Topic 1- operations
Chapter 1: ROLE OF OPERATIONS MANAGEMENT
The role of operations management
The creation of goods and the provision of services by businesses. The transformation of inputs into outputs or products to be sold. This involves:
selecting and implementing manufacturing processes
Developing strategies to gain a sustainable competitive advantage.
The strategic role of management
A strategic decision is one that affects the business in the long term. The strategic goals are to improve:
quality of outputs
Therefore, all strategic decisions will focus on lower costs to an industry benchmark through efficiency and producing a good or service that is different to and competitive against rivals in the market.
There are 3 types of strategies that are commonly used by businesses to gain and maintain a competitive advantage. These are:
A cost leadership strategy is where a business aims to be the lowest cost manufacturer within its industry. The products are the basic, no-frills type with fewer features, perhaps lower quality and using low-cost packaging.
Low costs can be achieved through:
economies of scale in production and distribution,
access to cheaper raw materials
exclusive access to a large source of low cost inputs
Distributing the product using dealers who work with lower profit margins.
The issues that operation mangers need to be aware are:
Competitors can use the same strategy and can achieve even lower costs
The business’s product is not perceived by customers to be equal to its competitors because competitors offer better technology, features and service.
Developments in technology change consumer preferences
Consumers may even feel that these types of ‘throwaway are not environmentally sustainable
A strong competitor uses aggressive marketing with heavily discounted prices
A product may achieve a greater market share because it is uniquely different to its competitors. It may be achieved through:
Custom designed products
Location of operations
More features and applications
A differentiated product can command a higher premium price in the market as customers are attracted to the product and build up brand loyalty.
Goods and services in different industries
can be reused
more capital intensive (machinery)
can be stored
Hard to modify once manufactured.
Services outputs :
can only be used by one customer once
more labour intensive
more interaction with customers
Easier to change and customise.
There are some similarities, they both:
Must make predictions
Deal with customers and suppliers
Make decisions about capacity
Interdependence of operations and the business
Specialisation – where the business is separated into different functions, each of which is highly skilled at its specific task or role.
Interdependence – where the different parts of a business must rely on each other to perform their task or role.
There will be a constant flow of information between operations and the other key business functions: marketing, human resources and finance.
In marketing, research identifies the nature of goods consumers’ desire and marketing strategies encourage purchases.
Operations must supply a product that has the features and quality consumers demand as well as reliably distributing this product to the market.
The finance manager will create budgets and make funds available to purchase inputs, equipment, repairs
Human resources will ensure that enough employees with the appropriate skills
Chapter 2: INFLUENCES
Globalization gives consumers the opportunity to purchase...
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