Operations Activities Po3: Consider Marketing and Operations Activities for Personal Enterprise Operations Activities

Operations Activities In this topic you will learn about Activities: acquiring and handling inputs processing inputs to deliver outputs Deciding on operations activities considering the customer value proposition and: own skills and personality type potential costs (start-up and operating) support networks

Operations Activities Operations activities are those aspects of the business which are directly linked to the fulfilment of customer orders Operations takes inputs, processes them to form an output and distributes to the customer Operational efficiency involves maximising the output achieved from given inputs including machinery, materials and people Inputs include the factors of production or factor inputs: Land Labour Capital Enterprise

Acquiring inputs Inputs include the raw materials and components that are used to provide a good or service Suppliers are those people responsible for providing inputs to businesses Farmer supplying wheat to Kellogg's or beef to Asda Component manufacturer supplying bolts to a furniture manufacturer Electricity company providing power to a theatre Fashion designer providing their summer range to a boutique Regardless of the nature of a business they will have goods and services provided to them from another business (B2B) Most businesses will work with many suppliers The supply chain is all of the resource providers throughout every stage of operations Inventory is the number of goods held in stock including raw materials, work in progress and finished goods Take any product that you have with you today. It might be an item of clothing, piece of equipment or personal object such as a phone. Write a list of all the materials and components that would have contributed to producing that item.

Acquiring and handling inputs Acquiring inputs involves working with suppliers Key considerations include: It is commonplace for suppliers to offer credit to its customers i.e. the option to receive the goods or service now but pay at an agreed point in the future Payment terms will vary depending upon the relative sizes of the firms and also nature of the product or service Payment terms can be in advance, upon delivery, pre agreed credit terms e.g. 30 days and payment plan i.e. payment in stages A business may wish to choose a supplier with generous payment terms in order to help their own cash flow

How will the quality of inputs affect the customer value proposition? Acquiring and handling inputs Quality of inputs will have a direct effect on the quality of the finished product One poor quality component will affect the whole product A top chef working with a poor quality steak will not be able to achieve the quality of meal he/she could with a quality steak A pair of jeans with a poor quality zip will devalue the quality of the jeans The quality may also impact upon the operational efficiency Need to rework manufactured goods Cause breakages to machinery Take longer to handle In retail the quality of the stock will directly influence the reputation and image of the store How will the quality of inputs affect the customer value proposition?

Acquiring and handling inputs When handling inputs it is important to consider: How much stock to hold Sufficient to meet demand, but not too much to be left with obsolete stock Cost of handling stock e.g. warehousing, maintaining quality, insurance Frequency of purchase Buy in bulk to achieve discounts or buy in smaller quantities as required Flexibility and reliability of suppliers Just in time or buffer stock Hold some stock for in case there is a sudden increase in demand or a stoppage in supply v. a JIT system Why might these decisions be particularly difficult for a new entrepreneur?

Processing inputs to deliver outputs Processing inputs to turn them into an output can be: Capital intensive which uses a relatively high proportion of capital such as machinery in the production of a good or service This tends to occur in the secondary sector of the economy i.e. manufacturing Labour intensive which uses a relatively high proportion of labour i.e. workers in the production of a good or service This tends to occur in the tertiary sector of the economy i.e. services Potter versus 3D printing. http://www.bbc.co.uk/news/magazine-29941354 Head to head: Potter versus 3D printer An entrepreneur may not be able to afford capital equipment in the early years. In fact, they may be responsible for the majority of processing themselves or with a small workforce.

Processing inputs to deliver outputs Other considerations include: Labour productivity i.e. units of output per unit of labour. This can be increased with training and a motivated workforce Matching supply to demand to avoid excess supply or excess demand Logistics e.g. how to store and distribute finished goods Quality which can either be monitored throughout the process i.e. quality assurance or checked at the end of the process i.e. quality control

Operations activities Own skills and personality type Personal preferences and nature of the business e.g. mass produced or tailor made Value proposition e.g. low cost or highly differentiated e.g. hand made Potential costs (start-up and operating) Capital or labour intensive Cost of inputs and choice of suppliers Scale of operations Support networks Interest groups e.g. if a craft product Government support e.g. if offering training and employment opportunities Business groups e.g. meet the buyer events https://www.youtube.com/watch?v=EseIGwykPDo Meeting the buyer. How important are these for entrepreneurs?

Operations Activities In this topic you have learnt about Activities: acquiring and handling inputs processing inputs to deliver outputs Deciding on operations activities considering the customer value proposition and: own skills and personality type potential costs (start-up and operating) support networks