UNIT 3 BUSINESS MANAGEMENT AREA OF STUDY 3 OPTIMISING OPERATIONS

Transcription

1 UNIT 3 BUSINESS MANAGEMENT AREA OF STUDY 3 OPTIMISING OPERATIONS DISCUSS AND ANALYSE STRATEGIES RELATED TO OPERATIONS MANAGEMENT.

2 STUDY DESIGN OVERVIEW The operations management function In area of study 3, students investigate the operations management function from both a manufacturing and service perspective, and its objective to efficiently and effectively transform inputs into outputs. The study of operations management enables students to consider the best and most responsible use of all the available resources for the production of a quality final good or service in a competitive, global environment. The elements of an operations system are clearly stipulated as inputs, processes and outputs, and the strategies adopted to optimise operations include facilities design and layout, materials management, management of quality and extent of the use of technology.

3 KEY KNOWLEDGE the operations function and its relationship to business objectives and business strategy; characteristics of operations management within large-scale manufacturing and service organisations; key elements of an operations system (inputs, processes and outputs) in different types of large-scale organisations; productivity and business competitiveness, their importance for and impact on the operations system; strategies adopted to optimise operations, including: facilities design and layout materials management management of quality extent of the use of technology; ethical and socially responsible management of an operations system.

4 KEY SKILLS accurately use relevant management terms; research aspects of operations management using print and online sources; analyse business information and data; apply operations management knowledge and concepts to practical and/or simulated situations; discuss key aspects of operations management; analyse strategies that arise through practices within operations management.

5 RECAP Effectiveness is Efficiency is

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7 Optimising Operations Maximising the productivity of the organisation Output can be measured in quantity, quality or both Technology can help optimise productivity e.g. online banking Recently, we have seen an increase in offshore manufacturing cheaper to produce overseas so minimising financial input for increased output

8 Optimising Operations Four Key areas in which managers must make strategic decisions to maintain and improve productivity are: Facilities location, design and layout Materials management Technology Quality management

9 Optimising productivity In the quest to gain an increase in organisational productivity, a range of factors that can be utilised. These include: Layout of facilities often simply redesigning a workstation, moving equipment or fittings, or relocating stock storage areas can generate efficiency savings. Technology levels the implementation of new technology, such as robotics, scanning, wireless communications, teleconferencing. Research and development offer scope for the development of innovative work practices. Equipment and facilities the quality of the working equipment and facilities and their regular maintenance will affect reliability and reduce the likelihood of breakdowns and downtime.

10 Optimising productivity Tasks and processes the types of tasks and the methods used in undertaking these will affect how much is produced at what cost. Task analysis and the resulting sequencing and reordering of tasks will lead to productivity improvements. Communications processes when information flow is restricted, so too is productivity. The accurate processing of orders and specification requirements will improve accuracy in the processing of orders. Workplace safety Australian occupational health and safety legislation has decreed that all Australian employees have the right to a safe workplace and employers are obliged to provide this. Failure to take account of occupational health and safety requirements could see a worksite closed down until breaches are rectified. Machinery downtime or industrial accidents can have a significant effect on productivity.

11 FACILITIES LOCATION, LAYOUT & DESIGN

12 Facilities location, layout & design Facilities layout planning: the designing of the best physical layout for the organisation s facility The location, design and layout of an organisation s facilities are central to maximising the efficiency of the overall operations system. Where an organisation locates its manufacturing or service facilities can make a huge difference to both the speed and cost of its operations system. The design and layout of the business premises can determine how well an organisation can satisfy its customers.

13 Facilities location Must consider: space available, access to resources such as labour or raw materials, proximity to suppliers and customers and access to services such as electricity or water. The type of business activity will determine which of these factors is more important.

14 Facilities location Examples: A sawmill should be located close to timber plantations in order to reduce transport costs and allow for speedier delivery of the raw materials. When a manufacturing process requires a high labour input, access to cheap labour is a top priority. For this reason, many organisations have their manufacturing facilities in countries such as China and Vietnam. Low labour costs enable them to make their product more cheaply, giving either higher profits or, if their product is offered for a lower price, a competitive edge. Service organisations, however, must be located close to their customers.

15 Facilities layout & design Once the location has been chosen, the next strategic decision in operations planning is to design the best physical layout for the facility. This is called facilities layout planning. The available space needs to be assessed and then the work areas, tools, equipment, storage, toilets and other amenities need to be arranged. The aim is to allow for the most efficient workflow without disruption.

16 Facilities layout & design Look around your classroom. The layout has been carefully planned so that maximum use of available space is made. Materials and resources are logically placed so that the learning process is enhanced. Imagine if the whiteboard were placed at the back of the classroom or if desks were arranged in such a way that made it difficult for teachers and students to communicate.

