OPERATIONS FUNCTION

AND RELATIONSHIP TO BUSINESS

STRATEGY.

Operations management is about

producing goods and/or services based

on business objectives.

DefinitionsOperations management- consists of all the activities in which managers engage to produce a good or service.

Tangibles- are goods which can be touched.

Intangibles- include services, which cannot be touched.

Business objectives

• Improve business efficiency• “by lowering our costs of

doing business, we have built a world class model of efficiency and logistical expertise”. Said James Strong.

Operation strategies

• Improve supply chain management.

• Uti lizing technology to increase effi ciency.

• Relationship Between Strategy and Operations objectives

• Even though strategic and operational objectives are to a large extent different, it is important to be aware of the fact that they are closely related.

• An organization is unlikely to achieve a strategic objective if it fails to effectively translate it into practicable operational objectives.

• At the same time, operational objectives will lack structure with each other and with the over all organizational mission if they are not designed to affect the achievement of strategic objectives.

• objectives only become useful when translated into operational objectives and operational objectives are only effective when designed to serve a strategic objective.

Questions

• Tangible costs • A- are goods which can be touched.

Characteristics of Operations Management within Large-Scale

Manufacturing and Service Organizations

GlossaryTangible – goods which can be touchedIntangible – include services which cannot be

touchedService – cannot be physically touched and taken

homeGood – a physical product which can be handled

and stored before being soldOperations Management – consists of all the

activities that a manager participates in to produce a good or service

Depending on what type of large-scale organization is running (service or manufacturing) depends on how they run their operations system. Customers don’t need to be present for the production in a manufacturing business whereas in a service they are part of the production. The output of a service large-scale organization is intangible (haircut), where the product of a manufacturing large-scale organization is tangible (car).

This is a virtual tour of Sydney Children Hospital’s operations management system:

http://www.sch.edu.au/vt/ service

Example 1 – ServiceHospital

InputsRaw Materials – electricity,

medication, beds, cleaning products, medical equipment

Labor – doctors, nurses, suppliers

Information – research and development, medical procedures

TimeMoney

Transformation ProcessesOperation Nursing X-rays Cooking Cleaning Comforting

OutputsPatients are fixed

Example 2 – ManufacturingBakery

Inputs Raw Materials – water,

electricity, food products (ingredients)

Labor – Bakers, waitress/waiter, suppliers

Information – recipeTimeMoney

Transformation ProcessDesignsBaking foodQuality Control

OutputBread, cake, slice, biscuit

Questions

Give an example of two different services and goods.

What's the difference between a tangible and a intangible?

How does a service differ from a good? Use examples to support your answer.

Using Bakers Delight as an example- Australia’s most successful Bakery Franchise

KEY ELEMENTS OF AN OPERATIONS SYSTEM IN

DIFFERENT TYPES OF LARGE SCALE ORGANISATIONS

INPUTSResources used in the process of production

labour

timemoney

Raw ingredients

TRANSFORMATIONS/PROCESSESConversion of inputs (resources) into outputs (goods or services). For example, the blending of raw ingredients into a mixture and then cooking it.

OUTPUTSRefer to the end result of an organizations efforts- the service or product that is delivered or provided to the consumer. What makes the money.

OTHER NOTESTANGIBLES (GOODS)

Goods that can be touched (e.g. taken home- a TV or a cake

INTANGIBLES (SERVICES)Include services- which cannot be touched (e.g. a haircut, cannot be stored)

•To produce a good the customer doesn’t have to be present (doesn’t have to be there whilst the TV is made)

•To produce a service, customer has to present (whilst having a haircut)

USEFUL WEBSITES/ QUIZZESKey elements Interactive quiz

Bakers delight virtual bakery tour

QUESTIONSName one input that would be required by an orange juice producer?

Oranges, labour, sugar.

Using Bakers Delight as an example- Australia’s most successful Bakery Franchise

KEY ELEMENTS OF AN OPERATIONS SYSTEM IN

DIFFERENT TYPES OF LARGE SCALE ORGANISATIONS

INPUTSResources used in the process of production

labour

timemoney

Raw ingredients

TRANSFORMATIONS/PROCESSESConversion of inputs (resources) into outputs (goods or services). For example, the blending of raw ingredients into a mixture and then cooking it.

