Professional Documents
Culture Documents
Performance objectives
Low cost
Quality
Flexibility
Dependability
global sourcing
quality management
HR Rucruitment
New product design
Cost leadership refers to the strategies to produce goods or services at the lowest possible
cost whilst they are still acceptable to customers. By reducing the costs of production and
distribution, a business will be able to gain an advantage over competitors. However, it is
important that customers see that they are gaining value for money, otherwise this strategy
will not see long term rewards for the business. If the strategy is successful, the business will
become the leading provider of a particular good or service based on their lowered costs.
Businesses adopting a cost leadership strategy commonly have standardised products
The car manufacturer Kia is well known for being a cost leader. It has concentrated on
reducing costs of production but also focused on the look of the car because customers will
not buy a car that looks cheap.
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(i) Quality
Management set performance objectives around the quality of design and the resources used
in the product. Quality is usually be monitored at different stages of the production process
from the quality of inputs, the quality of processes to the quality of outputs. If the quality of
the final product is not well regarded by customers, they will not buy the product.
Quality Expectations
Quality expectations of consumers influence a business because if the product or service is
not considered good enough, especially compared to the way it is marketed, it can lead to
disappointment and consumers taking their business elsewhere.
A business also expects certain quality standards from its suppliers. If the inputs are not
satisfactory then the overall quality of the product/service may be affected. Similarly, if the
quality of the input is too high to suit the needs of the business, then the price of the product
is increased to maintain profit margins. Both situations result in a business potentially losing
customers.
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(iii) Dependability
It is important that the operations processes are consistent; that is they reliable and
dependable, if a business is to retain customers and maintain customer loyalty. The good or
service must be of a consistent and reliable standard. Performance strategies in this area
could concentrate on reducing customer complaints. A number of businesses involved in the
food and beverage industry have had negative social media coverage over changes in their
classic recipes resulting in alterations to the way the product tastes, thus affecting customer
loyalty.
(iv) Flexibility
A business needs to be flexible in the way that it adjusts to changes in the external business
environment. For example, if customer demand suddenly increases the business must be able
to meet this demand as soon as possible. A performance objective here could involve having
plans (such as critical path analyses) in place for different order sizes. Plans that include the
regular maintenance of equipment will allow the business to meet increased demand in a
timely way. Training and developing staff so that they can meet changed circumstances is
also important.
It is important that businesses are flexible about their products. Although their core product
may be popular with customers at the moment such as Carmans Fine Foods muesli, this may
not always be the case. Carmans is looking to expand their product range to include baked
goods, not just muesli related products. New product or service design and development also
seek to reduce the risk of business failure by increasing options for customers to make
purchases from the business. For example, imagine a fashion store that does not change its
range to suit changing customers tastes in colour, style etc. Mobile phone manufacturers are
a good example of producers who constantly change their product to reflect the changing
tastes and needs of consumers. To do this the operations department must consult with the
marketing department to determine what consumers want; they must ensure that production
processes are in place to meet these demands. Thus, for product design and development to
be successful operations management must be aware of consumer preferences and as well as
changes and innovations in technology.
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Control
Control is the checking that what was expected to happen, did happen; that is, checking the
results against the plan. Quality control should involve checking the quality of the product at
different stages of the transformation process. Operations will usually employ feed-forward,
concurrent and feedback controls to monitor the production process.
Feed-forward controls involve careful planning before production begins. In this way any
problems can be anticipated and the solutions considered. An example of this is a bakery
using a recipe and making sure that all ingredients and equipment are in place before making
bread. Concurrent controls are used during the production process. An example is the baker
checking on the bread during the baking to see if the bread is rising. Feed-back controls
occur after the production process. It can involve checking the final product prior to
distribution or even customer feedback to see how satisfied they are with the product. The
baker could ask customers to fill in a quick survey or even ask questions of customers, to
gauge how they feel about a new type of bread.
Assurance
Quality assurance is the establishing of a set of procedures so that errors are less likely to
happen in the production of a good or service. This will often involve building a culture within
the workplace so that every employee strives to produce an output of the highest standard.
The aim of quality assurance is to always meet or exceed customer expectations.
