BUSINESS STUDIES: TOPIC 1

ROLE OF OPERATIONAL MANAGEMENTOPERATIONS: refers to the business processes that involve transformation or production of inputs into outputs

Outputs can be both goods and services This involves

o Planning activitieso Purchasing inputso Managing inventoryo Selecting & implementing manufacturing processeso Developing strategies to gain a sustainable competitive advantage

Strategic role of operations management Strategic decisions: are long term plans & decisions that aim to increase productivity, efficiency or

quality affecting all key business functions Long-term decisions will cover 3 broad areas:

1. Planning production & delivery2. Controls to manage quality3. Improving operations

Strategic decisions include:o Products (new products to develop,

discontinuation, comparison competitors

o Processes (capital, labour & technological developments

o Capacity (venues & containment)o Location (country of operation &

online options)o Factory layout (how a manufacturing line will be set up)o People (employee numbers & skills required)o Quality (measuring & improving quality)

- Cost leadership A strategy where a business aims to obtain an advantage over its competitors by being the lowest

cost manufacturer within its industry Low cost is achieved through:

o Economies of scale (product & distribution)o New & innovative products methodo Cheaper & exclusive raw materialso Outsourcing (allows business to focus on core function)o Distributing products to dealers with low profit margins

Problems with cost leadershipo Competitors can use the same strategieso Small firms can reduce costs easier than large businesseso Business products may downgrade (less features/quality)o Changes in consumer preferenceso Competitors may increase marketing/ discount prices

QANTAS Case Study

STANDARDISATION – o Cut back on some services to destinations to reduce costs

TECHNOLOGY – o Adopted latest computer technology for online booking and ticketing e.g. online check in (eliminates need for staff to be

available for customerWASTE MINIMISATION –

o QANTAS has achieved electricity, water and waste reductions by:- Recycling- Energy efficient lighting- Water saving devices

- Goods and service differentiation Aims to obtain advantage over its competitors by having outputs that are differentiated to its

competitors, unique or leading edge technology Can be done by:

o Making product uniqueo New technologyo Increased qualityo Faster deliveryo Innovative designo Custom designed products

QANTAS Case StudyDIFFERENTIATION –

o Largest airline offering most comprehensive domestic and international coverage – services 76 international destinations- Jetstar aimed at price conscious customers and QANTAS is a full service airline- Offers different classes (First, Business, Premium Economy and Economy) on flights

Goods and/or services in different industries Manufacturing outputs: are tangible outputs that can be stored & distributed Service outputs: are intangible outputs Capital intensive: use lots of machinery to produce Labour intensive: require large amount of staff hours Similarities between service & manufacturing operations:o Both use technologyo Make predictions about consumer demando Deal with customers & supplierso Make decisions about capacity, locations & physical layout

Service Costs Intangible Can only be used by one customer

once Easier to change & customise More labour intensive More customer interaction E.g. tourism, healthcare, education

Tangible Easier to measure productivity of

physical goods Outputs can be stored, can’t be

changed or customised E.g. Manufacturing, food

Interdependence with other key business functions With specialisation: highly skilled at a specific task/role Interdependence: different parts of an organisation must rely on each other to perform their task

or role

Marketing: involving conducting research to determine what a customer wants operations to deliver

Finance: budgets make funds available to purchase inputs, equipment, conducts repairs & maintenance

Human Resources: ensures there are enough skilled employees available for operations requirements

INFLUENCES

Globalisation Globalisation: the integration of different national economies into a single market where goods and

services can be traded easily Global businesses: any business that has key functions outside its home nation, integrating with

economies globally Manufacturing is completed in the country with the cheapest labour Globalisation allows for reduced costs & exploitation of competitive advantage Japan (technological innovation), Italy (contemporary design), China (cheap labour) Depreciation: is a decrease of value in one nations currency against another. Caused by poor

economy/inflation Trade agreements: reduce barrier to trade & promote economic integration

o Bilateral: between 2 countrieso Multilateral: between 3 or more countries

Regionalism: the classification of the worlds nation into geographic areas (North America, Asia NAFTA)

Alliances are formed between national NAFTA Alliance reduce expenses, decrease risk & create wider distribution Globalisation enables greater spending power increases demand for products Enables product differentiation on international markets Globalisation provides market opportunities Mass production of goods allows for economies of scale Economies of scale: cost advantages created due to an increase in scales of business operations.

Increased efficiencies lower costs per unit Large scale businesses will aim to standardise services Supply chain: refers to range of supplier a business has & the nature of relationship with suppliers Business need predictable & reliable supply chain Global web: network of supplier a business has, chosen due to lowest cost, risk, maximum quality &

timingQANTAS Case Study

o enabled QANTAS to access new markets overseaso More than 70% of QANTAS’ assets are geared to global market

Technology Technology: the design, construction and/or application of innovative devices, methods &

machinery upon operations processes E.g. mobile phones, laptops, gaming consoles, email, internet allow for easier communication Technology can cause new skills needed or redundancy Robotics & CAD Factors affecting implementation of technology

o Staff required/ will be made redundant

o Finances availableo Speed of updateso Competitors decisions

Technology at an administrative level: Gantt charts, critical path analysis, computers, word, graphics assist with organisation, planning & decisions making

Technology at a processing level: used in manufacturing, logistics & distributions, quality management, inventory, supply chain & sourcing

QANTAS Case Studyo Will lead to less staff that are more skilled (increases training costs and wages)o Newer planes have greater capacity and are more efficient e.g. A380 generates ½ the noise, uses less fuel and carries more

passengers o Training staff to use technology can be expensive (spends $300 million a year on training) e.g. shifting reservation system onto