OUTPUTSRefer to the end result of an organizations efforts- the service or product that is delivered or provided to the consumer. What makes the money.

OTHER NOTESTANGIBLES (GOODS)

Goods that can be touched (e.g. taken home- a TV or a cake

INTANGIBLES (SERVICES)Include services- which cannot be touched (e.g. a haircut, cannot be stored)

•To produce a good the customer doesn’t have to be present (doesn’t have to be there whilst the TV is made)

•To produce a service, customer has to present (whilst having a haircut)

USEFUL WEBSITES/ QUIZZESKey elements Interactive quiz

Bakers delight virtual bakery tour

QUESTIONSName one input that would be required by an orange juice producer?

Oranges, labour, sugar.

Materials Management

By Camden Colee

What It Involves…

Materials Management

Identifying Ongoing Materials

requirements

Safely Storing Materials

Receiving Materials

Controlling the release of

materials into the production

process

Reducing holdings of

surplus stock

Materials management is the strategy which managers use, storage and delivery of materials to ensure the right amount of inputs is available when required in the operations system.

Materials planningIn the beginning the manager must come up a production plan. This then will give rise to a more detailed Master Production Schedule (MPS) and Materials Requirements Planning (MRP).

WHY? These lists and schedules allow the organisation to produce good or services on time, to the right specifications and in the correct numbers.

Inventory Control

Why?This allows cost associated with inventory to be minimised.

Organisations may use Just In Time. Ie

Supply Chain Management

Why? If materials are not on hand, nothing can be produced.We do not want inferior materials.Needed to meet demand.

McDonald's uses socially responsible suppliers.

I’m lovin’ suppliers

DefinitionsMaterials management

The strategy which managers use, storage and delivery of materials to ensure the right amount of inputs is available when required in the operations system

InventoryThe goods and materials held as stock by an organisation.

Materials HandlingThe physical handling of good in warehouses and distribution points.

Production PlanAn outline of activities undertaken to combine resources (inputs) to create goods or services (outputs).

Master production schedulewhat is to be produced and when.

Materials Requirements PlanningInvolves developing an itemised list of all materials involved in production to meet specific orders.

Inventory Control A system used to ensure that inventory costs are minimised and that the right amount of inputs is available when needed.

Just In Time An inventory control approach which ensure that the right amount of inputs is delivered only as needed in the system.

Supply ChainThe range of suppliers from which the organisation purchases materials and resources.

Technology

The acquisition of up-to-date technology is one strategy

which operations managers use to optimise operations

Office Technology• Computers• Video conferencing• Databases• Mobile telephones• The Web• Printers• EFTPOS• Photocopiers• Personal organizers• Printers• Answering and facsimile

machines

Customer relationship management

• CRM software technology can be used to improve customer service and increase competiveness as it stores information about existing and potential customers.

Manufacturing Technology• Robotics are highly specialised

forms of technology capable of complex tasks

• Computer aided design is the computerized design tool that allows business to create product possibilities from a series of input parameters

• Computer aided manufacture is the software that designs and controls manufacturing processes

• Computer integrated manufacturing is the method of manufacturing in which the entire production process is controlled by computer

Example

• 3 is part of Hutchison Whampoa’s global group of companies. It needed to quickly deploy a flexible customer management solution. The CRM software which 3 now uses provides for wireless access and integrates with its database and web site. This enabled 3 to reduce response times- it means that 3 can have a salesperson in contact with a potential customer only minutes after the customer has entered a query on the web sit.

technology quiz

• How can technology improve operations?• Google the answer• What types of tasks are robots useful for?• Google the answer• State two benefits and two costs of

manufacturing technology?• Google the answer

Productivity and business competiveness,

their importance for and impact on the

operations system

ProductivityIs the measure of efficiency – the amount of output produced compared to the input required in production

How organizations can improve productivity

•Improve communication

•Management style (participative)

•Human resource strategies

(recognition and reward programs)

•Automating work processes (robots)

•Improving design and layout facilities

ORMORE produced for the same input

COMPETITIVE SCOPEThe range over which the organization intends to compete.

