Thought for the day:
“You've got to be very careful if you
don't know where you're going,
because you might not get there.” Yogi
Berra
WIKI
• Go to wiki
• Operations
• Open ‘Note taking_Ch1’
Operations
Role of Operations
Management
1.1 Introduction
1.2 Strategic role of operations
management
1.3 Good and/or services in different
industries
1.4 Interdependence with other key
business functions
Get an A
A
Grade
Band 6
Evaluation
To what extent, Evaluate, discuss,
justify, advise, recommend.
Apply, Examine, Analyse,
Interpret, Formulate.
Band 5
Band 4
Band 2/3
Application & Analysis
Understand
Knowledge
Compare, Contrast,
distinguish,, construct,
calculate, explain.
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state summarie
Role of operations management
Syllabus
– strategic role of operations management
– cost leadership, good/service differentiation
– goods and/or services in different industries
– interdependence with other key business
functions
1.1 Introduction to Operations
management
Target
• Learning Objective

•
•
Define Business operations
Describe the Operations processes
ALL
D/C
Band 3/4

•
Distinguish between inputs and outputs
MOST
B/C
Band 4/5

•
analyse business functions and processes in large
and global businesses
evaluate the effectiveness of management in the
performance of businesses
communicate business information, issues and
concepts in appropriate formats.
•
•
Who?
SOME
A
Band 6
Keywords
Operations
Transformation
Value adding
Lean Production
Starter:
Play
Listen to this definition
write down key words….
Knowledge
Definition
• Operations…….the business processes that
involve transformation or, more generally,
‘production’.
• It is a term that applies both to the
manufacturing and services sector.
• In manufacturing, operations refers to the
processes involved in turning raw materials
and resources into outputs of finished goods
or products.
Recap
• Businesstudiesonline
• Activites>GCSE>by topic>production
• 1) The Chain Of Production- Drag 'n' Drop
• 2)Which sector - Drag 'n' Drop
Operations — inputs and outputs
Operations can be described as those processes
that help
transform business inputs
…………….into business outputs.
• Operations involves the creation of value by
businesses.
• Both transformation and value adding.
• Value adding is the creation of extra or added
value as inputs are transformed into outputs.
'Value Added'
• Think of a loaf of bread…
• List as many stages you can think of that the
product would have had to go through during
its production.
Tips:
• Food products will have ingredients that have
to be grown by farmers; someone has to
process the foods and then manufacture them
and someone also has to package them, put
them on display and sell them to us!
• How does the value of the product change as
it goes through each stage?
Operations processes
Operations processes are broad and include aspects of all of the
following activities undertaken in business:
• the production of goods and services
• Production controls and associated quality controls on
processes. Included in this are input management and
capacity (volume of output) decisions.
• inventory controls
• supply chain management
• logistics and distribution
• management decision making in terms of operational
processes.
Inputs
Processes
Outputs
What makes a Business?
Inputs
Processes
Outputs
Inputs –tangible things such as raw materials,
land, labour resources, capital in the form of
machinery and technology(Business use in
the production process) , as well as
intangible inputs such as ideas and
information.
Processes – turning the inputs into the
provision of services or the manufacturing of
goods.
Output – the provision of final goods and
services (Product).
A product can refer to both goods and services.
What makes a Business?
Outputs
Output – the provision of final goods and services
(Product).
A product can refer to both goods and services.
Goods – Physical products (cars, computers, books and
food)
Services – intangible products such as haircut, a bus ride
or a visit to a cinema.
A business can provide both.
Operation management
• Operation management – ‘managing
the activities needed to create and
deliver an operation’s goods and
services’.
• …. To broad
• ‘OM is about producing the right
amount of good or service, at the right
time, at the right quality and at the
right cost to meet customer
expectations’
QUESTION
Operations is what can lead to a business having
a competitive advantage…
How do you think this is so?
Eg….
