1. The nature of operations

2. In this chapter Understand what is meant by operations management
Appreciate the nature of the production process and how value ca be added
Understand the difference between production and productivity, efficiency and effectiveness
Evaluate the different advantages and limitations of labour intensity and capital intensity

3. The nature of operations The production process
Added value = the difference between the cost of purchasing raw materials and the price the finished goods are sold for
Resources
Production = converting inputs into outputs
The level of production = is the number of units produced during a time period
Productivity = the ratio of outputs to inputs during production, e.g. output per worker per time period
Raising productivity levels
Is raising productivity levels always the answer?
Efficiency and effectiveness
Efficiency = producing output at the highest ratio of output to input
Effectiveness = meeting the objectives of the enterprise by using inputs productively to meet customers’ needs

4. Labour intensity and capital intensity
Labour intensive = involving a high level of labour input compared with capital equipment
Capital intensive = involving a high quantity of capital equipment compared with labour input

5. Operations planning

6. In this chapter Understand the need for operations planning
Analyse the influence of marketing, resources and information technology on operations planning
Understand the need for flexibility and process innovation
Differentiate between different production methods: job, batch, flow, mass customisation
Evaluate the factors that determine the production methods used in different situations and understand the problems in changing method
Assess the importance of location decisions to the success of a business and evaluate the factors that influence location and relocation decisions
Understand why the business may want to increase scale of production
Analyse the importance of economies and diseconomies of scale and the impact on unit costs
Understand enterprise resources planning (ERP)

7. Introduction to operations
Operations planning = preparing input resources to supply products to meet expected demand
Operations planning - the importance of the marketing link
The need for flexibility
Operational flexibility = the ability of a business to vary both level of production and the range of products following changes in customers demand
Process innovation
Process innovation = the use of a new or much improved production method or service delivery method
Production methods
Job production = producing a one-off item specially designed for the customer
Batch production = producing a limited number of identical products – each item in the batch passes through one stage of production before passing on to the next stage
Flow production = producing items in a continually moving process
Mass customisation = the use of flexible computer-aided production systems to produce items to meet individual customers’ requirements at mass-production cost levels

8. Recent innovations in production methods Mass customisation
Job production
Batch production
Flow production
Recent innovations in production methods
Mass customisation
Production methods – making the choice
Problems of changing production methods
Final evaluation
Location decisions
The benefits of an optimal location
Optimal location = a business location that gives the best combination of quantitative and qualitative factors
Factors influencing location decisions
Quantitative factors = these are measurable in financial terms and will have a direct impact on either the costs of a site or the revenues from it and its profitability
Qualitative factors = these are non-measurable factors that may influence business decisions

9. Advantages and disadvantages of multi-site locations
Other location issues
Advantages and disadvantages of multi-site locations
Multi-site locations = a business that operates from more than one location
Offshoring = the relocation of a business process done in one country to the same or another company in another country
Multinational = a business with operations or production bases in more than one country
International location decisions
Trade barriers = taxes (tariffs) or other limitations on the free international movement of goods and services
Issues and potential problems with international location
Scale of operation
Scale of operation = the maximum output that can be achieved using the available inputs (resources) – this scale can only be increased in the long term by employing mare of all inputs

10. Increasing the scale of operations
Economies of scale = reductions in a firm’s unit (average) costs of production that result from an increase in the scale of operations
Diseconomies of scale = factors that cause average costs of production to rise when the scale of operation is increased
Large-scale production – unit costs of production
Are diseconomies avoidable?
Enterprise resource planning (ERP)
Enterprise resource planning = the use of a single computer application to plan the purchase and use of resources in an organisation to improve the efficiency of operations
Supply chain = all of the stages in the production process from obtaining raw materials to selling to the consumer – from point of origin to point of consumption
Sustainability = production systems that prevent waste by using the minimum of use – renewable resources so that levels of production ca be sustained in the future

11. The nature of operations

12. In this chapter
Understand why business hold stocks (inventories) and the costs of stock holding
Analyse the advantages and disadvantages of traditional stock – management systems
Discuss the just-in –time (JIT) stock – management system

13. Why business hold stocks Stock management Stock – holding costs
Stock (inventory) = materials and goods required to allow for the production and supply of products to the customer
Why business hold stocks
Stock management
Stock – holding costs
Costs of not holding enough stocks
Optimum order size
Economic order quantity = the optimum or least-cost quantity of stock to re- order taking into account delivery costs and stock-holding costs
Controlling stock levels a graphical approach
Buffer stocks = the minimum stocks that should be held to ensure that production could still take place should a delay in delivery occur or should production rates increase
Re-order quantity = the number of number ordered each time
Lead time = the normal time taken between ordering new stocks and their delivery