•Countries•Markets•Industries•Customers

Organizations compete in two ways:•Cost•Differentiation (flexibility, speed, quality)

It may be narrow or wide in relation to

Competing on cost

Strategies when

Competing on cost

Achieve economies of scale

Bulk buy

input Eliminate waste

Produce high volume output

Produce standardize products or large markets

Use automated production systems

Operations manager when competing on cost

Prioritise decisions based on reducing costs and improving productivity by:

• Stable production with limited interruptions

• All resources used to their optimum advantage (minimise waste)

• Constantly looking to streamline the production process

• Updating facilities and equipment (new technology, more efficient)

• Provide training and development to improve employees skills and knowledge

Competing on quality

Competing on Quality

View quality as a

competitive weapon

Market themselves as a quality business

Use technology to produce large

numbers of customized products

to varying specifications

Publicly communicate an organization wide

commitment to quality

Immediately respond to

customer needs

Reduce defect rates in

production process

Strictly comply with design

specifications

Taylor products to customers

OPERATIONS MANAGER WHENCOMPETING ON QUALITY

Prioritise their decisions based on strict application of total quality management by:

• Evaluate process to ensure minimal defect rates

• Reduce human variables (inconsistency)

• Rely on extensive use of integrated technology and computerization

• Develop strong links with the customer

Mercedes

BMW

Competing on Quality

Competing on speed of

delivery

Often have flatter

management structures

Respond quickly to changes in

demand Quickly identify an act

on trends

Maintain a corporate culture

expecting ongoing and

radical change Promote a sense of urgency

Reduce the problems

associated with bureaucracy

Competing on speed of delivery

Operations manager whenCompeting on speed of

deliveryPrioritise their decisions based on ensuring a faster transformation process by:

•Creating autonomous work teams

•Establish a efficient supply chain

•Develop faster feedback mechanism

•Adapting the transformation process to reflect the necessity for constant change

THE IMPORTANCEOrganizations that can improve their productivity ( the amount of inputs required to produce outputs) will become more competitive because they are • reducing production cost by minimizing defects

• adopting new strategies to purchase their inputs at a cheaper price (such as bulk buying)

• continuously improving the speed of their transformation process by upgrading their technology when the changes are available.

Therefore they can be more competitive in not only the price of their product but its quality and the speed of its delivery as well. If an organisation can be more competitive with its competition it can increase its sales and possibly market share resulting in more overall success.

Ethical and social responsible management

Ethics involve the study of moral issues and choices. They are concerned not with legal obligations but with what is morally right or wrong.

It is sometimes difficult to definitively say what is ‘right’ and what is ‘wrong’, as it often depends on the circumstances surrounding the situation.

Management ethics refers to moral standards as applied to management behaviour.

Management ethics are the application of moral standards to management behaviour.

• The modern concept of ethical organisations encompasses many related issues including:

• corporate social responsibility (CSR) - or simply social responsibility• the 'triple bottom line'• ethical management and leadership• 'Fairtrade'• globalization (addressing its negative effects)• sustainability• social enterprise• mutuals, cooperatives, employee ownership• micro-finance, and • well-being at work and life balance

Ethical Issues

Fairness and honesty

Respect for people

Conflict of interest

Financial management

WWF Code of EthicsHow they behave towards their Mission, Our World, and theirselvesWWF has a clearly stated mission and purpose. All of their programmes support that mission, and its goals will be more easily reached if the following principles are embraced.

http://wwf.panda.org/who_we_are/organization/ethics/

Management ethics are the applicaion of moral standards to management behaviour.

Social responsibility is the awareness of an organisation’s management of the social, environmental, political and human consequences of its action.

A social audit is a report of what an organisation has done, and is doing, with regard to social issues.

An audit is an independent check of the accuracy of financial records and accounting procedures.

A corporate code of conduct is a set of ethical standards for managers and employees to uphold

ethicalPleasant work environment, community support, improved business performance

unethical

Discrimination, harassment, unfair dismissal, bullying, enethical work

http://www.businessballs.com/ethical_management_leadership.htm

http://www.corporatecomplianceinsights.com/why-ethics-matter-a-business-without-values-is-a-business-at-risk/