Amadeus required training 10 000 staff

Quality Expectations Quality: specific reference to how well designed, made & functional goods are & the overall degree

of competence with which services are organised & delivered Customers will expect a certain level of quality based on brand & price Expectations include:

o Durability: how long it can be usedo reliability how long a product functions with repair & maintenanceo fit for purpose: how well it completes desired function

QANTAS Case StudyQUALITY EXPECTATIONS – o Customers will make purchase decision on expectation of quality o Constant pressure on Operations at QANTAS to ensure customer expectations are fully met and if possible, exceededo If this is done, customers are more likely to fly with QANTAS in future (customer loyalty)o Includes arriving, departing on time and comfort based features e.g. online check in, self check in, in flight entertainment

Cost-based Competition is derived from determining breakeven point (level at which firm matches total costs & total

revenue) & then applying strategies to create cost advantages over competitors using cost leadership strategies price advantage fixed costs: costs which do not changes, regardless of production output variable costs: costs which vary according to quantity produced economies of scale: refers to cost advantage due to larger business operations of scale

o cheaper materials due to bulk ordering result in lower cost/unito more capital = more efficient production technologies

QANTAS Case StudyCOST BASED COMPETITION –

o To achieve lowest competitive cost, QANTAS has sought to introduce technology, seek alliances and outsourceo Has to be balance between cost minimization and maintenance of quality standards e.g. QANTAS criticized for quality recently

with increased safety incidents and shut down of services in union battle

Government policies government policies affect business rules & regulations which affect management of various key

business functions

government policies encourage innovative operation, safe & competitive behaviour economic performance & growth

government objectiveso increased economic growth (GDP)o increased productivity, increased employment

this is done by:o offering financial grants/ subsidieso reducing feeso deregulating trade (increased globalisation)o providing infrastructure failure to meet these goals can cause shut-down e.g. Bonds 2009-10 Aus.-industry: federal government agency that assist with innovation, investment & international

competitiveness. Has budget of $2 billion, provides grants, loans & granting tax concessions

Legal Regulation Range of laws wit which a business must comply collectively termed with ‘compliance’ Aims to promote safe & fair practises by businesses Can involve WH&S, environmental protection, consumer protection or protection of industry

relations Occupational Health Safety Act (1991): forces workplaces to provide safe workplaces for

employees, including proper training & equipment Dangerous goods (roads & rail transport) Act 2008 (NSW): also covered by WH&S encourages safe

practises with hazardous materials Federal environment protection & biodiversity Act 1999: ensures hazardous material does not

enter the environment/ damage it in any way National Strategy on Energy Efficient Program: enforces energy efficient operations Competition & consumer Act 2010 (cth): ensures consumers are protected from business

malpractice

Environmental sustainability Means that business operations should be shaped around practices that consumer resources today

without compromising access to these resources for future generations (intergenerational equity) Due to rising awareness of environmental issues (climate change) businesses now aims to reduce

waste & increase recycling Also involves reduction of carbon footprint 2 aspects to environmental sustainability

1. reduction of use of non-renewable resources2. sustainable use of renewable resources

QANTAS Case StudyFuel Saving Technology

o Qantas has recently signed an agreement to use GE Aviation’s Flight Efficiency Services to help monitor, analyse and modify its fuel use.

o The airline currently has over 100 fuel saving projects under way, but this new technology has already saved 65 million kilograms over the two past financial years- an equivalent of 210,000 tonnes of CO2.

o Furthermore, the addition of wingtip devices to 8300 in-service aircrafts, has saved about 56 million tonnes of CO2 in the past 15 years.

Corporate social responsibility refers to open & accountable business actions based on respect for people, community/society & the

broader environment involving more than just complying with laws & regulations

- the difference between legal compliance & ethical responsibility legal requirements require that a business follows the letter of law- the prescribed standards behaviour ethical responsibility: sees businesses meeting all of their legal obligations & taking it further by

following the ‘intention’ & ‘spirit’ of law complying with legislation costs a business money – compliance costs to go further than requirement of legislations is even more cost for the business compliance legally is under: labour law compliance, environmental & public health compliance,

business licensing rules, taxation, trade practises ethically a business may align with values of the ILO (international labour conference)

- environmental sustainability & social responsibility economic development must be accomplished sustainably competing objective: economic growth vs. environmental sustainability social conscience has led to businesses begin responsible for conservation, recycling & restoration concerns about climate change have causedo greenhouse reduction measureso encourage the development of long-term sustainable strategies

QANTAS Case StudyENVIRONMENTAL SUSTAINABILITY AND SOCIAL RESPONSIBILITY –

o QANTAS has invested millions in recent years to reduce carbon emissions – introduced scheme in 2007 that gave passengers option of paying extra to offset the CO2 emitted by their flight (passengers offset 240 000 tonnes of carbon in 2011)

o Donated over $2 million to charitable causes in 2011 across community, environment, education and arts

PROCESSES operations processes are activities that transform inputs outputs there are several questions to ask

1. what production activities are required?2. What is the sequence of activities?3. How often will the process be changed/ adjusted?4. What technology will be used?

Each activity adds value to the product so it can be sold for profit Role of operations manager: to save time, improve efficiency, fix delays & control input usage & costs 2 key approaches

o top-down approach: interprets overall business strategy into operations, aiming to achieve goals

o systems management approach: focuses on integrating operations with other key business functions

Manufacturing systems produce: tangible (physical) goods that can be stored and used at a later time. Non-manufacturing operations systems produce: services and other non-physical items (delivery of

goods, intangible goods such as legal services, banking and finance, tourism and education.

