Unit 5: Operations Management

Content 5.1 The role of operations management Operations management and its relationship with other business functions Operations management in organizations producing goods and/or services Operations management strategies and practices for ecological, social (human resource) and economic sustainability 5.2 Production Methods The following production methods: job/customized production, batch production, mass/flow/process production, cellular manufacturing The most appropriate method of production for a given situation 5.3 Location The reasons for a specific location of production The following ways of reorganizing production, both nationally and internationally: outsourcing/subcontracting, offshoring, insourcing

5.1 The role of operations management Operations management and its relationship with other business functions Operations management in organizations producing goods and/or services Operations management strategies and practices for ecological, social (human resource) and economic sustainability

Operations Management Operations refer to the fundamental activities of organizations: what they do and what they deliver i.e. how they produce the goods and services that meet consumers’ needs and wants The art of managing production to get the best end product is called operations management Operations can be described as the “how to” of business management Therefore, it is an integral part of the organization and its decision-making process

Triple Bottom Line When making operational decisions, economic, social, and ecological factors must be taken into account. That is the Triple Bottom Line. Economic sustainability: the need to use available resources and raw materials to their best advantage Social sustainability: the need to take human factors into account, both internally (workers) and externally (the local communities) Ecological sustainability: the need to take ecological factors into account (especially about nature and ecosystems)

5.2 Production Methods The following production methods: job/customized production, batch production, mass/flow/process production The most appropriate method of production for a given situation

Production Methods Production Method Type of Product Advantages Disadvantages Job (customized) production Special/custom order Example: custom made car with personalized accessories High mark-up Clients get what they want Flexible production Expensive to produce Time consuming Product might fail Relies on skilled workers Batch production Groups of identical products Example: car models with differing features for each model Economies of scale Allows more choice Useful for product trials May lose production time (for recalibration) May need to hold large stocks of work (in case of unexpected orders) Mass production High volume of standardized products Example: cars made to a standard design Low maintenance needed Labor costs are low Quick response to unexpected orders High set up costs Costly breakdowns System is inflexible Demotivating work environment

5.3 Location The reasons for a specific location of production The following ways of reorganizing production, both nationally and internationally: outsourcing/subcontracting, offshoring, insourcing

Location of Production Organizations must consider several factors to decide where to start up or where to move to our office

Factors in locating a business Costs Include cost of land, labour and transport Competition A balance needs to be made between finding a gap in the market and setting up not too far from the direct competitors Type of Land Different types of land vary in suitability for the business in question for example ski resort needs to be in a place where it snows Markets Set up close to their customers, if a physical store Familiarity with the area Owners should be familiar with the area Labour Pool Type of workers available in the location should be suitable to business operations Infrastructure Existing networks for people and products (i.e. roads, available power and water, housing, etc.) Suppliers Availability of a range of good, local suppliers Government Includes both laws and taxes

Offshoring is outsourcing outside the home country The practice of employing another business (as a third party) to complete part of the work Offshoring is outsourcing outside the home country

Reshoring is bringing back business functions to the home country In-sourcing The practice of performing outside activities internally within the company Reshoring is bringing back business functions to the home country