputs.
ADD THESE FOR EXAMPLES
- Mixing
- Designing
- Baking
- Computing
- Cutting
- Washing
- Assembling
- Constructing.

Outputs
are the final goods or services produced as a result of a business’s operations system, that
are delivered or provided to customers
3C Characteristics of manufacturing and service businesses
Manufacturing businesses
use resources and raw materials to produce a finished physical good.

Production process
- Manufacturing businesses tend to have highly automated processes that are capital
intensive (high degree of machinery and equipment).
Occurrence of production and consumption
- At manufacturing businesses, production and consumption of the product occur at
separate times.
Customer contact
- Manufacturing businesses often have a low degree of customer contact during
production, as the production stage is separated from consumption.
Tangibility (is the ability to be touched)
- The outputs produced by a manufacturing business are tangible.
Storability
- The outputs produced by a manufacturing business can be stored as inventory.
Consistency
- Manufacturing businesses produce standardised goods through mass production.

Service businesses
provide intangible (something that cannot be touched) products, usually with the use of
specialised expertise.

Production process
- Service businesses tend to have production processes that are labour intensive (high
degree of employee involvement)
Occurrence of production and consumption
- At service businesses, production and consumption of the service occur
simultaneously.
Customer contact
- Service businesses tend to have a high degree of customer contact during production
as it occurs simultaneously with consumption.
Tangibility
- The outputs produced by a service business are intangible.
Storability
- The outputs produced by a service business cannot be stored as inventory.
Consistency
- Services are usually not standardised and instead tailored specifically to fulfil
individual customers’ needs.
3D Technological strategies
Automated production lines
Involve machinery and equipment that are arranged in a sequence, and the product is developed
as it proceeds through each step.

Efficiency
- Using fewer human resources
- Reducing wastage due to improve accuracy
- Perform tasks quicker than humans
Effectiveness
- Allowing the business to meet customer demand
- Improve safety
- Increased quality due to improve accuracy and consistency
Advantages
- Tasks can be performed faster and cheaper than human labour.
- Increased accuracy, enhancing quality, generating more sales revenue.
- Products and tasks are consistently produced at a high standard
- Removes tedious or boring tasks from their workloads increased job satisfaction
Disadvantages
- High establishing and ongoing maintenance costs
- If production solely lies on APL, production may need to stop if machinery breaks down
- May lead to job loss or additional expenses to train current employees

Robotics
Are programmable machines that are capable of performing specified tasks.
Example – manufacturing and service industries

Efficiency
- Using fewer human resources
- Reducing wastage due to improved accuracy
- Perform tasks quicker than humans
Effectiveness
- Allowing the business to meet customer demand
- Improving safety
- Increased quality due to improved accuracy and consistency
Advantages
- Tasks can be performed faster and cheaper than human labour.
- Increased accuracy, enhancing quality, generating more sales revenue.
- Products and tasks are consistently produced at a high standard
- Removes tedious or boring tasks from their workloads increased job satisfaction
Disadvantages
- High establishing and ongoing maintenance costs
- Robotics may break down, causing delays
- May lead to job loss or additional expenses to train current employees

Computer-aided design (CAD)

Is digital design software that aids the creation, modification, and optimisation of a design and the
design process.
Example - Designs made easily with fewer resources

Efficiency
- Using fewer resources to design a product
- Allows the business to determine material requirements, preventing
understocking/overstocking
- Ability for others to view the product and provide feedback, preventing producing a product
the market doesn’t want
Effectiveness
- Viewing the product before production and making adjustments to ensure it meets customer
needs
- Can view 3-dimesional product to get a more realistic perspective
Advantages
- Greater accuracy in product design process resulting in consistent levels of quality
- Speed up process as designs can be created and modified faster
- Products and tasks are consistently produced at a high standard
- Removes tedious or boring tasks from their workloads increased job satisfaction
Disadvantages
- Employees need to be trained, increasing time and costs of implementation
- Software can crash, causing design delays

Computer-aided manufacturing (CAM)

techniques involve the use of software that controls and directs production processes by
coordinating machinery and equipment through a computer.
Example – Manufacturing designs with minimal human involvement

Efficiency
- Speeding up production
- Need for fewer human resources
- Ability to produce with fewer errors
Effectiveness
- Can enhance product quality
- Ability to easily provide customisations for customers
Advantages
- Tasks can be performed faster and cheaper than human labour.
- speed up process as designs are not manually reset by humans.
- Products and tasks are consistently produced at a high standard
- removes tedious or boring tasks from their workloads increased job satisfaction
Disadvantages
- Cost of implantation. Initial investment and training
- Machines often only perform one type of task, potentially reducing flexibility for multiple
products