Inputs Inputs: materials, people or physical resources to be transformed into outputs (e.g. raw materials,

labour, maintenance, land, machines & tools) can be intangible or tangible Common direct inputs: inputs used by any given business e.g. labour, energy, raw materials, machinery

& technology (capital)

- Transformed resources Are inputs which change/ are converted into something else. Are formed by a combination of

materials, information & customers

Materials o Are the basic elements used in the production process & consist of 2 types: raw materials,

intermediate goodso Raw materials: are the essential substances in their unprocessed state o Intermediate goods are manufactured & used in further manufacturing or processingo Stored assets: are in warehouse, but stored inventory is still a martials output

QANTAS Case StudyMATERIALS –

o Fuel o target in 2009 was to improve fuel efficiency by 1.5% per year to 2020o reduce our fuel consumption and improve our operating efficiency.

Fuel reduction is dependent on;o the aircraft type;o weight of the aircraft;o Investing in lighter equipment and material, for example lightweight galley equipment and baggage containers.o flying time;o weather and airport conditions; ando other operational and technical requirements.o Has decreased since June 2014 o From 4496 to 3899 million $ being spent o Which is 13% o Always looking for new supplierso Buy a vast range of goods and services

Information o the knowledge gained from research, investigation & instruction, which results in an increase in

understandingo Is used to make plans, execute operations & maintain control over materials (e.g. knowledge of

how to operate equipment, quality control reports, customers’ orders etc.o External information: comes from market reports, industry, ABSo Information on new technology can influences operations processeso Internal environment: comes from inside the business e.g. financial reports, inventory turnover

rate & production data

QANTAS Case StudyINFORMATION –

o future planning from booking informationo customer feedback o from the performance summary;

Customers o Act as an input because their needs drive business operationso A business conducts market research to maintain a competitive advantageo Customer relationship marketing (CRM): refers to the systems that businesses use to maintain

customer contacto CRM can be used to improve customer service; increase competitiveness & identify changes in

consumer tastesQANTAS Case Study

CUSTOMERS –o NPS – Net Promoter Score – global brand benchmarking model of customer advocacy o Embedded into the customer service operations of Qantas and Jetstaro Enables continuous feedback from customers to improve service strategy and deliveryo Used to measure progress o OPERATIONAL – help to track journey competitiveness and determine focus for customer improvements

o Regular surveys of customer’s end to end experience per flighto Measurement of journey advocacyo Measure total end to end customer journey

- Transforming resources Remain in the business, being applied to the inputs to add values Remain in the business even after materials are used up Transforming resources & transformed resources = transformation process

Human resources o are the people with skills & knowledge required for operational functiono effectiveness of HR determine success with transformation & value addingo strong relationship with the human resource function being able to provide qualified, skilled &

experiences employees o employees are the single most important part of the businesso employees coordinate & combine other resources e.g. machinery & technology, raw materials &

finance to produce goods and serviceso well-designed HR management policies & practices can improve performance of operations process

e.g. designs, extensive training programs, flexible work practices & good communication can assist to maximise performance

QANTAS Case StudyHUMAN RESOURCES –

o Staff o Uniform – evocative symbol of service excellence and irrepressible Australian spirit of travel.o Currently has 35000 plus staff o Covers many different areas o Such as administration, call centre, catering, corporate, customer service, engineering, environment, finance and strategy,

flight attendants, ground operations, human resources o Different jobs for different people with o Create a work environment that supports our people and enables them to do their best work o Reward their performance

Facilities o Refer to the plant (buildings, land, equipment & technology), & machinery used in the operations

processo Major decisions include design layout of facilities, number of faculties used, location & capacityo Non-current assets; remain in business after materials are used up o Business needs to decide:o Whether required facilities should be located in one or two large sites/ divided among numerous

smaller siteso Impact zoning & other restrictions will have upon the facilities size & locationo Special conditions, e.g. energy & water requirementso The most efficient plant designo Optimum plant & process layout – arrangement of machinery, equipment & people within the

facilityo The plant & machinery can make a significant difference to a business & its capacity to transform

QANTAS Case StudyFACILITIES –o Physical assetso Hangarso Terminals – 3 in Australia o For different flights o T1 – Sydney International Terminal o Oneworld flights, Jetstar International

o T2 – Sydney Domestic Airport o Jetstar domestic flights o T3 – Qantas Sydney Domestic Airport o QantasLink o Airport lounges – relaxing before the flight o Dedicated check in, priority baggage handling, complimentary food and beverage, wireless internet, latest newspaper and

magazines

Transformation processes Transformation: the conversion of inputs (resources) into outputs (goods& services) Transformation processes are activities which determine how value will be added Can include:

o Physical altering of inputso Sequencing & scheduling o Technology, task design & process layouto Monitor, control & improve

The operations manager must consider for optimal processo Capacity of facilityo Available knowledge skills of employeeso Type of production (job, batch/flow)o Layout of plant & equipmento W H &So Production costso Maintenance requirements

Transformation process needs to be as smooth & uninterrupted as possible

- Influences: Influences depend on type of production method Job production: produces a single unique item per customer request Batch production: producing a small number of the same item Mass production: producing a large amount of the same item Lower cost per unit

- volume refers to how much of a product is made lead time: the time it takes for an order to be fulfilled from the moment it is made high volume operations: large amount of capital, facilities, technology, materials & less labour, low

costs low volume operations: use much less equipment, multi-skilled labour low volume e.g. 5-star restaurants, high fast food