• right quality
• right cost
• meet customer expectations
Minimising waste
• Minimising waste, also called lean production,
• Operations management wants to eliminate
waste — ‘lean’ in this case means no excess.
• Waste is non-value adding, though it does add
cost.
• If waste can be minimised then production
processes are most efficient.
• How do you think you could minimise waste?
Thought for the day:
“In the end, all business
operations can be reduced to three
words: people, product, and profits.”
Lee Iacocca
(American businessman - engineered the Mustang)
Hwk
• Chapter 1 notes due Monday
• (ensure all HR notes up to date)
RECAP
"It's deja vu all over again“ Yogi Berra
Name
generator
Minimising waste
There are several sources of waste in business
including:
• the under use of labour, over production
• errors and defects requiring remediation
• creating lost product
• under utilisation of machinery
• slow lead times and waiting times within processes
• carrying of excess inventory
• Each of these sources of waste adds cost but does
not add value.
Reflect fair value for any labour used in
processes
• It is important to consumers that businesses
operate fairly and compensate and treat
employees appropriately.
• The growth of the fair trade movement is a
direct result of consumers advocating for
operations processes in production and supply
to integrate notions of a fair price, decent
working conditions and local sustainability.
Summarise the key points of…
• Operate at low cost so as to
maximise affordability
• Pg 7
• Integrate environmental
awareness and a need for
ecologically sustainable
practices
• Pg 7 - 8
Reflect changes in the needs of consumers over time
• Consumers also inform operations processes
through the shift in their tastes over time.
• As consumers seek innovative goods,
businesses will create innovative products.
• This is evident in businesses such as IBM and
Apple.
• These global businesses centre production
and operations processes around the need to
innovate because consumer markets seek
innovative products (goods and services).
Summary
• Operations involves various processes that transform
and add value to business inputs in the creation of
outputs.
• Operations is informed by the business drive to
maximise profits and also increasingly by the needs
of consumers.
• Minimising waste is an operations management
approach designed to eliminate waste.
Summary
• The growth of the Fairtrade movement is a direct result of
consumers advocating for operations processes in production
and supply to integrate notions of a fair price, decent working
conditions and local sustainability.
• In terms of a manufacturing enterprise, businesses will
continually seek to minimise production costs so that the
retail prices for consumers are as reasonable as possible.
• As consumers seek innovative goods, businesses will create
innovative goods
Operations
Role of Operations
Management
1.1 Introduction
1.2 Strategic role of operations
management
1.3 Good and/or services in different
industries
1.4 Interdependence with other key
business functions
Strategic role of operations
management
Strategic means
• ‘affecting all key business areas; that is, the strategic role of
the operations management involves operations managers
contributing to the strategic direction or strategic plan of the
business.
The goal of a business:
How to make profit:
• revenue or income
• costs or expenses.
Profit center are those aspects of the business
that directly derive income.
Cost center are those that do not directly derive
income but do incur cost. (operations function is
a cost)
COSTS
There are several different sources of operations costs
in business.
• input costs,
• Processing
• transformation costs
• costs of getting products to markets.
• There are also costs associated with inventory
management and quality management.
• Some of the different types of cost are shown in table
1.1. pg 10
Cost Leadership
• Lots of costs involved in operations.
• Therefore, operations management involves cost
leadership.
• Aim to have the lowest costs or to be the most pricecompetitive in the market.
• the overall business should still be profitable.
• This means that operations managers must find ways
to minimise costs.
Economies of scale
• Economies of scale refers to cost advantages
that can be created because of an increase in
scale of business operations.
• Think: ‘buying bulk’
• the cost savings come from being able to
purchase lower cost per unit of input
• and efficiencies created from the improved
use of technology and machinery.
• Play 7mins
Activity
1. Define good/service differentiation
How can a business differentiate a good &
service? (sources of differentiation )
- Hint = look at ‘summary’
Define
Explain
2. Explain what is Cross branding?
Summary
Product differentiation means distinguishing products (goods or services)
in some way from its competitors.
