Operations Management LB

Job Production- where products are made on at a time. All processes are completed to that product before beginning on the next one.

Examples- wedding dresses. Wedding cakes. House extensions.

Advantages:

• Tailor product to what the customers want = customer satisfaction = repeat custom.
• Potential USP = higher selling price = higher profit margins.
• Higher job satisfaction for workers.
• Ability to meet one-off orders.

Disadvantages:

• Time consuming = less productivity = higher average cost.
• No economies of scale
• labour intensive = Higher labour cost.
• Workers rrequire extra training = higher cost
• Quality Issues

Batch Production- making products in a group or set. All parts of the batch go through the same processes at the same time.

Examples- Cakes, clothing, Shoes, Ice Cream, Crisps

Advantages:

• Quicker = higher productivity = lower average cost = higher profit margin.
• More machinery used = lower labour cost.
• Standardisation of quality.
• Bulk buy raw materials = economies of scale.

Disadvantages:

• Cannot tailor product to specific customer needs.
• No ability to meet on-off orders.
• No potential USP.
• Mistakes affect entire batch = higher wastage costs.
• Lower job satisfaction.

Flow production- where products are made continously with multiple products being made at the same time and more along, through different processes via a conveyor belt/production line.

Advantages:

• Higher productivity = lower labour cost.
• Mass economies of scale from bulk buying = Reduce price = increased customer base.
• Higher productivity = lower average cost = higher profit margins.
• Standardised quality = good reputation.

Disadvantages:

• Machine breakdown = high repair costs and damage to products.
• Expensive initial set up.
• Boring repetative work = lower motivation.
• Higher labour turnover.
• No ability to tailor to customer's needs.

Economies of Scale- when average cost falls as you increase level of production.

Internal Economies of Scale- when average costs falls due to growth of business itself.

Purchasing/Bulk Buying- ability to negotiate bulk buying discounts with your suppliers.

Technical- using the most efficient technology to produce lowest average cost.

Marketing- advertising costs spread out over more units reducing average costs.

Financial- wider choice of willing lenders and benefit from lower interest rates,

Managerial- Managers specialise in certain roles = increased efficiency = lower average cost.

External Economies of Scale- when average cost falls due to growth of industry.

Raw materials: current businesses will expand and new suppliers will join the industry.

Industry: as industry grows more people trained because of job and earning potential.

Specialisation- where an economy/individual/business focuses on a narrow range of products.

Benefits:

• Higher output = lower average costs = higher profit margin.
• Higher quality = increased customers = higher sales revenue.
• Ability to sell for lower prices to be more competitive/Possible USP = higher selling price.

Division of Labour- involves splitting workforce up into different roles in an organised way.

Benefits:

• Higher productivity = lower average cost = higher profit margins.
• Higher quality products = increased customer satisfaction = higher repeat custom.

Problems:

• Boredom due to repetitive work = damages motivation = increased labour turnover.
• Lack of flexibility to cope with absencies unless job rotation is used.

Communication- the passing of information between people. (suppliers, employees, customers)

Benefits of good communication:

• Meet production and delivery times = customer satisfaction = higher repeat custom.
• Confident staff = lower labour turnover.
• Increased productivity = lower average costs.
• Lower wastage costs.
• Increased efficiency = better overall teamwork.
• Better customer service = customer satisfaction = repeat custom = better external reputation.

Communication Process:

Sender > Message > Medium > Reciever > Feedback

Internal Communication:

• Upward Communication- communication travels up the hierarchy.
• Downward Communication- communication travels down the hierarchy.
• Horizontal Communication- communication between people at the same level.
• Diagonal Communication- travels diagonally across the hierarchy between departments/levels

Types of Communication:

• Written = letters / memo's / reports / notices.
• Oral = telephone / face to face / meetings
• Visual = charts / tables / posters / adverts
• Electronic = email / computer / text.
• Non-verbal = body language.

Lean production- using less resources to become more efficient and reduce wastage costs.

Just in Time production- a method of stock control where supplies are delivered just before they are needed. Suppliers respond to the businesses orders and only deliver what the business needs. Long term commitment with supplier, who will set up close by to reduce transport costs

Advantages:

• Reduces need to hold stock = no storage costs.
• Reduces damaged goods/out of fashion goods.
• Frees up cashflow for other purposes.
• Excellent relationship with supplier developed.

Disdvantages:

• Any problems with supplier then you cannot produce = no stock = no sales revenue.
• Unexpected fluctuation in demand = difficulties in supplies.
• Hard to develop and sustain relationship with supplier.

Quality- a product fit for purpose and which meets and hopefully exceeds customer expectations.

Benefits of good quality product:

• Repeat custom = regular customer base = higher sales revenue.
• Good customer reviews = good reputation = increased customer base.
• No wastage costs = lower costs.

Problems of poor qualiy product:

• Poor customer reviews = damaged reputation = less repeat custom = smaller customer base.
• Lower customer satisfaction = less repeat custom = less sales revenue.
• Cost of replacement / repair / refunds.
• Cost of compensation / legal costs.

Quality Control- ensuring products meet an agreed standard and product sample checked.

Benefits: prevents faulty product from reaching customer.

Problem: time-consuming and expensive to pay for quality control staff. Wastage costs.

Quality Assurance- Involves implementing methods that prevent faulty products being made.

Benefits: prevents product made in the first place = no wastage costs.

Problems: Expensive- staff require training. Time consuming, slows down production process.

Total Quality Management- mindset to quality with 2 aims- customer satisfaction/ zero defects.

Benefits: Customer satisfaction = repeat custom. Lower defects = lower wastage costs.     Motivated staff = better morale.

Problems: Expensive as training required. Slower production process = time consuming.

Statistical Process Control- releases correct amount at same time of production process.

Benefits: Standardisation. Higher productivity.

Problems: Expensive machinery costs.

Quality Circles- groups of workers at production level meeting together to improve quality.

Benefits: People closest to the job best to spot problems. Shared ideas and open culture.

Problems: demotivating when ideas are not accepted. Conflict and disputes can occur.

Kaizen groups- change in culture where everyone is resposnible for improving quality on a small but continual basis.

Outsourcing- Another company is responsible for part or all of the production process, meaning greater efficiency.