QANTAS Case StudyVOLUME –

o Schedule of flights o depending on where you’re going there are different timeso some planes are dailyo more popular places such as Melbourne have more frequent flightso every 15 minutes

- variety concerns the number of different models or versions offered mix flexibility: is the mix of products made or services delivered through the information process if business has customers with different needs, goods & services have to be modified/ wide variety of

models & options will be provided low variety: routine in producing high-volume of standardised product with a low cost e.g. car factory

with small variations of standard models high variety: financial advice

QANTAS Case StudyVARIETY –o locationo destinationso additional 140 seasons services o between December and February to New Zealand, Jakarta and Singapore to cater for strong demand during upcoming summer

holidays o provide customers with more options during peak period

- variation in demand strongly influenced by demand overtime low variety, high volume: steady, predictable demand level, little variation volatile demand: operations will need to be highly flexible low variation: bread & milk high variation ice-cream factory an increase in demand: increased inputs from suppliers, increased HR, increased energy use, increase

use of technology & machinery increase in demand may be hard to meet if:

o suppliers cannot supply quickly enougho labour is not flexible enough, skilled or availableo the adopted machinery cannot adjust increased capacity quickly (not designed to/ breaks

down) decreased in demand: require operational flexibility s staff may need to have their hours reduced,

production may need to slow to avoid inventory build-up all businesses try to forecast demand so adjustments can be anticipated & a business can act

accordingly

Christmas & seasonal factors cause predictable variation in demand

- visibility the extent to which customers can see the operations in action direct contact: surveys, interviews, letters, blogs & verbal contact indirect contact: review of sales data, consumer reviews

- sequencing and scheduling sequencing: refers to the order in which activities in the operations process occur scheduling: refers to the length of time activities take within the operations process scheduling & sequencing defines all steps in the operations process & helps organise them effectively to schedule effectively we need to knowo what production activities are necessary?o What order do they need to occur in?o How long does each take to complete?o Can any be run concurrently?o What resources are required?

Gantt charts o Is a type of bar chart that shows both the scheduled and completed work over a period of timeo It is often used in planning & tracking a projecto Created by Henry Gantt in 1917o Outlines the activities that need to be performed, the order in which they should be and how long

each activity is expected to takeo Gantt charts are used for any process that has several steps & involves a number of different

activities that need to be performedo Can be used to schedule the work activities of one employee or a team of employeeso Advantages of using Gantt charts:

1. Force manager to plan steps needed to complete a task & to specify the time required for each task

2. Make it easy to monitor actual progress against planned activities

Critical Path Analysis o Is a scheduling method/technique that shows what tasks need to be done, how long they take &

what order is necessary to complete those taskso Scheduling & sequencing are extremely important to ensure efficient processo Ensures employees are appropriately specialised easier monitoring & controlo The critical path is the shortest length of time it takes to complete all tasks necessary to complete

the process/ projecto Some tasks can be performed simultaneouslyo Because each activity on the schedule must be completed to make the final product the critical

path is the shortest path through the process o PERT (Program evaluation review technique): allows operations & production management to

obtain an overview of the relationship between the activities in a complex operation, evaluate progress & take necessary corrective action early on

o CPA shows:1. What tasks need to be

done2. How long they take 3. What order is necessary

to complete

QANTAS Case StudySEQUENCING AND SCHEDULING – o Planes need to be cleaned and checked by engineers before taking off (example of scheduling)o Includes making sure that each flight has pilots, cabin crew, catering, airport and engineering support o QANTAS uses Sabre Air Flight Suite Systems (complex scheduling software, leading edge technology) to automate flight

scheduling

- technology key input into operations use of innovative product of processes (CAD & CAM) allows for quicker, more efficient production

produces less waste & allows for quality to be maintained manufacturing: used to speed up processes & enables fuller use of raw materials, making

operations processes more cost effective services: office & communications technology have enable whole markets to open up & allows

SMEs to trade globally office technology: computers, modems, answering machines & EFTPOS machines

o development of office technology has created the opportunity for people to do more, more work in less time

Manufacturing technologyo Key manufacturing technologies are robotics, CAD & CAMo Robotics applies to highly specialised forms of technology, used in specialised research

robotics: highly specialised forms of technology, capable of complex tasks, $$ CAD: computerised design tool that allows businesses to create product possibilities from input

parameters, allows visualisationo A computerised design tool that allows businesses to create product possibilities from a

series of input parameterso It is a computerised graphical design tool that generates three-dimensional diagrams from a

set of given input data (parameters)o 3-D viewingo material usage o design sequence of steps

CAM: used to allow manufacturing process to become computer controlled, can calculate how much of each input resource would be required

o Software used to allow the manufacturing process to become computer controlledo CAD is linked to CAM software to allow instantaneous manufacturing od designs that are

accepted by clientso Used more broadly to calculate how much of input requiredo Can store historic purchasing records to assist with present purchasing decisions

- Task design Involves classifying job activities in ways that make it easy for an employee to successfully perform

& complete the task Jobs are allocated to employees with appropriate skills & capability May involve employee training to improve efficiency Skills audit: formal process used to determine the present level of skilling & any skills shortfalls that

need to be made up either through recruitment or training Task design job description person specification recruitment selection

- Process layout Is the arrangement of machines so that the machines & equipment are grouped together by the

function (or process) then perform Occurs once the tasks are analysed & technology requirements are determined This is influenced by: equipment size, work area, storage space, size of output & staff availability Inputs are transported to an area of the factory/ office where a specialised function is performed to

add value/ process the input Plant layout: is the arrangement of equipment & staff within the facility (either a factory/ office)

which has an impact on the efficiency of the operations function Functional/process layout: used in hospitals where there are dedicated areas to particular types of

medical care Product layout: equipment arrangement relates to sequence of tasks performed in manufacturing a

product

Fixed position layout: product remains in one location due to its weight or bulk e.g. construction of bridges ships, aircraft/buildings