Sources of differentiation in goods include:
– varying the actual product features
– varying product quality
– varying any augmented features.
Sources of differentiation in services include:
– varying the amount of time spent on a service
– varying the level of expertise brought to a service
– varying the qualifications and experience of the service provider
– varying the quality of materials/technology used in service delivery.
For both goods and services, differentiation can be created from cross branding
or strategic alliances.
Summary
• A marketing strategy which combines two offerings from separate
companies. The technique is usually used to sell complementary products
or services. Also called cross promotion or cross merchandising.
•
•
•
Apple Inc. and Nike Inc. have formed a long term partnership to jointly develop and sell
“Nike+iPod” products. The "Nike + iPod Sport Kit" links Nike+ products with Apples MP3Player iPod nano, so that performance data such as distance, pace or burned calories can be
displayed on the MP3-Player’s interface.
YouTube and NBA have joined forces up to develop a special NBA Channel on the video
platform, which basically is an individualised micro site providing primarily NBA material and
offering user recordings of NBA games/players
Omega partnered with the James Bond franchise to help promote their watches, Daniel Craig
appeared in advertisements.
Summary
•
•
•
•
Operations management is an essential key business function that overlaps with
the other business functions such as marketing, finance and human resources
management (HRM).
There are several different sources of operations costs in business. There are input
costs, processing or transformation costs and the costs of getting products to
markets.
Cost leadership involves aiming to have the lowest costs or to be the most pricecompetitive in the market.
Economies of scale refers to cost advantages that can be created because of an
increase in the scale of business operations.
RECAP
"It's deja vu all over again“ Yogi Berra
Name
generator
Operations
Role of Operations
Management
1.1 Introduction
1.2 Strategic role of operations
management
1.3 Good and/or services in different
industries
1.4 Interdependence with other key
business functions
Goods and/or services in different
industries
• The operations function within any business is
shaped by the range and types of goods and
services that are produced.
Standardised goods
• mass produced,
• assembly line.
• uniform in quality
• production focus.
Customised goods
• varied according to the
needs of customers.
• produced with a market
focus
Services in different industries
• Standardised and customised.
• The fast-food industry/GP =
standardise/standard service.
• professionally educated (depending) =
customised service. (medical specialist)
Activity
Note the difference
between
• perishable
• non-perishable
• intermediate goods
Define
Explain
Pg 15 - 16
Self-service
• Self-service means encouraging the customers
to take the initiative to help themselves.
• Some industries seek to encourage selfservice. (eg. financial services sector and the
travel industry encourage people to make their
own transaction online).
• businesses can then concentrate on
customisation when a person cannot help
themselves.
Summary
• Goods and services are produced differently.
• Goods may be standardised (mass produced or an assembly
line) or customised (varied according to the needs of
customers).
• Goods may be perishable or non-perishable.
• The character of the goods will shape the nature of the
operations processes.
• Intermediate goods have gone through one set of operational
processes then become inputs into further processing.
• Services vary according to whether they are highly specialised
or more customised.
Operations
Role of Operations
Management
1.1 Introduction
1.2 Strategic role of operations
management
1.3 Good and/or services in different
industries
1.4 Interdependence with other key
business functions
Interdependence with other key business
functions
• 1 Define the term ‘interdependence’.
• 3 Identify the four key functions of business.
• 4 Recall when interdendence occurs between the key
business functions.
• 5 State the benefits of interdependence.
Summary
• The range of typical business functions is operations,
marketing, finance and human resources.
• Interdependence refers to the mutual dependence
that the key functions have on one another. This
means that the various business functions work best
when they work together.
• In most businesses, closely related tasks are grouped
together — for example, sales and marketing,
finance and administration, and operations and
research and development.
Summary
• Operations refers to the business processes that
involve transformation or, more generally,
‘production’.
• Marketing is about meeting the needs and wants of
consumers through provision of products (both
goods and services) at prices that the market is
prepared to pay.