Artificial intelligence (AI)

involves using computerised systems to simulate human intelligence and mimic human behaviour.
Example – quality, market analysis and material management

Efficiency
- Can greatly speed up the analysis of large amounts of data. E.g., Can analyse customer
demand
- Can monitor materials to ensure there is no over/under stocking
 - Can identify errors in a product early and notify employees to allow corrective action to take
place
Effectiveness
- Improving decision making
- Improving quality of the product being produced
- Peed up and improve customer service
Advantages
- Perform complex functions, such as analysing data
- Tasks can be performed faster and cheaper than human labour.
- Ability to provide prompt customer service to improve customer satisfaction
- Removes tedious or boring tasks from their workloads increased job satisfaction
Disadvantages
- High initial costs
- Can make incorrect assumptions/advice as it relies on human data
- Potential for ethical issues to arise without regulation
- Possible job loss

Online services
Are services that are provided via the internet.
Example – website/mobile applications, online education, cloud computing, social media platforms

Efficiency
- Reduced costs of operating
- Ability to monitor real time date, helping manage materials
- Communicate with customers with fewer resources
Effectiveness
- Increased accessibility, improving customer satisfaction
- Ability to monitor demand, helping plan for materials and production needs
Advantages
- Ordering platforms, can process orders accurately and provide increased customer
convenience
- Price comparison platforms, may be useful for a business to showcase competitive prices or
distinguish its product’s features.
- Removes tedious or boring tasks from their workloads. increased job satisfaction
Disadvantages
- May need to increase distribution channels if being offering products aboard
- May require large investments to keep online services updated and up and running
- Need to invest heavily in data privacy

3E Materials strategies
Forecasting
Is a material planning tool that predicts customer demand for an upcoming period using past data
and market trends.
Efficiency
- Ensuring enough materials are on hand, leading to a continuous flow (reducing waiting
times)
- Minimises wastage – reduces the amount of stock perishing/becoming obsolete/damaged
Effectiveness
- Helps the operations meet customer demand
- Enhances the ability to respond to changes in the market.
Advantages
- Informed decisions about the quantity of materials required to meet customer demand
- Prevents the excessive ordering of materials that may go to waste if unneeded
- Reduce the cost of storage
Disadvantages
- Potential for inaccuracies
- Time consuming to monitor data trends

Master production schedule (MPS)

Is a plan that outlines what a business intends to produce, in specific quantities, within a
set period of time.
Efficiency
- Streamlines production processes by proving a clear plan and schedule for production
(planning resources
- Can reduce lead times as materials are on hand at the right time
- Reduces over production
Effectiveness
- Meeting customer demand by aligning production with market demand
- Allows the business to plan their resources, reducing costs and improving profits

Advantages
- Reduced impact on the environment as prevents wastage
- Clear schedule of operations that includes the timeline and quantity of production targets.
- Determining production targets, businesses are more likely to meet customer demand

Disadvantages
- Using an MPS can sometimes result in less flexibility if there are quick changes to production
required
- Maintaining and monitoring the MPS can take dedicated staff, increasing costs

Materials requirement planning (MRP)

Is a process that itemises the types and quantities of materials required to meet
production targets set out in the master production schedule.
Efficiency
- Ensuring materials are on hand so there is a continuous flow
- Minimises wastage
Effectiveness
- Reduces delays, helping meet customer demand
- Can lead to reduced costs
Advantages
- Accurate ordering of the quantities of materials avoids excess storage and expenses
- Reduced impact on the environment as prevents wastage

Disadvantages
- Requires accurate data to be effective
- Costs involved in implementing MRP can be significant

Just in Time (JIT)

Is an inventory control approach that delivers the correct type and quantity of materials as soon as
they are needed for production.
Efficiency
- Reduces storage costs
- Minimises wastage
Effectiveness
- Allowing the business to be more responsive to market conditions and changing customer
needs/wants
- Improving product quality
- Less money tied up in idle stock
Advantages
- Reduced impact on the environment as prevents wastage as limiting the amount of stock
- Can switch to the production of a different product without wasting resources as there are
minimal materials on hand
Disadvantages
- Highly dependent on suppliers
- Vulnerable to supply chain disruptions
- Increased risk of stockouts
- Increased delivery costs (potential for higher carbon emissions)

3F Quality strategies
Quality
Is a good or service’s ability to satisfy a customer’s need.