Office layout: office space organised around discrete workstations

- Monitoring Is the process of measuring actual performance against planned performance Aims to meet performance objectives: quality, speed, dependability, flexibility, customisations,

costs etc. Involves the measuring of all aspects of operations from supply chain management and the use of

inputs through to transformation processes & outputs Monitored by key performance indicators (KPIs) which are predetermined variables that are

measured so that appropriate controls to operations processes can be made:o Operations costso Wastage/leftover materialso Defective goodso Quality (design, specification comparison)o Speed of manufactureo Volume of outputo IT & maintenance costso Direct & indirect cost analysiso Defect rates, repair rates & warranty claimso Inventory turnover rates/ stock-out rates

- controlling control occurs when KPIs are assessed against predetermined targets & corrective action is taken if

required if there is a discrepancy between performance & goals, changes & improvements can be made control requires operations managers to take corrective action, changes in the transformation

process e.g. redesigning the facilities layout or adjusting the level of technology in order to correct the problem

taking short-term corrective action to keep current production & performance on targets limits the short term impact of the lapse in production

- improving the systematic reduction of inefficiencies & wastage, poor work processes & the elimination of any

bottlenecks improvements include

o qualityo dependabilityo cost improvementso speedo flexibility

continuous improvement involves ongoing commitment to achieving perfection although the goal of perfection will never be reaches, the ‘striving’ is important to the business

culture process becomes one of setting higher & higher standards in the continual pursuit of improvement

Outputs are the end result of the operations process that are delivered to the customer generated as a result of operations must be responsive to customer demands

- customer service refers to how well a business meets & exceeds the expectations of customers in all aspects of its

operations usually found in the business visions or mission statement is an intangible output of operations, requires intensive customer contact can be labour intensive & costly difficult to measure with key performance indicators businesses implement procedures for customers’ services systems

o handling questions/ requests promptlyo anticipate customer needso follow up enquiries o manage complaints

QANTAS Case StudyCUSTOMER SERVICE –1. We will never compromise on safety

- Safety is always first priority 2. Committed to getting you and your bags to your destination

- Aim is to get you to your destination on time every time with your baggage3. We will look after you if things don’t go as planned

- Committed to on time performance but bad weather, natural disasters, technical problems, operational and other issues can lead to flight delays

- If flight is delayed overnight, will provide with meals, accommodation and transfers Overbooked flights - Seek a volunteer to change flights- No longer wish to travel, will refund the fairChange of Aircraft - Insufficient seats in the class you booked, will offer to travel in a lower class or on the next available flight in the same class Delayed baggage - If you arrive at the destination which is not your city of residence, and your baggage is delayed, will be provided with basic

comfort items whilst continuing to track down baggage.4. We will look after you if you have specific needs

- Detailed guide for customers with a disability 5. We are always on hand to help

- Always here to assist with your travel needs 6. We value your opinion

- Feedback about Qantas’ performance helps identify and address issues with their service - Aim is to resolve any complaint or concern where it happened The Airline Customer Advocate- Facilitate in accordance with the Complaints Process

7. We will protect your personal information- Respect personal information and treat it with the utmost security

8. We support environment initiatives - Committed to being an environmentally responsible organization across all levels of the business - Aim to minimize environmental impact of operations and target and commitments to guide our performance

- warranty where the business assures customers of the quality level of good/services offers to correct any defects example of effective customer services, sometimes required by Fair Trading act 1987 (NSW)

QANTAS Case StudyWARRANTIES – QBE INSURANCE

o Aka travel insurance Annual multi-trip o Available to maximum age 69.o Unlimited trips in a 12-month period - $545.o Available to Australian residents and citizens.o Qantas Frequent Flyers earn 1000 extra points.

Cancellation, Baggage and Rental Vehicle Excess

o Domestic flight cancellation baggage and rental vehicle excess cover from $29 per person.o Available to Australian residents and citizens, from minimum age 21.

International Comprehensiveo Available to maximum age 69 or ages 70+.o Coverage for Single International Trips.o Available to Australian residents and citizens.o Additional extra snow sports cover.o Two different conditions;o Maximum age 69o Ages 70+

STRATEGIES

Performance objectives are goals related to particular aspect of a production process & are usually

interrelated are set to make business more efficient, productive & profitable

- quality relates to the physical good or service provided to the customer & encompasses several qualities also related to the production process good quality = happy customers, less recalls/issues qualities include

o conforming to specifications: product matches design brief & purposeo performance: how well product meets expectationso durability: how long product lasts without serviceso reliability: whether the product performs the same each timeo aesthetics: how product looks/feels o features & serviceability: what product does

QANTAS Case Studyo Means consistently producing services to customer expectationso Major influence on customer satisfaction/dissatisfaction at QANTASo At QANTAS, quality means things like airport is tidy and clean, courteous, helpful, friendly staff and user friendly website etc.

- speed relates to efficiency of productions & is often improves through new technologies a production line can only move as fast as its slowest process (bottleneck) goals for speed include:

o reduced wait timeso shorter lead timeso faster processing times

bottleneck: demand exceed production capacity lead time: the time it takes for an order to be fulfilled from the moment it is made

QANTAS Case Studyo Qantas needs to create objectives that meet customer expectations for lead-time and are faster than their competitors. o Hence KPIs would be short lead-time. o This is achieved through on-line check in and Q Bag Tags, which increase the speed of their service.

