6/9/2015
AN OVERVIEW OF OPERATIONS
U O W
B U S I N E S S
S T U D I E S
©
S T U D E N T
C O N F E R E N C E S ,
2 0 1 5
M O H A N D H A L L
P L C S Y D N E Y
2013 HSC
1 Which business function transforms raw materials
and resources into finished goods or products?
(A)Finance
(B) Human resources
(C)Marketing
(D)Operations
© Mohan Dhall
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OPERATIONS
2013 HSC
35 marks in total across three different sections:
• 6 multiple choice questions:
• Q1, Q5, Q8, Q14, Q17 and Q18
• 9 marks of short answers
• Q23 (a), (b) and (c) Operations strategies
• One Extended response (Section IV)
• Question 27 (20 marks)
2014 HSC
25 marks in total across three different sections:
• 5 multiple choice questions:
• Q5, Q7, Q11 (and marketing), Q15 and Q18 (Gantt Chart)
• 10 marks of short answers
• Q21 (a) and (b) Operations strategies (resistance to change) and processes
(sequencing and scheduling)
• Report (Section III)
• Question 25 (20 marks) – Combined with finance topic to look at outsourcing and
global factors affecting operations
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ROLE OF OPERATIONS MANAGEMENT
• Strategic role of operations management
Operations is intrinsically and intricately linked with
each of the the other key business functions. This is
crucial to understand.
Management perspectives are important.
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ROLE OF OPERATIONS MANAGEMENT
• Cost leadership
• Two aspects apply
• Efficiency – cost-minimisation
• Note the relationship between supply costs and cost leadership
• Delivering product to the market in a price-competitive manner
• Case studies:
• International
• WalMart: “Save money. Live better.”
• Aldi and Trader Joes (USA) – note SCM implications
• Australian
• Big W, K-Mart, CostCo
• Ford, Holden vs Mazda and Toyota
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ROLE OF OPERATIONS MANAGEMENT
• Good/service differentiation
• Distinguishing between goods and services
• Goods and/or services in different industries
• The different levels of processing: intermediate and final
goods
• The interaction between goods and services
Case study: http://sydneyskin.com/cosmetic-dermatology/
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INFLUENCES ON OPERATIONS
• Globalisation
• Coca Cola
• Technology
• Black Milk Clothing, Tencent
• Quality expectations
Mercedes Benz, Rodd and Gunn
• Cost-based competition
• Aldi, Walmart, TATA Motors
• Government policies
• Multigate, Simpson
• Legal regulation
• Environmental sustainability
• Legal regulation
• Alcohol and tobacco retailers – CUB and British American Tobacco
• Environmental sustainability
• Westpac
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INFLUENCES ON OPERATIONS
Globalisation:
•
•
•
•
•
Aldi, IKEA, Rio
How business operations are structured
How businesses source their supplies (SCM)/distribute their products
How global businesses compete
IP issues
Technology
•
•
•
•
Technologies used in manufacturing processes for sourcing (B2B)
Technologies used in creating services, accessing markets (B2C)
Technologies used to manage inventory
Technologies used to manage quality
•
https://blackmilkclothing.com/collections/all
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INFLUENCES ON OPERATIONS
Quality expectations
• ISO definition of Quality: “the totality of features and characteristics of
products (goods) and services that bears its ability to satisfy stated or implied
needs”
Must distinguish between quality for goods and quality
of services
• Goods:
• Design (including functionality, materials, innovation), fitness for
purpose, durabilit: http://www.rolex.com/y
• Customisation, reliability and competence of the service provider,
overall levels of professionalism and standard of care
• Services: peoples, processes and physical evidence
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INFLUENCES ON OPERATIONS
Cost-based competition (note: cost-leadership)
Relies on efficiencies, scale, waste minimisation, use of technologies
Government policies and legal regulation (Compliance or regulatory
costs)
• Health and safety – products and businesses based on
• Workplace Health and Safety (WHS), environmental laws,
transport laws, anti-discrimination laws, fair trading laws
(including implied conditions such as fitness for purpose and
merchantable quality)
• Multigate Medical Supplies
• http://www.multigate.com.au/about/videos-and-corporateprofile
Environmental sustainability
• Principles of ESD
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INFLUENCES ON OPERATIONS
Corporate social responsibility (CSR)
• The business dilemma:
• What is the purpose of business?
• What is the nature and effect of compliance?
• The difference between legal compliance and
ethical responsibility – Including
environmental
sustainability and social responsibility
• Case study:
• Westpac vs Cootes Transport
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OPERATIONS PROCESSES
An overview of the processes
Inputsintothe
transformationprocess:
WHATINPUTS
• Labour,rawmaterials,
energy,information,
technologies
• Transformedresources
• Material,information
customers
• Transformingresources
• Humanresources,facilities
Operationsprocesses
andtransformingfactors
• Influenceofthe4V’s
• Sequencingandscheduling
processingactivities
• Roleoftechnologyin
processing
• Plantandofficelayout
• Monitoring,controllingand
improvingprocesses
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Outputs:
Finalgoodsandservicesthat
aresoldtomarkets:
(intermediateandconsumer)
• Customerservice
• Warranties
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OPERATIONS PROCESSES
A: Inputs
1. Transformed resources
2.