For some educational resources available on the internet, businesses have their own quality
assurance standards to ensure equal access for all students. For example, the resources must
pass a few tests including the ability to access information via a variety of web browsers; fit
different size monitors; provide adequate colour contrasts for people with vision difficulties;
and contain correct spelling and grammar.
Improvement
Businesses look to continuous improvement in their production processes as this will build
loyalty in existing customers and encourage new customers. This improvement should be
aimed at streamlining processes so that waste is eliminated, improving product quality and
maximising the skills of the workforce. The management functions of planning, organising,
leading and controlling will be used to carry out these goals.
To ensure that value adding does occur in the transformation of inputs into outputs;
operations management will set performance objectives.
(i) Quality
Management set performance objectives around the quality of design and the resources used
in the product. Quality is usually be monitored at different stages of the production process
from the quality of inputs, the quality of processes to the quality of outputs. If the quality of
the final product is not well regarded by customers, they will not buy the product.
(ii) Speed
It does not matter how good a product is if the customer does not get that product when they
want it. Objectives in this area will include reducing the time involved to take the customers
order, make the product and deliver it to the customer. For example, like many businesses
taking online orders, ING Direct has different rates for delivery of services such as getting a
bank cheque written. If the cheque is urgent, say when paying a deposit on a house, the
customer can choose from different delivery speeds such as platinum express which
guarantees next day delivery, standard post which takes 3-5 business days. In most
businesses, if an item is in stock for online orders, then often it is up to the customer to pay a
premium for immediate delivery.
(iii) Dependability
It is important that the operations processes are consistent; that is they reliable and
dependable, if a business is to retain customers and maintain customer loyalty. The good or
service must be of a consistent and reliable standard. Performance strategies in this area
could concentrate on reducing customer complaints. A number of businesses involved in the
food and beverage industry have had negative social media coverage over changes in their
classic recipes resulting in alterations to the way the product tastes, thus affecting customer
loyalty.
(iv) Flexibility
A business needs to be flexible in the way that it adjusts to changes in the external business
environment. For example, if customer demand suddenly increases the business must be able
to meet this demand as soon as possible. A performance objective here could involve having
plans (such as critical path analyses) in place for different order sizes. Plans that include the
regular maintenance of equipment will allow the business to meet increased demand in a
timely way. Training and developing staff so that they can meet changed circumstances is
also important.
(v) Customisation
Customisation means the ability of business operations to meet the needs of its customers. It
is the ability of the business to customise its good or service. This is relatively easy in some
business sectors such as those selling software. It services focus on tailoring the software to
suit the needs of other businesses. Another example of customisation can be seen in hair
salons. A hairdresser will listen to the clients preferences and provide a style to meet their
request. Other sectors find it difficult to customise their product due to the business model
set up, usually involving mass production. They have relied on a one size fits all philosophy.
Henry Ford famously said, about his mass produced Model T Ford, they can have any colour
as long as it is black. Technology has allowed businesses to move away from this way of
operating and let them adapt their production processes to satisfy the desires of individuals
and small groups. Performance objectives in this area will involve implementing technology
that allows customer choice in how the final product looks.
It is important that businesses are flexible about their products. Although their core product
may be popular with customers at the moment such as Carmans Fine Foods muesli, this may
not always be the case. Carmans is looking to expand their product range to include baked
goods, not just muesli related products. New product or service design and development also
seek to reduce the risk of business failure by increasing options for customers to make
purchases from the business. For example, imagine a fashion store that does not change its
range to suit changing customers tastes in colour, style etc. Mobile phone manufacturers are
a good example of producers who constantly change their product to reflect the changing
tastes and needs of consumers. To do this the operations department must consult with the
marketing department to determine what consumers want; they must ensure that production
processes are in place to meet these demands. Thus, for product design and development to
be successful operations management must be aware of consumer preferences and as well as
changes and innovations in technology.
(i) Logistics
Logistics management is the coordination of the supply chain and what goes where at what
time. It plans, organises and monitors activities such as transportation , inventory
, warehousing ,material handling , and packaging , and often security . Some
businesses will outsource aspects of the supply chain and so management will have to
oversee the contracting process involved. For example, Coca-Cola Amatil (CCA) has, in the
past, outsourced the delivering of its drink products to Linfox, a business that specializes in
transportation. CCA does this so it can concentrate on its prime function of drink production,
and not worry about managing and maintaining a fleet of vehicles as well. Operations
management in CCA is responsible for getting quotes (tenders) for the transportation
contract and monitoring the contract.