17 Facilities layout & design There are three types of workflow layouts that managers can choose from. These are: Process layout: the layout of a facility in which the equipment and work centres are arranged according to similarity of function Product layout: a layout in which goods are moved from workstation to workstation in a sequential order. This layout deals with large volumes of goods Fixed-position layout: a layout in which the product remains in the one location and the workers and machinery come to it *Note: this has appeared on past exam questions

18 Process layout Process/functional layout involves pieces of equipment with like functions being grouped together. It is used with products that require a large degree of variety, but that are generally only produced in small amounts. Batch production employs this layout, as it allows for intermittent production of different batches of products. Each batch or product is taken to the appropriate machinery as required. Because each product or batch is different, there is no established pattern of use of machinery, so similar machinery is placed together. A hospital would use a process layout, for example. Each patient will have different requirements and needs, therefore they will utilise different machinery and locations with no set pattern. A functional layout allows for variations in volume produced and specification.

19 Fixed-position layout Fixed-position layout occurs when the product remains in one position while it is being built or constructed. All of the labour and resources are brought to it. This layout type is used for the construction of large and bulky products, such as building or aircraft construction. It is used to produce a customised product as a single entity from start to finish. Each individual product is completed before the next is started. The advantage of a fixed position layout is its greater flexibility, enabling manufacture of product to exact specifications. This also allows for high quality to be built into the production process. However, a fixed position layout is expensive as it is time-consuming and has high input requirements of labour.

20 Product layout Product layout is used when employing mass production techniques that create large amounts of consistent quality products. Mass production usually involves automation and generally the products move to the equipment along a conveyor belt. Standardised inputs are put through standardised processes to produce the required output in large amounts.

21 Product layout Assembly line: used in manufacturing organisations when machines pass a product past workers who perform a small specialised task Customisation: made or altered to meet an individual order Mass customisation: large-scale production of customised products Cell production: the production line is split into a number of self-contained cells or units; each cell produces the whole of one unit or a significant subassembly of a unit

22 Continuous flow production Continuous flow production is another form of product layout. It is a high-volume process that runs without ceasing. The product goes through the same sequence of steps continually. A refinery and printing press are two examples of this type of production.

23 Assembly line An assembly line involves inputs moving along different stages on a conveyor belt. Most factories employ this production process, as it is capable of producing larger quantities of standardised output in a relatively short time. It therefore suits industries where the demand for their product is both high and consistent. It is an efficient and predictable means of production offering: low unit costs a constant rate of output consistent quality standards. The disadvantages of the mass production method are: initial high set-up costs with the purchase of capital-intensive high-technology production lines unmotivated employees through repetitive, low-skilled work no allowance for any customisation.

24 Assembly Line Henry Ford is credited with the introduction of the moving assembly line at his Detroit car plant in Its introduction saw the time taken to produce a Model T Ford car fall from 14 man hours in 1910 to just two man hours in The price of the car therefore actually fell from $850 to just $345 in 1916.

25 ACTIVITIES Ford Case study Activities Page 107 Question 1-6

26 MATERIALS MANAGEMENT

27 GLOSSARY WORDS 1. master produc8on schedule (MPS) 2. materials requirement planning 3. just- in- 8me (JIT) method 4. Con8nuous improvement 5. Benchmarking 6. computer- aided design (CAD) 7. computer- aided manufacture (CAM)

28 MATERIALS MANAGEMENT One of the most important strategies operations managers must be aware of is the planning, organising and controlling of the materials (inputs) used in the operations process. This process is called materials management. Organisations do not want to have too much stock or inventory on hand as this means that capital is tied up in stock when it could be used elsewhere. Overstocking of perishable materials such as food can lead to waste. More waste means a higher cost price for he product or service and less profit for the organisation. The aim of materials management is to ensure that the correct amount of stock or raw materials is available at the right price and at the right time to allow a smooth production process.

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30 Production plan The first stage of materials management is the production plan. The production plan is a general plan that includes an outline of the activities that are undertaken in the operations process. The organisation must initially determine what goods or services it will provide, the best way to produce them and how much to produce. Once these initial decisions have been made in the production plan, the basis has been formed for more detailed materials management.

31 Master production schedule (MPS) From the production plan the operations manager will complete a master production schedule (MPS). This identifies the quantity of goods to be produced and when and where they are to be produced. It breaks down the production plan, specifying: the quantity and type of each product and service how, when and where the production will take place the labour force requirements. This ensures that the materials will be produced and then delivered in time to meet the scheduling in the MPS. The MPS is then used for more detailed materials management planning.

32 Materials requirements planning The next step in the materials management planning is materials requirements planning (MRP). The MRP is a computerised method of materials planning that ensures the exact materials and parts are available when needed in the operations process.

