Operations Planning We have looked at Operations Management, who deal with the production inputs for a business: Land Labour Capital So, what is Operations PLANNING? “Preparing input resources to supply products to meet expected demand” What problems might other departments have if the Operations Manager decided that his department will increase output by 40% in the next 6 months? COMMUNICATION BETWEEN DEPARTMENTS IS PARAMOUNT Finance Department... No capital for equipment, stocks or labour HR Department... No workers for increased output Customers... Who will buy the extra products?

Operations Planning Which department is the most important for future production to talk with? Sales Supply needs to be matched with demand... If Sales forecasts are accurate, Ops Managers can:  Keep waste down  Match output with demand  Keep stock low  Employ staff efficiently  Get the product “mix” right – who wants what and when BUT – flexibility will be needed due to a changing environment

Operations Planning How can this flexibility be achieved?  Increase capacity – buy equipment/build more facilities BUT – expensive $$$$  Hold high stocks BUT – can become damaged & ties up capital  Have a flexible workforce (P/T, contractors, temporary) BUT – lack motivation  Introduce flexible production methods OPERATIONAL FLEXIBILITY: varying the level of production and the range of products following changes in demand

Operations Planning  There are several methods of production: Job production Batch production Mass or flow production Mass Customisation

Job Production Single, one offs Specifically designed for the customer Usually Labour Intensive production (particularly small businesses) Motivating for workers – see the whole process through BUT  Time consuming Usually expensive

Batch Production Groups of products Every unit in the batch goes through the process together More division of labour based Can allow for economies of scale (if large enough batch) Batches of products can be customised and easily changed BUT  Staff can get bored – low motivation = reduced quality Stocks in progress can be high Machinery might need to be altered/cleaned between jobs

Flow (Mass) Production Large quantities of production are possible due to the continuous “flow” of the process Demand for the product is high and consistent Items are standardised Labour costs lower – capital intensive method of production Low stocking levels – due to constant flow of output (JIT) Consistently high quality – if checked regularly BUT  Needs very strict and controlled planning- equal duration and output at each stage High initial capital investment – capital intensive method Demoralising for workers – repetitive and boring

Next-Generation 737s line up nose-to-tail on a moving production line, speeding along at a rate of two inches a minute through the final assembly process. The moving line, one of several Lean Manufacturing tactics used at the Renton, Wash., facility, has enhanced quality and reduced flow time and inventory levels.

Expectations in an exam Know the advantages and disadvantages of each method of production If you are asked to suggest a suitable method, don’t just write about one method! Discuss them all and then suggest the one you feel is most appropriate and WHY... APPLY your answers to the case study if you have one OR – use examples from different businesses to strengthen your points

The “Perfect” production method Maybe a bit of Job – the highly skilled and motivated staff Maybe a bit of the Flow Production – low costs Innovation through technology is getting there... CAD – Computer Aided Design CAM – Computer Aided Manufacturing Machines can easily be changed to make different products/parts MASS CUSTOMISATION “Producing a range of varied products with multiskilled workers and technology”

Operations Management JOBBATCHFLOWMASS MAIN FEATURES Single one off items Each item passes through each stage together Large scale production of identical products Many common components but with differences which allow diff products to be made Essential Req’s Highly Skilled workers Labour and machines must be able to adapt Specialised, expensive but efficient capital equipment. High steady demand for identical products Many common components and flexible equipment and skilled labour

Operations Management JOBBATCHFLOWMASS Main Advantages Able to undertake specialist projects or jobs, often with high value added Some benefits from economies of scale. Faster and lower unit costs than job production Low unit costs as a result of economies of scale and high productivity Low unit costs with ability to produce a range of different goods, almost to order Main Dis- advantages High production costs. Time consuming High levels of stocks in the form of un- finished goods at each stage of the process Inflexible- difficult to switch to producing much different products May need expensive redesign of products to achieve compatibility of components and processes

Operations Management  What’s one of the key decisions for any business when deciding upon strategy and long term success ? Location  How does location decisions have an impact on the different aspects of the profit equation ? Fixed costs can vary location to location Variable costs such as transport of materials will differ Revenue will be most definitely influenced especially if you are a service industry

Operations Management  Quantitative factors that influence location decision: Site costs Regional incentives Transport costs Labour costs Revenue generation

Operations Management  Qualitative factors that influence the location decision: Infrastructure – quality of local infrastructure like transport and communication links. Environmental and planning considerations – maybe reluctant to set up in a sensitive environmental area. Management preferences – senior managers will have a say and a preference of where they would like to be for one reason or another. Clustering – the benefits of having similar business situated together in same area is obvious but hard to quantify.

Operations Management  The pull of the market. Not so much as issue anymore Technology and the ‘single market’ has changed this Good example is a cinema. It was once the main feature in a town now they are placed on the outskirts like Sylvia park. The car has made this possible.  Location decisions are no longer national but global decisions.  What does a business have to think about if planning on setting up in other country or relocating ? Exchange rate risks Trade barriers Ethical considerations Political and language considerations.

Operations Management Costs and Break – Even  Operations management covers wide issues not just location but also method of production, what to continue to make, whether or not to buy components in or make them from within.

Operations Management  But you cant make these decisions without cost data. Business costs key in profit equation. Need to keep records of costs to make effective decisions. Other departments like marketing will need cost data, why ? To make pricing decisions cost data records helps us make comparisons with competitors. The data helps us set budgets.

Operations Management  What are the costs of production – what’s included ?

Operations Management  What are the costs of production – what’s included ?

Operations Management