(ii) E-commerce
E-commerce means electronic commerce. Technology means that customers can now place
orders on line from anywhere in the world. This not only provides opportunities for a business
to gain more customers but it also provides opportunities for other businesses, resulting in
greater competition. Ensuring that the customer receives their on-line order is an important
function of the operations department. Australia Post has adapted its operations, due to the
change in the way that people communicate, by providing the delivery of many online
purchases. The Financial Review has written a case study about how Australia Post has met
the challenge of change in the external environment. The case study can be found
at http://www.afrbiz.com.au/case-studies/australia-post-building-the-logistics-of-anation.html
Suppliers are chosen very carefully. It often takes 3-5 years to select the right
supplier because detailed discussions about cost, quality and technology
requirements take place and critical issues are identified and resolved before a
contract is signed. The performance of suppliers is monitored very carefully and
those that perform well often earn more business. Toyota believes that longterm partnerships are more cost-effective and flexible, than short term ones.
Outsourcing
A business may contract out some of its operations to other businesses that specialise in
these tasks. This is called outsourcing and may occur for a variety of reasons. For example,
as stated above, Coca-Cola Amatil does not own its own transport fleet as it wants to focus
its energy on what it does best.
Outsourcing has advantages and disadvantages:Advantages
Disadvantages
It is important before making the decision to outsource some of its production processes that
the Operations manager weighs up the advantages and disadvantages.
Technology
Technology will give a business a competitive advantage in the market place but will also be
expensive to implement. The operations manager will have to decide whether to be a leader
in implementing new technology and absorb the associated costs, hoping for increased
profits; or to be a follower and let another business take the leading role, perhaps also
gaining most of the customers as well. If the business decides to be a follower, it is able to
look at the advantages and disadvantages of introducing the established technology. It will
be able to examine the successes and failures of businesses that have already introduced the
technology. However, timing is important and the business may find that the other
businesses have built strong customer loyalty by introducing the new technology earlier.
Apple has a competitive edge over many other businesses producing electronics due to its
innovative and unique technological designs. Fierce competition over technology has arisen
between Apple and Samsung. In a court case over patent infringement, Apple was awarded
over $1 billion when, in August 2012, a jury decided that Samsung looked to Apples devices,
software icons and general features to design their own technology.
this is in a supermarket where the new milk is placed behind the older milk on the shelf so
that the milk with the shorter expiry date sells first.
Other businesses will use a last-in-first-out (LIFO) system where new items are placed in
front of older stock. Products that have along expiry date are usually shelved in this manner.
Businesses that are running special promotions on products with may also use this inventory
system.
Just in time (JIT) inventory management is where the product is made or delivered just in
time to meet consumer demand. Modern technology involving electronic stock monitoring
systems have made this possible for many businesses and have meant that they can cut
down on the costs involved in holding stock at the retail outlet. Many businesses will
warehouse bulk stock on the outskirts of large urban areas, where rent is cheaper, and have
items delivered in time to meet consumer demand. Toyota uses the JIT method of lean
production to eliminate waste and reduce warehousing costs. Increased productivity for
Toyota is due to the JIT method where they make only what is needed, when it is needed
and in the amount needed.
Control
Control is the checking that what was expected to happen, did happen; that is, checking the
results against the plan. Quality control should involve checking the quality of the product at
different stages of the transformation process. Operations will usually employ feed-forward,
concurrent and feedback controls to monitor the production process.
Feed-forward controls involve careful planning before production begins. In this way any
problems can be anticipated and the solutions considered. An example of this is a bakery
using a recipe and making sure that all ingredients and equipment are in place before making
bread. Concurrent controls are used during the production process. An example is the baker
checking on the bread during the baking to see if the bread is rising. Feed-back controls
occur after the production process. It can involve checking the final product prior to
distribution or even customer feedback to see how satisfied they are with the product. The
baker could ask customers to fill in a quick survey or even ask questions of customers, to
gauge how they feel about a new type of bread.
Assurance
Quality assurance is the establishing of a set of procedures so that errors are less likely to
happen in the production of a good or service. This will often involve building a culture within
the workplace so that every employee strives to produce an output of the highest standard.