14. Just-in-time (JIT) stock control
Just-in-time = this stock-control method aims to avoid holding stocks by requiring supplies to arrive just as they are needed in production and completed products are produces to order
JIT evaluation

15. Capacity utilisation

16. In this chapter
Understand the meaning calculation of capacity utilisation
Analyse the problems of excess capacity and capacity shortages
Evaluate the different approaches to overcoming these problems
Assess the reasons for the rapid growth of outsourcing
Evaluate the benefits and limitations of outourcing

17. Capacity utilisation – impact on average fixed costs
Capacity utilisation = the proportion of maximum output capacity currently being achieved
Capacity utilisation – impact on average fixed costs
Excess capacity – what are the options?
Excess capacity = exists when the current levels of demand are less than full capacity output of a business – also known as share capacity
Rationalisation = reducing capacity by cutting overheads to increase efficiency of operations, such as closing a factory or office department, often involving redundancies
Working at full capacity
Full capacity = when a business produces at maximum output
Capacity shortage
Outsourcing
Capacity shortage = when the demand for a business’s products exceeds production capacity
Outsourcing = using another business (a ‘third party’) to undertake a part of the production process rather then doing it within the business using the firm’s own employees
Business-process outsourcing (BPO) = a form of outsourcing that uses a third party to take responsibility for certain business functions, such as HR and finance
Outsourcing evaluation

18. Lean production and quality management

19. In this chapter
Analyse the importance of lean production to competitive business
Evaluate the main lean production techniques
Explain the concept of quality
Understand the difference between quality control and quality assurance
Explain the importance of business establishing quality – assurance systems
Evaluate the effectiveness of total quality management
Assess the costs and benefits of managing quality
Explain how managing quality effectively can improve the competitiveness of business

20. Just-in-time stock-control principle Kaizen – continuous improvement
Lean production
Lean production = producing goods and services with the minimum of waste resources while maintaining high quality
Simultaneous engineering = product development is organised so that different stages are done at he same time instead of in sequence
Cell production = splitting flow production into self-contained groups that are groups that are responsible for whole work units
Flexible specialisms
Just-in-time stock-control principle
Kaizen – continuous improvement
Kaizen = Japanese term meaning continuous improvement
Continuous improvement (Kaizen) – an evaluation
Mai advantages of lean production
Are lean production and JIT appropriate in all business situations?

21. Managing operations - quality
Quality product = a good or service that meets customer’s expectations and it therefore ‘fit for purpose’
Quality standards = the expectations of customers expressed in terms of the minimum acceptable production or service standard
Quality – how can it be achieved?
What are the differences between quality control and quality assurance?
Quality-control techniques
Inspecting for quality
Quality assurance
Quality control = this is based on inspection of the product or a sample of products
Quality assurance = a system of agreeing and meeting quality standards at each stage of production to ensure consumer satisfaction
ISO 9000 = this is an international recognised certificate that acknowledges of a quality procedure that meets certain conditions

22. Total quality management (TQM)
Total quality management = an approach to quality that aims to involve all employees in the quality-improvement process
Internal customers = people within the organisation who depend upon the quality of work being done by others
Zero defects = the aim achieving perfect products every time
What are the costs and benefits of introducing and managing quality systems?
How can he competitiveness of a business be improved by managing quality effectively?
Benchmarking
Benchmarking = it involves management identifying the best firms in the industry and then comparing the performance standards – including quality – of these business with those of their own business
Benchmarking – an evaluation
Quality circles
Quality issues – an evaluation

23. Project management

24. In this chapter Understand the purpose of project management
Analyse the key elements of project planning
Analyse how critical path analysis (CPA) and network diagrams can be used to help with project management
Apply CPA to different projects
Evaluate the usefulness of the technique

25. Critical path analysis
Project management
Project = a specific and temporary activity with a starting and ending date, clear goals, defined responsibilities and a budget
Project management = using modern management techniques to carry out and complete a project from start to finish in order to achieve per-set targets of quality, time and cost
Planning operations
Critical path analysis = a planning technique that identifies all tasks in a project, puts them in the correct sequence and allows for the identification of the critical path
Critical path analysis
Network diagram = the diagram used in critical path analysis that shows logical sequence of activities and the logical dependencies between them – and the critical path can be identified
Critical path = the sequence of activities that must be completed on time for the whole project to be completed by the agreed date
Using critical path analysis

26. How the critical path is determined: a more complex example
What is the latest finish time and how is it calculated?
What is the critical path for this project?
Dummy activities
The advantage of critical path analysis (CPA)
Critical path analysis – evaluation