Quality control
involves inspecting a product at various stages of the production process, to ensure it
meets designated standards, and discarding those that are unsatisfactory.

Efficiency
- Identifies errors early, reducing wastage
- Less time spent reworking products
- Fewer product returns – less time and resources

Effectiveness
- Improve customer satisfaction
- Improved image, brand loyalty
- Increased profits

Advantages
- Consistently high-quality products
- Reducing number of faults minimise number of refunds
- Improve businesses reputation

Disadvantages
- Can slow down production
- Reactive strategy – identifies errors after they have occurred
- Not actively reduce wastage
Quality assurance
involves a business achieving a certified standard of quality in its production after an
independent body assesses its operations system.
Efficiency
- Improving the process in business, leads to improved use of resources.
- Fewer errors created.
- Less wastage
Effectiveness
- Customers more incline to purchase from quality assured business – allowing to meet
objectives.
Advantages
- Focusing on prevention rather than detection
- Improved consistency – greater customer satisfaction
- Improved image – brand loyalty larger market share
Disadvantages
- Can be costly and time consuming to implant.
- May require a change in culture.

Total Quality Management (TQM)

is a holistic approach whereby all employees are committed to continuously improving the
business’s operations system to enhance quality
for customers.

Efficiency
- reduce waste.
- fewer errors (using fewer resources)
- continuous improvement in all areas of the business
Effectiveness
- TQM can improve levels of customer satisfaction – therefore improving sales
Advantages
- Improved customer satisfaction
- Greater customer loyalty, improved market share
Disadvantages
- Requires commitment from all employees.
- Can be expensive to implement.
- Requires a change in culture.

3F Quality strategies
Quality control - involves inspecting a product at various stages of the production process,
to ensure it meets designated standards, and discarding those that are unsatisfactory.

Quality assurance - involves a business achieving a certified standard of quality in

its production after an independent body assesses its operations system.

Total Quality Management (TQM) - is a holistic approach whereby all employees are
committed to continuously improving the business’s operations system to enhance quality
for customers.

3G Waste minimisation - is the process of reducing the amount of unused material, time, or
labour within a business.

Efficiency
- Using fewer resources to produce products
- Focusing on reducing and reusing can lead to more efficient process

Effectiveness
- Lowering long term costs
- Reducing impact on environment
- Enhanced reputation

Reduce - is a waste minimisation strategy that aims to decrease the amount of resources,
labour, or time discarded during production.

Reuse - is a waste minimisation strategy that aims to make use of items which would have
otherwise been discarded

Recycle - is a waste minimisation strategy that aims to transform items which would have
otherwise been discarded.

3H Lean management
Lean management - is the process of systematically reducing waste in all areas of a
business’s operations system whilst simultaneously improving customer value.

Pull - is a lean management strategy that involves customers determining the number of
products a business should produce for sale.

One-piece flow is a lean management strategy that involves processing a product

individually through a stage of production and passing it onto the next stage of production
before processing the next product, continuing this process throughout all stages of
production.

Takt - is a lean management strategy that involves synchronising the steps of a business’s
operations system to meet customer demand.
Zero defects - are a lean management strategy that involves a business preventing errors
from occurring in the operations system by ensuring there is an ongoing attitude of
maintaining a high standard of quality for the final output.

3I CRS in operations
Corporate social responsibility (CSR) - is the ethical conduct of a business beyond legal
obligations, and the consideration of social, economic, and environmental impacts when
making business decisions.

Inputs
- Using renewable energy
- Local suppliers

Processes
- Minimise waste generated.
- Offering training and development
- Going above legal obligations during safe processes

Outputs
- High-quality goods/services
- Producing a recyclable product
- Minimises packaging or sustainable packaging
3J Global considerations
Global sourcing of inputs - involves a business acquiring raw materials and resources from
overseas suppliers.

Advantages
- Business can source resources that may be unavailable in Australia
- Possible for cheaper recourses

Disadvantages
- Language barrier
- May have delays or damage through transportation.

Overseas manufacture - involves a business producing goods or services outside of the

country where its headquarters are located.

Advantages –
- Cheaper labour costs
- Access to employees with higher quality skills

Disadvantages
- May have delays or damage through transportation.
- Taking jobs away from local economy

Global outsourcing - involves transferring specific business activities to an external

business in an overseas country.
Advantages
- Access to employees with higher quality skills
- Productivity increase as only doing specific task

Disadvantages
- Reduced control
- Language barrier