33 Inventory Control Once the materials requirements have been planned, purchased and delivered, the organisation must keep account of them. Inventory control = cost control. Inventory control allows organisations to minimise costs by reducing overstocking and waste. Organisations that can minimise their inventory can then reduce cost and improve efficiency. Inventory control also determines when stock needs to be reordered, ensuring that materials are on hand when needed. Organisations keep control of stock through a stocktake; that is, a physical counting of every individual inventory item. Today, most organisations use bar coding in their quest to control inventory.

34 Just-In-Time (JIT) Just-in-time method (JIT): an inventory control approach that focuses on materials arriving just as they are required in the production process. **Important This reduces holding costs, and minimises space wastages in the production area. Also known as just-in-time inventory control This approach allows organisations to keep inventory costs down as there are never any large amounts of stock sitting idle, waiting to be used. This system requires both a good relationship with suppliers and a reliable transportation system.

35 Inventory Management Another important aspect of materials management is correct storage of the stock once it has been ordered and delivered. There are many considerations, depending on the type of business operation. Perishable goods must be stored and maintained correctly, and some may require refrigeration. Chemicals must be stored safely and labelled appropriately to avoid potential hazards. Fragile stock must be carefully stored to avoid breakage. Good storage has a great deal to do with the quality of the product or service at the end of the operations process.

36 Activities Page 110 Question 1-5

37 QUALITY MANAGEMENT

38 Quality Management Quality is the term we use to describe the grade or level of excellence of a product or service. Quality: the degree of excellence in a good or service and its ability to satisfy the customer

39 Quality Management Quality is a term that can mean many things, both for consumers and for businesses. It is a continuous process that means having a welldesigned production process. Every organisation wants a reputation for the high quality of its goods and services. We see advertisements everywhere boasting the perfect product or the best service. This perfection or quality depends largely on the management of the operations processes.

40 Quality Management Quality management has become a central focus of the operations systems as a result of increased competition in the marketplace, especially in light of globalisation. Producing high-quality goods or services is necessary for competing in a global marketplace Think Pair Share to explain this statement

41 Quality Management Consumers generally base their purchasing decisions on the quality and price of a product as they look for the best possible quality at the lowest price.

42 Quality Management Quality management is the management of the production process to ensure that the outputs are consistently reliable and durable. It includes the implementation of quality controls at different stages of the production processes. Modern approaches to quality management that have been implemented by organisations include: quality control quality assurance total quality management.

43 Why is Quality Management important? Quality management aims to: minimise waste and defect rates in production, thereby maximising operational efficiency and productivity obtain consistently high standards of product and service at every stage of production achieve set quality standards or benchmarks.

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46 There are 3 main Quality Management Measures you need to know Quality Control Quality Assurance Total Quality Management

47 Quality control Quality control: the process of inspecting and maintaining the quality of a good or service at regular intervals during production Similarly, service organisations must critically observe the services they provide at the point of delivery. Through these regular inspections of quality, any defects or problems can be detected early. The organisation is then able to correct these and maintain its quality standards in its finished output. Quality control can thus be described as a preventive measure.

48 Quality Control Students who proofread their work as they go to check they are on the right track are also engaging in quality control. It makes sense to do this, rather than reaching the end of the assignment before discovering that there are many errors and the work is not up to standard. A student who fails to proofread will have wasted much time, and must then go back to the beginning. Similarly, there is no use in manufacturers identifying a defect in their product after thousands have been produced, or a service organisation realising its service is not up to standard after it has lost many customers. Pan Pharmaceuticals, for example, had to recall products worth many thousands of dollars. The cost and negative effect on the company s reputation proved too difficult to recover from.

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50 Quality assurance Organisations that meet quality assurance standards obtain certification or endorsement. (ISO stands for International Organization for Standardization.) The ISO standards are voluntary; that is, an organisation can choose whether or not to meet the specified standards and get the quality assurance.

51 Quality assurance Quality assurance: the process through which an organisation achieves a level of quality in the goods and services it produces that is defined by an independent body. Quality assurance: a system established to ensure that predetermined quality standards are achieved An example is ISO 9001

52 ISO 9000 Quality assurance The ISO 9000 family of quality management systems standards is designed to help organizations ensure that they meet the needs of customers and other stakeholders while meeting legal and regulatory requirements related to a product. ISO 9001 deals with the requirements that organizations wishing to meet the standard must fulfil. Third-party certification bodies provide independent confirmation that organizations meet the requirements of ISO Over one million organizations worldwide are independently certified, making ISO 9001 one of the most widely used management tools in the world today

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54 Quality standards While different quality standards apply to different types of organisations, standards usually cover aspects such as: specific processes to be adopted in regard to customer satisfaction, continuous improvement, the production process training of staff documentation of processes Controls corrective action auditing of processes.

55 Total Quality Management (TQM) Total quality management (TQM) is a quality system that takes a whole organisation approach to achieving and maintaining quality. With this approach, quality becomes the focus for every employee. The commitment to excellence becomes part of the corporate culture.

