1. OPERATIONS HIGHER BUSINESS MANAGEMENT

2. Importance of Operations Core activities of any business Operations Purchasing Raw Materials Appropriate methods of production Warehousing and distribution Managing stock control Quality techniques to ensure quality

3. Operations/Production 3 Distinct Phases Inputs Process Outputs

4. Inputs Raw Materials Labour

5. Process Converting raw materials into something useful Use of machinery and other processes Assembly

6. Output The finished product! Packaging Storage Distribution Transport

7. Factors Affecting Production Systems Nature of the product Quantity to be produced Resources available Labour Capital

8. Labour Intensive vs Capital Intensive (machines) Most manufacturing companies use a mix of labour-intensive and capital-intensive production. The mix used determines the degree of automation. The greater reliance on machines, the greater the automation.

9. Labour-intensive production Labour is cheap and readily available Product requires craftmanship or expertise Business is small and cannot afford expensive machinery

10. Labour-intensive production Costs Skilled labour force expensive to pay and train May be limited to small scale production Production could halt due to absences Quality has to be closely monitored

11. Capital-intensive production A standard product is being produced with standard operations Labour supply is scarce or expensive Consistency and quality of product is required Economies of scale desirable Continuous production required

12. Capital-intensive costs Set-up costs of machinery is high Lost production time due to machine breakdowns is costly Individual customer needs cannot be met Worker motivation can be low

13. Labour vs Capital Identify an example of an organisation that would use labour intensive production Identify an example of an organisation that would use capital intensive Give reasons for why each organisation would use that production

14. Methods of Production Job Production Batch Production Flow Production

15. Job Production Each job completed before another job is started A custom built boat A piece of artwork A house built to your own design A hand crafted bowl A custom designed wedding gown

16. Batch Production All stages of production process completed at same time A number of similar products (repeated jobs) Each batch may differ slightly Tinned foods i.e Heinz Bakery goods Wallpaper rolls

17. Flow Production Mass production of almost identical products Cars White goods i.e washing machines, fridges etc Newspapers

18. Production Videos Audi T8 production Kia car production

19. Coca Cola How is Coca Cola made and bottled? Use their website and virtual plant animation to write a short report on how Coca Cola is produced. OR – pick any product/brand of your choice!

20. Quality Management Consumers Satisfaction of consumer needs Reliability Durability Special features Availability of parts, repairs and maintenance After care service Perceived qualities Producer Meets exact specifications – manufactured quality Complaint free – design quality Production is cost effective Can be produced under current conditions

21. Measuring Quality Tangible Appearance Reliability Durability Functions Suitability After sales service Maintenance Intangible Image and brand (“street cred”) Reputation Exclusivity

22. Quality Management “A quality product or process is one which provides satisfaction of consumer needs (through design quality) and sufficient reliability (through manufactured quality) relative to cost.” Eg. A Bic biro is a quality product because as a disposable pen it does what consumers want (ie writes) and is reliable relative to cost.

23. Quality Control A sample is checked to ensure they meet agreed standards. Unacceptable products are discarded. Reactive Leads to scraps, waste and re- working of products Works by failure Can be costly

24. Quality Assurance Products are checked at regular points in the production process. Based on prevention Requirements determined in advance Minimises risk of error, or non- conformity to specifications Quality checked at checked at every stage of production Known to reduce wastage and scrap “Right first time, every time”

25. Quality Systems Total Quality Management (TQM) Benchmarking Quality circles

26. Total Quality Management (TQM) This is a system of doing things right first time – no errors are tolerated. Consistent, clear message on quality Staff commitment to ongoing improvement Partnership with suppliers Educate and train staff Supervisors encourage and help Eliminate fear of failure Departments integrate and share problems Set clear, achievable goals Help employees to take pride in their work Train and educate Establish a structure and culture to support these aims

27. Features of TQM Commitment to customer needs Close links with supply chain Personal responsibility by employees Company-wide policy for staff Emphasis on team work Clear measures of “quality” Good 2-way communication systems

28. Benchmarking Is the process of setting competitive standards, based on the achievements of other firms against which an organisation will monitor its progress Benchmarking tends to focus on the “best of class” companies, but for specific functions a company may compare itself to an organisation in a different industry

29. Types of Benchmarks Internal – comparison with a function within the organisation External – comparison with other organisations Competitive – direct comparison with a competitor Generic – comparing general business activities (eg recruitment) Customer – contrasting the level of fulfilment of customer expectation

30. Quality Circles Small groups of workers meet at regular intervals to discuss where improvements can be made in production. Production workers know more about the production process than “managers” Workers are motivated by being involved and consulted about production problems (empowerment)