- dependability relates to reliability & consistency of the good/service how well it delivers on promises also relates to delivery & supply, how well business can fulfil its orders goods: how long products are useful before they fail services: consistency & reliability of service standards

- flexibility flexibility: refers to how easily/quickly operations can switch to a new model/design to meet markets

changes, changing consumer tastes & preferences volume flexibility: relates to increasing/decreasing demand for product stock out: when a business runs out of inventory flexibility can be achieved by: increased capacity of production, new technology, changing product

design services: flexibility achieved through increased number of service providers, increase provider’s skill

level, new technologyQANTAS Case Study

FLEXIBILITY –o Because of seasonal demands like holidays, QANTAS must operate to flexibility performance objective to be able to adjust to

major increases in passenger demando Jetstar, with its variable fare (baggage/catering options) structure shows flexibility in product and product mix

- customisation refers to how quickly the product can be redesigned to produce a unique good/service that meets new

demands refers to creation of individualised products to meet the specific needs of the customers customers’ orientation is needed to business to meet specific customer needs mass customisation: is a process that allows a standard, mass-produced item to be personally modified

to specific customers’ requirements QANTAS Case Study

CUSTOMISATION –o Means giving QANTAS customers more options by varying product in minor wayso Does this through OneWorld Alliance where it offers services to almost 700 destinations o Varies its product by offering Jetstar as no frills alternativeo Offers different classes of seating (economy, premium economy, business and first class on international flights

- cost refers to the minimisation of expenses so that operation processes are conducted as cheaply as

possible cost must be kept as low as possible without sacrificing quality

o results in improved profit margins & increased revenue types of costs

o fixedo semi-fixedo variable: change as output volume changeso direct: related to product/supply of serviceo indirect: overheads, not related directly to output

QANTAS Case StudyCOST –o Has interest in keeping costs as low as is compatible with levels of quality, speed, dependability and flexibility

o Productivity is best measureo Passenger load factor is a measure of productivity for airlines (measures how much of airline’s passenger carrying capacity is

used) o In 2012, this was 80.1%

New product or service design & development demand for a product declines at end of product cycle products can be revised with new designs & improvements development process: helps eliminate unnecessary expenses & design issues through extensive

research utility: value/usefulness of product/service cost, quality, supply chain management must be considered when designing services:

o explicit service also called the tangible aspect of the services being provided, e.g. application of time, expertise, skill & effort

o implicit service based on a feeling, intangible, satisfaction of implicit service

QANTAS Case StudySERVICE DESIGN AND DEVELOPMENT –

- Businesses like QANTAS must find new services or upgrade and update existing services to maintain competitiveness and profitability

- Strategic decision to develop new product/service cannot be taken lightly – commitment in cost, time and resources - QANTAS has recently launched new airlines (Jetstar Asia, Jetstar Pacific, Jetstar Japan and Jetstar Hong Kong) to take advantage

of growth in Asian aviation market- Introduction of 787-9Dreamliners

- Increased Hong Kong flights

Supply chain management involves integrating/ organising flow of supplies through transform process in order to reduce time &

best meet customer needs lead time: the time it takes between supplier’s receipt of a request for goods until their delivery to the

customer suppliers should provide inputs at the best price, reliability & with required quality

- logistics refers to the transport of physical raw materials, input distribution & storage, warehousing &

distribution centres

focus is to move resources through processes ASAP & achieve steady flow of material plans, implements & control the efficient & effective flow & storage of goods, services & related

information between the point of origin & point of consumptionQANTAS Case Study

Logisticso Qantas sources its products based on forecast of quantity required. o Qantas ensures that it obtains goods and services that meet specifications and are purchased from suppliers who have short-

lead times, hence targeting Qantas’s dependability and flexibility objective. o An example is where Qantas sources food from Australia for its domestic flights.

- E-commerce Is the use of internet to buy & sell goods/ services 2 types of e-commerce

o B2B: Business to businesso B2C: Business to consumer

A: instant communication & lower cost Electronic data interchanges (EDI): use of computers, barcodes & scanner systems to monitor individual

stock items & kept accurate records of inventory levels Improves efficiency

QANTAS Case StudyE-Commerce

E-Commerce provides real time information on quantity, availability and price of all goods and services to be instantly accessible. As it is conducted on-line, it is beneficial for Qantas as it eliminates linguistic barriers, which results in faster and reliable sourcing, hence the dependability, quality and speed objective.

- Global sourcing Involves business purchasing supplies/services for the transformation process without location

constraints Aim to achieve lower costs by accessing new economies with competitive advantages in that area

QANTAS Case StudyGLOBAL SOURCING –

o Global sourcing is advantageous in the sense that it is lower cost because the materials are cheaper elsewhereo Qantas has employed some pilots in NZ at lower wages & has engine maintenance carried out in Malaysia die to economies

of scale, which meets its cost and speed objectives

- Outsourcing Involves contracting out a non-core business activity

ADVANTAGES DISADVANTAGES Access to specialist knowledge in

different areas Most efficient production Better technology & most suitable

equipment Experience at solving complex problems Lower costs as the contracted business

can achieve better economies of scale, which can be passed on

Increased speed & quality of output

Reliant on other businesses (i.e. risk of failure)

Lower response to changes in the market (longer production process)

Redundant employees Breakdown in business outsourced to

will affect the entire operations Loss of control over quality, reliability &

costs Loss of control due to cultural

incompatibility Poorer relationship with stakeholders Outsourcing may/may not involve

offshoring ( outsourcing to overseas

suppliers public backlash in domestic country)