56 Total Quality Management TQM is a holistic approach to quality where all members of an organisation aim to participate in ongoing improvement of organisational culture and production processes. All organisational members are required to have a commitment to ongoing, incremental quality improvements in everything they do.

57 TQM - Continuous improvement The concept of an organisation continually striving for perfection in every aspect of its operations system Continuous improvement is the concept that, through the TQM commitment to quality, an organisation continually strives for perfection in every aspect of its operations system. Standards are always being elevated. The consequence for all employees is that they each have a responsibility to improve their own performance and that of their team or department.

58 TQM - Benchmarking Measuring an organisation s output against the standards set in an industry in order to compare quality and performance Linked to continuous improvement is benchmarking. This occurs when an organisation compares its performance to standards set by leading organisations in the industry that have a proven record of excellence. These benchmarks are used to evaluate performance and identify areas for improvement.

59 Quality Circles Quality circles are one of the strategies that form the concept of continuous improvement. They are small work groups of up to ten employees from a particular section of the organisation who meet on a regular basis to share problems and ideas they have regarding quality. This initiative works to improve employee motivation by giving them a degree of empowerment and responsibility, and has the advantage of saving the organisation time and money through improvements in the quality of production.

60 Total Quality Management (TQM) An example of a company which practises TQM in practice is Holden. Total quality management is part of the vehicle management philosophy. Holden supports its employees through training and development and encourages employee contribution to improving the quality in all levels of the vehicle manufacturing operations.

61 Elements of TQM 1. Customer focus Everyone has a customer: External customer the person who purchases the product or service. Internal customer those who use what another group in the workplace provides. Every work group must think about providing value to the people who use their product. This involves finding out exactly what the user needs and wants, and ensuring that the process provides it. 2. Defect prevention TQM tries to prevent defects in products or services before they arise rather than relying on inspection to find them after they occur.

62 Elements of TQM 3. Universal responsibility With TQM, quality is not just the responsibility of the inspection department: it is everybody s responsibility. Every work group in the business should be concerned with seeking ways to improve the quality of their own product or service.

63 Activities Quality Management Question 1-6 Page 114

64 TECHNOLOGY

65 Technology The introduction of new technology as it becomes available to organisational operations can offer significant efficiency savings as well as improvements in the quality of product. Technological innovation has developed in recent years, this has added significantly to operational productivity. All are examples of automation

66 Key Terms: Automation: the techniques and equipment used to achieve automatic, as opposed to human, operation or control of a process, equipment or a system Think ATM s, Automatic Check-Outs

67 Technology Organisations must keep up with the latest technology if they wish to remain competitive. Those that do so are able to reduce waste and costs, make better use of their human resources and speed up production and ensure quality.

68 Computer Aided Design (CAD) Computer-aided design (CAD): the use of computers and software to prepare product designs, which can then be reviewed and examined without the need for a prototype Engineers and designers use CAD software to evaluate initial designs and, where necessary, change them. This technology saves the organisation time and money the designs can be reviewed and examined without the need for a prototype. CAD software is also used to test the reliability of the product.

69 Computer Aided Manufacturing (CAM) Computer-aided manufacture (CAM): the use of computers in the control and design of the manufacturing process. Computers may control machinery, equipment and materials in the production process Computer-aided manufacture (CAM) allows the manufacturing process to be controlled by computers. CAM software is used to design the appropriate production process and then control it. This means changes to the production process can be made quickly by reprogramming. This software works in conjunction with the CAD software, as the computerised information stored on the CAD system is accessed and used by the CAM software. The CAM software then uses this to direct the machinery to complete the CAD.

70 Robotics Robotics refers to highly specialised computerised technology that undertakes complex tasks in the production process. The use of robotics has enabled car manufacturers in particular to refine their production to allow greater accuracy than any human employee is capable of. Although the initial cost of robotics is high, robots do not need breaks or holidays, nor do they go on strike. The use of robotics on the assembly line of car manufacturers means that several tasks can be done at once.

71 Robotics Robotics: the use of computer controlled robots to perform manual tasks, especially on an assembly line, replacing functions previously performed by human labour

72 Application of technology in service industries There has been much innovation in the technology that is used in service industries. This makes a large difference to the services that businesses can offer and the number of customers they can attend to. The use of computers to save client details or files has increased productivity in many organisations. In the office, technology such as the Internet and intranets have saved time and money and increased productivity.

73 ecommerce E-commerce has also allowed many organisations to improve their services and increase revenue. Electronic Funds Transfer at Point of Sale (EFTPOS) is an example of advanced technology used in the retail industry that has been an advantage for businesses and consumers. Paypass Online shopping

74 Activities Pg 116 Question 1,2,4,5

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