OperationsN5 Business Management

Role of OperationsOperations is about ensuring the

right resources are bought and used to make a finished product.

PurchasingStock ControlProductionQuality ManagementDistribution

Advantages of Operations Management

Lower Costs

Improved Quality

Customer Satisfaction

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1-5

StockStock exists in 3 types:

Raw materialsWorks in progressFinished goods

Stock Management

Holding too much stock

Stock ready to go when ordered

Money can be invested elsewhere in business

Stock can go out of fashion or spoil

Not having enough stock

Can’t fulfil orders

Production may stop

Poor reputation

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Stock Control

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12-18

Purchasing Mix

PriceReliabilityQuality of raw materialsQuantityLocationDelivery Time Working with

Suppliers

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Factors of Production

Land – all natural resources used in production

Labour – all people used in production

Capital - all items used to make other things in production

Enterprise – the art of bringing together the other factors of production and being successful

Methods of Production

Job

Batch

Flow

Added Value

How do we select a method of production?

The nature of the product itself

Is it labour or capital intensive?

Projected sales?

Finance available

Technology available

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20-23

In PairsDescribe the Factors of Production for:Shell OilRoyal Bank of ScotlandAppleEasyJet

Job ProductionJob Production concentrates on

producing one product from start to finish. Once one product is complete, another can begin.

It is extremely labour intensive

Some examples:Wedding dressPaintingHouse extension

Job Production +/-High quality

productCan customise

ordersWorkers involved

in entire production process from start to finish

Production costs likely to be high

Production time may be longer

Investment in machinery may be higher as specialist equipment may be needed

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24-25

Batch ProductionBatch production enables items to be

created in bulk (‘a batch’)

General purpose equipment and methods are used to produce small quantities of items that will be made and sold for a limited time only

Commonly used in food production

Big MacsGregg’s Rolls

Batch Production +/-Allows flexible

productionStocks of part-

finished goods can be held and completed later

Production runs of small batches can be expensive to produce

If production runs are different there may be extra costs and time delays in setting up different equipment

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26-27

Flow ProductionAka continuous production, flow

production enables products to be created in a series of steps.

Large amounts of goods produced and is highly capital intensive (machinery, automation)

Cars are massed produced for a large market using flow

production

Flow Production +/-

Economies of scaleAutomated

production lines save time and money

Quality systems can be built into the production

Standard product produced (opposite of customised)

High set-up costs of automated lines

Repetitive and boring work

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28-31

N5 Bus Man – 2.2: Operations © BEST Ltd 25

ICT Task

Prepare a presentation which compares the different methods of production:

JobBatchFlow

Ensure you have appropriate text, images & examples

Include some advantages & disadvantagesAlso include a short quiz to test other

learners

QualityWhat is quality?

Why is quality important?

Definitions of Quality“The standard of something as measured against

other things of a similar kind; the degree of excellence of something.” – Oxford English Dictionary

"Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for.“ - Peter Drucker

"Degree to which a product/service fulfils customer requirements.“ - ISO 9000:

"Number of defects per million opportunities.“ - Six Sigma

“Quality is everyone’s responsibility”

- W. Edwards Deming

Quality Methods

Employees – Investors in People

Raw Materials – GIGO

Quality Control

Quality Assurance

TQM - Quality Management

Total Quality Management

Commitment - Everyone is involved in quality

Get it right first time - aims for zero defects & wastage

Quality Circles

Kaizen – continuous improvement

Other Quality Methods

BSI Kitemark

Benchmarking

ISO 9000

ISO 9000ISO 9000 is an international standard. Inspectors check if the

company: can answer these questions.

Does it have a quality policy? Is the policy understood by employees? Does it make decisions about quality systems based on

recorded data Are the Quality systems regularly evaluated? Do they have records of where raw materials & products were

sourced? Does it communicate with customers about product

information, inquiries, orders, feedback, and complaints? Does it plans new product development, with appropriate

testing at each stage? Does it regularly review performance? Does it deal with past & potential problems?

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HomeworkAs part of Literacy across learning, you

will prepare and present a solo talk on this question:

“What does Quality mean to you?”

Ethical and EnvironmentalFirms now have to socially

responsible. They can do this by:

RecyclingLess wasteBiodegradable packagingLow pollution levelsFair employee working conditionsPay workers a fair wage

N5 Bus Man – 2.2: Operations © BEST Ltd 36

N5 Bus Man – 2.2: Operations © BEST Ltd 37

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39-42

Go Further

Research the following events/issues:Exxon ValdezBhopal – Union CarbideDeepwater HorizonWalmart in China

DistributionBy road, rail, air or sea?Or pipeline?

Decided by:

CostInfrastructureProduct/service type

An Oil Pipeline in Saudi Arabia

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Operations is affected by:Internal Factors

External FactorsTechnolo

gy

Labour

Finance

Political Economic Social Technological Environmental Competitive

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