31. BSI An organisation that produces national standards for certain products. When a business produces a product and proves it meets agreed quality and safety standards specified by the BSI it is approved and marked with the Kitemark symbol. Competitive Advantage Consumer confidence Process and paperwork lengthy  Expensive 

32. BSI and Other Trade Organisations 1. Identify 3 other quality assurance standards such as Red Lion Quality mark on eggs 2. How do you apply for the BS Kitemark? www.bsigroup.com

33. Stock Control

34. Types of Stock Raw materials, components etc Work in progress (unfinished work) Finished goods

35. The Importance of Stock Control “Stock out” = lost sales and poor reputation Excess stock = high storage costs Excess stock runs risk damage of obsolescence, “opportunity costs” (alternative use for the money tied up in stock)

36. Factors Influencing Stock Levels Level of demand Unpredictability of demand Degree of spoilage Rental costs for storage Bulk-buying discounts Reliability of suppliers Competition – luxury/necessity

37. Elements of Stock Control Maximum stock levels Minimum stock levels Rate of consumption Lead time – ordering to receipt Re-order level SEE PAGE 78 – COPY OUT DIAGRAM

38. Storage of Stock Centralised storage Decentralised storage Just-In-Time (– Kanban system)

39. Centralised Storage - Warehouses in which all stock is held before being dispatched Advantages Improved security Supervised by specialist staff Agreed procedures for issue/receipt Agreed procedures for ordering Bulk ordering/storage may be cheaper Increased efficiency in distribution Disadvantages Time wasting going to and from stores Cost of specialist staff Cost of dedicated storage area

40. Decentralised Storage – stock is held in smaller quantities at more locations, closer to the customer Advantages Stock always ‘on hand’ when required Orders of stock will reflect actual usage Faster turnover of smaller amounts of stock reduces the likelihood of deterioration/decay Disadvantages Less rigid control – theft and loss more likely Takes up space in production areas

41. Just-In-Time (JIT) Just-in-time aims to get the highest volume of output at the lowest unit cost. It is really a method of production control. If there is no demand for the product there is no production. Finished goods are produced just in time to be sold to the customer. Component parts are assembled just in time to become finished goods. Materials are purchased just in time to make component parts.

42. JIT Advantages Stock exactly matches production Improves cash flow (less tied up) Savings on purchase and storage costs Less stock wastage Production delays are prevented Can respond to changes in demand Close ties with suppliers established

43. JIT Disadvantages High dependency on suppliers to meet delivery and quality standards Suppliers must be willing to participate – can be high risk (“all the eggs in one basket”) Increase in order processing costs

44. The Purchasing Function Having sufficient stock available Avoiding wastage of stock Having the correct quality In the factory when needed Competitive prices paid Building good relationship with suppliers

45. The Purchasing Mix Best quality Dependability Lowest price Delivered in correct quantities Delivered at correct time Location

46. PRODUCTION Read the Dell Case Study on P80 Read and summarise the information on the Kanban Stock Control system on P80

47. Employers Objectives Motivation Cost Prestige

48. Employees Objectives Purchasing power Recognition and fairness How payments are made up

49. Payment Systems £ Time rate payment systems £ Overtime £ Piece rate payment systems £ Piece rates plus a basic/fixed pay element £ Commission payments £ Fringe benefits and non-financial payments £ Bonuses £ Incentives to professionals £ Contract employment £ Profit sharing schemes Definitions P81

50. Distribution and Delivery Warehousing Design and layout Mechanical handling Transportation Transport and delivery Scheduling

51. Distribution Right goods Right place Right quantities Right time The right channel of distribution must be chosen to ensure the above happens (market)

52. Distribution Mix – The route which a manufacturer distributes products is known as the Distribution Mix Manufacturer’s distribution capacity The product itself Desired image for product Finance available Reliability of other organisations Legal restrictions Creditors

53. Distributed via Road Rail Air Sea What are the advantages and disadvantages of each?

54. Scheduling A schedule or production plan is often drawn up to show the order of production, what staff and materials are required and when they are required for. Eliminates staff and machines being idle whist waiting for previous stage of production to be completed

55. Ethical and Environmental Issues 1. What unethical or immoral decisions might a business be tempted to do? 2. How has the UK Government encouraged businesses to be ethical and environmentally friendly? 3. Research Fairtrade. Write a short report with your findings.

56. Recycling Householders and businesses recycle waste New products Save energy Protect environment No need for landfill COSTS: Providing bins, bags etc Staff to collect waste Transporting Recycling sites

57. Packaging Reducing Packaging + Less packaging + Less waste + Less litter - May get damaged - Less attractive packaging 1.Identify a brand that uses attractive packaging. Do you think sales would be affected if packaging was reduced? 2.What advice would you give your employer on packaging?