Technology Technology: the equipment & knowledge available to the business to perform functions to make goods

& services Role of operations manager to be aware of possible applications of new technology to operation

strategies Cost benefit analysis must be conducted to ensure profitability

- Leading edge technology Most advanced technology available to a given point in time Technology can create new & innovative processes & significantly improve operations Usually untested & expensive Created by innovative thinking & processes

- Established technology Technology that has been proven to be effective therefore widely adopted Are functionally sounds & help to establish basic standards of productivity & speed E.g. CAD, CAM, Barcoding, IT, smartphones, EFTPOS

QANTAS Case StudyInflight Technology

o Qantas have scanned and learned through research and have begun to provide customers access to inflight WIFI entertainment technology, across the domestic network.

o Customers with their own devices are also given the option of utilizing the WIFI for work and receiving messages. Fuel Saving Technology

o Qantas has recently signed an agreement to use GE Aviation’s Flight Efficiency Services to help monitor, analyse and modify its fuel use.

o The airline currently has over 100 fuel saving projects under way, but this new technology has already saved 65 million kilograms over the two past financial years- an equivalent of 210,000 tonnes of CO2.

o Furthermore, the addition of wingtip devices to 8300 in-service aircrafts, has saved about 56 million tonnes of CO2 in the past 15 years.

Inventory Management Inventory encompasses all raw materials & input supplies used to production processes Stock: refers to the partially/fully processed products that are yet to be sold Role management to determined how much stock to hold, for how long, how to move it ( based on

staff, availability, perishability etc.) Inventory/stock: refers to amount of raw materials, work-in-progress & finished goods that a business

has on hand at a particular point in time Service-based businesses: queues/ amount of customers’ inventory

- Advantages & disadvantages of holding stock

ADVANTAGES DISADVANTAGES Able to better meet consumer

demand Reduces lead time Generates immediate revenue Stock counts as a positive on

balance sheet Making products in bulk reduces the

High costs associated with holding stocks e.g. holding & storage costs

Spoilage & obsolete products Invested capital, labour & energy

could be used elsewhere

price as there are economies of scale

Stock can be rapidly transported from distribution centres by demand

Better for standardised products

- LIFO (last-in-first-out) Method of pricing inventory where stock purchased most recently is sold first Used for products with no use by date & the remaining stock value is lower Can be used to determine a more accurate cost of inventory/ unit over financial year Simplified application of LIFO would cost each unit sold at the last

cost recorder LIFO may overstate costs & understate gross profit May undertake stocks on hand at the end of the period LIFO is illegal in Australia

- FIFO (first in first out) Stock purchased first is sold first Used for perishable products & the remaining stock value is higher Simplified application of FIFO would cost each unit sold at the first costs recorded

TOTAL SALES – TOTAL COST OF SALES

Stock costs may be understates & profits overstated Stocks are the end of the period may be overvalued Closing stock on the balance sheet will have a higher value, increasing the value of current assets COGS will be lower & income higher

- JIT (Just in Time) Holding as minimal stock as possible & only producing the exact quantities to be delivered This reduces labour/logistics costs & ensures product is not obsolete Only enough products to meet demand Requires flexible operations & flexible processing Business needs high availability to respond to changes in market demand & reliable deliveries Improves efficiency of whole operations process Not an inventory valuation technique; method of managing flow & storage of stock A: increased liquidity of working capital, less cash tied up as stock, reduces perishable stock spoiling D: heavily reliant on supplier

QANTAS Case Studyo Since Qantas is a service-based business, their inventory management consists of ordering, storage and recovery of the

material inputs. o FIFO method: used for foods in order to retain freshness and quality of products o LIFO method: used for non-perishable goods such as headphones to whereby customisation and flexibility outcome is

assuredo JIT system: utilised when Qantas pre-orders its fuel as it is needed, reducing lead times, meeting speed and cost objectives.

TOTAL SALES – TOTAL COST OF SALES

Quality Management Refers to those processes that a business undertakes to ensure consistency, reliability, safety & fitness

of purpose of productQANTAS Case Study

o With the provision of food from Q catering, Qantas have implemented a strict set of policies in order to maintain its image of quality and safety.

o Qantas boasts its high quality through the ISO 22000 certification from the world’s leading food safety management system. o Qantas has also placed Quality Managers and teams in each catering centre, and ensure national coordination and strong

management and review of suppliers at all times, with constant inspection structures and microbiological testing. o Through this logical, structured method of quality management, customers are provided with the best products as well as

the growth of a healthy, high quality image of the business.

- Quality Control Involves the use of inspections at various points in the production process to check for problems &

defects Businesses need to have defined quality standards which should be broadly applied across a range of

products & processes May require that labour is appropriately trained to apply quality standards throughout working process Many businesses will conduct inspection to assess the level of quality Benchmarking: measuring performance against established standards, such as a comparison of a firm’s

performance against standards set by competitors in the same industry in the domestic (or international market)

QANTAS Case StudyQUALITY CONTROL –o Programmed inspections carried out at key stages of QANTAS’ service to ensure process is meeting standards o Attempts to solve root cause of quality problems at QANTAS

- Quality assurance Involves the use of a system to ensure that set standards are achieved in production Establishing & using a set of procedures and/or processes that will prevent products from having

problems More emphasis on contributions to quality from whole operations system Employee involvement through quality circle: regular meeting of a group of employees from different

sections of the business to discuss issues in the workplace Proactive approach

QANTAS Case StudyQUALITY ASSURANCE –o Minimum level of satisfactory quality at all stages of process is continually monitored at QANTAS (what happened vs. what was

supposed to happen)o Attempts to broaden organizational responsibility for quality