The aim of quality assurance is to always meet or exceed customer expectations.
For some educational resources available on the internet, businesses have their own quality
assurance standards to ensure equal access for all students. For example, the resources must
pass a few tests including the ability to access information via a variety of web browsers; fit
different size monitors; provide adequate colour contrasts for people with vision difficulties;
and contain correct spelling and grammar.
Improvement
Businesses look to continuous improvement in their production processes as this will build
loyalty in existing customers and encourage new customers. This improvement should be
aimed at streamlining processes so that waste is eliminated, improving product quality and
maximising the skills of the workforce. The management functions of planning, organising,
leading and controlling will be used to carry out these goals.
a cost advantage. By then selling to customers in other countries, a business can optimise its
production processes.
Globalisation has also given businesses the opportunity to scan and learn which means that
management can see what is happening in global businesses and economies and benefit from
these experiences. In the same way, businesses can take advantage of research that is being
carried out in other countries and adapt this research to develop products for the domestic
market.
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Operation refers to the coordination of those activities in a business that are involved in
combining inputs for the purpose of producing an output that is valued by consumers. This
process is called value adding. For example, a bag of oranges can go through certain
procedures to turn it into bottles of orange juice. The bottles of juice will be worth more than
the original bag of oranges because, at each stage of production, value was added.
The operations department is responsible for acquiring the inputs and devising the best
production methods so that value adding occurs in the most efficient and effective way. Thus,
the role of operations management (and the operations manager) is to ensure a smooth
production process that contributes to the output of goods and services of an organization.
Cost leadership
Cost leadership refers to the strategies to produce goods or services at the lowest possible
cost whilst they are still acceptable to customers. By reducing the costs of production and
distribution, a business will be able to gain an advantage over competitors. However, it is
important that customers see that they are gaining value for money, otherwise this strategy
will not see long term rewards for the business. If the strategy is successful, the business will
become the leading provider of a particular good or service based on their lowered costs.
Businesses adopting a cost leadership strategy commonly have standardised products
The car manufacturer Kia is well known for being a cost leader. It has concentrated on
reducing costs of production but also focused on the look of the car because customers will
not buy a car that looks cheap.
Discuss staffing and training and development needs with the Human Resources
department/manager.
Discuss financing requirements with the Accounting and Finance
department/manager.
Discuss product design with the Marketing department/manager.
Therefore, it can be seen that the Operations department carries out a coordinating role in
the business to ensure that the prime function (main activity) of the business is carried out
efficiently and effectively so that consumer demand is met. In this way the business will be
profitable.
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Inputs
Inputs are those features that go into the creation of goods and services. These features are
changed, or transformed, so that value adding occurs and the result is desired by customers.
For example a bag of oranges will be transformed into orange juice; a university student will
be transformed into a professional. A transformed resource is an input that has been already
been altered in some way. Transforming resources are those factors of production that carry
out the actual transformation.
The major inputs into the operations process are human resources, materials, finance, time,
information and customers.
(ii) Information
(iii) Customers
The goal of operations is to ensure that the product made meets consumer demand.
Therefore, it is important that consumer input is included in the production process.
Traditionally many businesses made a product first and then developed the marketing
campaign to sell the product to consumers. However, the modern approach is to research
consumer needs and wants first and then develop the product. This modern approach has led
to more efficient production processes and more loyal consumers and, as a result, a more
sustainable product.
Transforming resources
(i) Human Resources
Human resources play an important part in transforming resources so that value adding
occurs. Human resources can range from untrained employees to highly skilled employees
and consultants. Each plays an important role in the production process. For the operations
function, job design is a vital aspect of operations management. If job design and job
specifications are poorly done, employees may not understand the requirements of their job,
product quality may suffer and employee dissatisfaction may arise. Therefore, jobs should be
designed to motivate workers so that they can meet the goals of the business using their
skills and abilities.
(ii) Facilities
The physical place where the production process occurs is very important in the achieving the
goals of the organisation. The operations manager must consider many factors when deciding
on the facilities. Location decisions play an important role in the success of the
business. Management must ask a range of questions such as how easy it is for suppliers to
access the premises, how the finished product will be distributed and how accessible the
premises are for employees and customers.
The premises might be cost effective in terms of rent or mortgage but if it is difficult for
suppliers, staff and customers to access, it will not be sustainable in the long run.