- Quality improvement Quality improvement focuses on two aspects: continuous improvement & total quality management Continuous improvement: is an ongoing commitment to improving a business’s goods or services Total quality management: concept focuses on managing the total business to deliver quality to

customers

Overcoming resistance to change Driving forces: force that pushes towards the need for change

Restraining forces: hold back businesses and resist change Challenge: identify and develop strategies to overcome resistance to change Resistance to change arises from two principal sources within a business

o Financial: purchasing new equipment, retraining, changing layout, redundancy paymentso Psychological/ emotional

Most important step in overcoming resistance is to ensure managers understand main reason why change is resisted

Once identified, strategies can be put in place to overcome resistance

- Financial costs Change can be expensive Main financial costs associated with change include:

o Cost of purchasing new equipmento Cost of redundancieso Cost of retraining employeeso Costs associated with structural reorganisation of the business, including changes to plant and

equipment layoutsQANTAS Case Study

o To address financial costs, Qantas has sold off subsidiaries (company controlled by holding company) of the business to increase their cash position.

o The advantage would be increasing cash flow and achieving a liquidity and solvency ratio of 2:1. o By selling off non-current assets, any incurred debt is paid off and the remaining money goes to their working capital, thus

satisfying the cost and flexibility objective.

- Purchasing new equipment New technological changes can be integrated into operations to drive changes Although expensive short term, long term cost reductions Will cause improved:

o Processing flexibilityo Processing speeds & shorter lead timeso Higher overall quality of processingo Reduced wastage & losses from equipment failure

QANTAS Case StudyPURCHASING NEW EQUIPMENT –o New and more efficient aircraft cost QANTAS $22billion between 2011-2018o Upgraded and new IT systems

- Redundancy payments Employees receive payments if their jobs are made irrelevant due to technology changes Loss of job arising from job skills no longer required or relevant to the workplace Redundancy payout: money given to employees when they are forced out of work Typically, very high payments which depend on:

o Length of employmento Level of pay prior to redundancyo Amount of outstanding leaveo Outstanding wages

Typically occurs in capital-labour substitution In Australia redundancy payments have to follow requirements:

o Award/enterprise agreement covering redundancy payo 15+ employees in businesso 12 months worked, full-time

- Retraining labour is considered businesses most expensive cost/ most important asset when changes are made to the business another cost consideration is the cost of retraining staff so

they are productive, efficient & effective may take an extended period before employees are back to prior productivity levels job roles may change causing the need for acquiring new skills can be achieved through training

- Reorganising plant layout purchasing new equipment requires changing the layout of manufacturing facilities, improve efficiency

and remove bottlenecks in a large number of businesses, production represents a large financial outlay technology could significantly reduce costs if the layout were reorganised managers may use existing layout because of financial cost to making the change one cost incurred is bringing, transporting & placing new plant and equipment further costs are incurred when transferring old machinery to new machinery

QANTAS Case StudyREORGANISING PLANT LAYOUT –

o Acquiring new aircraft requires re-organization of maintenance operations to seek increased capacity and efficiencyo Jetstar is replacing Boeing 717s with Airbus A380s so a new heavy maintenance base becomes necessary (existing one

cannot accommodate larger planes)

- Inertia uncertainty is often associated with driving forces is a term that describes a psychological resistance to change fear of job losses and competitive losses become large restraints to/against change internal stakeholders (owners, managers, employees) can becomes comfortable in a stable

environment as there is a feeling of security and predictability may also be uncertainty about financial futures driving forces include: globalisation, technology, demographics, attitudes, the law, economic growth

and competitors retraining, work teams & flatter management can overcome inertia

QANTAS Case Studyo To address social costs, Qantas needs to spread information, justifying reasons why their positions would become obsolete

so workers can understand the importance of retraining. o Through this Qantas has instigated retraining programs to up-skill and retain their proactive workers, thereby satisfying

outcomes pertaining to cost, flexibility, quality and dependability. o Qantas has also hired Alan Joyce to become CEO and introduce contemporary business practices in 2008 when Qantas was

going under.

Global Factors

are another external influence on businesses and must be managed to reduce additional risks of operating in a global business environment

need to be able to respond to international business and environmental changes can influence opportunity to source inputs, expand, achieve economies of scale and develop products

for the internet market

- Global sourcing involves sourcing lower cost inputs from other global regions benefit of globalisation is businesses acquire LCR (low-cost region) inputs to reduce costs additional influences from the global environment in setting up a system of sourcing inputs:

o time and research in finding and building relationships with supplierso lack of international experience and cultural barrierso increased lead timeso less control over quality and reliability of inputso competitors may use same suppliero global web strategy: business sourcing inputs, manufacturing, obtaining finance at the cheapest

country and distributing products to nations with highest demand

- Economies of scale occurs when a cost advantage is gained by producing larger output volumes reducing per unit cost this increases profitability larger size of the business, the actual cost of making each individual product decreases\ economies of scale only occur to a certain point inefficiencies are caused by overly complex operations and loss of control

- Scanning and learning involves scoping the global environment to identify trends (products, demands, industry trends) thus

informing strategic decisions businesses can integrate knowledge of global demand, competitors, laws and policies into the

operations changes are monitored by KPIs to ensure improvement KPIs: are predetermined variables that are measured so that appropriate controls to operations

processes can be made

- Research and development involves implementing innovative strategies to create new products and improve existing ones aims to extend product life cycles, open new markets and improve quality while reducing costs still risky and expensive practise