Management must also consider the future when choosing premises, such as potential for
expansion.
Internal layout is important. The operations manager must look at configuring the facilities to
ensure the most efficient and safe method of production. For example, if the process involves
assembling a good, there needs to be a logical work flow. If the process involves shared
equipment there must be a roster so that one piece of equipment is not required by everyone
at the same time.
Transformation processes
The transformation process refers to the actual conversion of inputs to outputs. It is
important that management makes this process as efficient and profitable as possible. Having
spent time and money on ensuring the right inputs, the business needs to also make sure
that the output is the desired result.
(ii) Variety
The production process must also be flexible enough to provide variety, that is, although a
basic product is provided, it can be adapted to suit individual customer needs. For example, a
car manufacturer can use the same processes to make a basic model car with slight
adaptations made for different colours.
(iv) Visibility
Visibility refers to building a relationship with the customer; this not only builds customer
loyalty but also enables the business to improve its operations. An example of this is asking
customers to fill out satisfaction surveys and questionnaires. Sydney Morning Herald now
requires paid subscriptions to access news via the internet and sought feedback about this
about two months after the initiative was introduced. Questions were posed to investigate the
times and types of access to digital information and results were used to tailor appropriate
packages to both suit the needs of customers and boost the SMHs profits.
In order to sequence and schedule the production process, management will use different
planning tools. A Gantt chart is a type of bar chart that illustrates the start and finish dates of
a project. The project will be broken down into the different tasks that must be performed
and the time frame for their completion. This allows management to see what jobs need
doing, when they need doing and any overlapping tasks. For example, Gantt charts were
used for teams of people in the co-ordination and construction of building Royal North Shore
Hospital.
Critical path analysis allows management to map out the production process, looking at the
longest possible time frame the project could take. It is very like a flow chart that shows how
one task will lead to another. This analysis not only helps sequence and schedule tasks but
also to see where problems might arise.
The process layout will affect how efficiently a business is able to transform the inputs into an
output. Technology and task design will impact on this layout. Technology will need to be
located in the business dependent on its requirements as access to electricity, cooling, water,
etc. If the technology is needed to be used by different employees at different times, task
design will identify this so that clashes do not occur. At all times the process layout needs to
emphasise a smooth flow of production and occupational health and safety.
http://upload.wikimedia.org/wikipedia/commons/thumb/2/29/Ford_assembly_line__1913.jpg/566px-Ford_assembly_line_-_1913.jpg
Modern process layout note the absence of people. In modern organisations employees are
not doing the repetitive work of an assembly line
http://www.themanufacturer.com/wp-content/uploads/2011/11/Wakefield-productionline.jpg
business do such things as reduce the time that it takes to provide the customer with the
good or service; to reduce the costs involved in providing the product; to reduce dangerous
work place practices and to provide a better quality product.
Outputs
Outputs are the end result of a businesss production processes, the good or service that is
sold to the customer. Some outputs are also inputs into another businesss production
process. For example a flour mill will make wheat, sell this wheat to a baker who will in turn
make a cake which is sold to a caf or an individual customer. It is vital that the output of a
business must meet the demands of customers if the business is to be able to cover the costs
of making the product. The cake made by the baker must sell for more than the cost of
making it.
Customer service
Customer service is a non- physical output of the operations process. It refers to how well the
business can meet the expectations of customers. Although this is often seen as the domain
of the marketing department (and will be discussed more in this topic), it is important that
the operations department recognises its obligations in this area. Operations management is
responsible for the provision and quality of the product and if customers are disappointed in
these things, they will look to other businesses for an alternative product. A good quality
product, which is provided in a timely fashion, will not only encourage customer loyalty but
will often let the business charge a higher price than competitors.
Warranties
By law in Australia, all products sold must come with a warrantee or guarantee that the
product will serve its advertised purpose. Many businesses when selling a physical product
over a certain value will offer a written warranty, valid for a period of time.
In monitoring the effectiveness of the operations department, management can look at how
many warranty claims are made. Customers usually only make a warranty claim when the
product is defective in some way. If the number of claims is high, it would indicate that
something is wrong with the production process and this must be rectified. If the business
has good monitoring and quality control mechanisms in place, then the business will be able
to reduce warranty claims.