• Materials, information, customers
Transforming resources
•
Human resources, facilities – agents of transformation/change/value-adding
B: Transformation processes
The influence of the 4 V’s:
•
•
•
•
Volume: business issue – how much to make?, capacity management
Variety – a mature product strategy, ‘mix flexibility’, diversification
Variation in demand – analytics (KPIs) and demand predictions
Visibility (customer contact) – what, if any, influence customers have
on transformations processes – responsiveness of processing
Case study: KFC, Vodafone
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2013 HSC
17 Which of the following combinations would result
in the lowest production cost per unit?
(A)Limited customer contact, limited product variety
and low volume
(B) Limited customer contact, limited product variety
and high volume
(C)Extensive customer contact, extensive product
variety and low volume
(D)Extensive customer contact, extensive product
variety and high volume
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OPERATIONS PROCESSES
Sequencing (what order)
and scheduling (when and for how long):
• Process and resource management tools
• Gantt charts, critical path analysis (CPA)
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2013 HSC
8 What does a critical path identify?
(A)The lowest cost path to complete all tasks in a
project
(B) The highest cost path to complete all tasks in a
project
(C)The longest time required to complete all tasks in
a project
(D)The shortest time required to complete all tasks in
a project
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OPERATIONS PROCESSES
Technology
• Production (manufacturing) technologies: CIM, CAD, CAM, Robotics
• Service technologies: ICTs, laptop and desktop computers and
associated software. Note technologies are used in a huge range of
service industries:
• Professional: medical, engineering, architecture
• Trades: plumbing (optical fibre technology), carpentry (laser cutting)
Task design
• Overlaps with HR: analysing what needs to be done (creates a
job/duty statement), leads to an analysis of the desired skills, abilities,
attributes, qualifications and experiences
Process layout
• (Aside: note the bias of the syllabus towards goods manufacture)
• Process layout is a reference to plant
• There are various forms of layout relevant to production: process
(functional layout), product (for mass production of standardised
goods), fixed position layout
• Services layout includes office layout and how services are conducted
and carried out
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OPERATIONS PROCESSES
C: Outputs
• Customer service
• Operations processes - implications
• Outsourcing
• Warranties
• A quantitative (measurable) assessment of operations
processes
• Effect on inputs and processes
• Case study:
• The recall of 8.1 million Toyotas following slipping mats and
sticky accelerators being linked to 19 accident deaths. Honda
recalling 437,000 vehicles due to faulty airbags.
• See also: VW (Skoda and Audi)
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2012 HSC AND 2014 HSC
2 A factory manager is deciding the best order in which to complete tasks. Which
operations process is being carried out?
(A)
(B)
(C)
(D)
Monitoring
Scheduling
Sequencing
Task design
18
A Gantt chart for Sam’s Chocolate Shop is shown.
Jan
Feb
March
April
May
June
Obtain lease
and refit shop
Purchase stock
Select and train
staff
Advertising
campaign
Commence
trading
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2012 HSC AND 2013 HSC
7 In winter, the number of beach lifeguards employed by a local
council is reduced. What has influenced the transformation process
in this situation?
(A)
(B)
(C)
(D)
Variation in demand
Variation in visibility
Variety
Volume
14 Which of the following includes two examples of transforming
resources?
(A)
(B)
(C)
(D)
Materials and energy
Information and customers
Task design and technology
Human resources and facilities
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OPERATIONS STRATEGIES
Performance objectives (all quantifiable)
• Quality
• design quality, service quality and consistency, quality standards and conformance
rates
• Speed
• The notion of ‘lead times’ is relevant. This implies supply chain management controls,
flexible processing (in response to demand) and reduction of processing and delivery
bottlenecks
• Dependability
• Flexibility
• Market responsiveness and service customisability
• Customisation
• Both goods and service providers aim to standardise their operations as far as
possible. The proportion of standardisation is linked with cost savings
• Cost
• Cost leadership (expense minimisation) and therefore low-cost delivery of product to
markets is most likely to maximise profitability
New product or service design and development
• Involves research and development (R&D), product design,
product/market testing, product refinement/adjustment, delivery to
market and ongoing adaptation.
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6/9/2015
2014 HSC
5 Which of the following are all examples of operations performance objectives?
(A)
(B)
(C)
(D)
Choice, flexibility, profit, speed
Cost, dependability, quality, speed
Customisation, flexibility, profit, quality
Choice, customisation, dependability, profit
11 An Australian business sells its Bonza Pies in both Australia and China. Bonza Pies
sold in China are made to a different recipe.
What is this an example of?
(A)
(B)
(C)
(D)
Customisation and hedging
Global pricing and standardisation
Customisation and global branding
Global branding and standardisation
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OPERATIONS STRATEGIES
Supply chain management (SCM)
• Logistics (note in order of processes this should be
dealt with LAST)
• Involves distribution (channels)
• Involves transportation modes
• The role, if any, or warehousing
• E-commerce
• E-procurement (B2B)
• E-tailing (B2C)
• Global sourcing
• Global web
• Make-or-buy and vertical integration
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2012 AND 2013 HSC
11 Which of the following is an essential aspect of logistics?
(A)
(B)
(C)
(D)
Undertaking a skills audit
Checking the quality of all output
Materials handling and packaging
The creation of a budget for new machinery
5 A company’s policy is to purchase from lowest cost suppliers
regardless of their location.
What is this policy an example of?
(A)
(B)
(C)
(D)
Global sourcing
Global branding
Economies of scale
Research and development
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OPERATIONS STRATEGIES
Outsourcing (the most underrated strategy and most widely used)
• Advantages
•
•
•
•
•
•
Cost saving/efficiency
Increased ability to process – functional/capacity increases = growth
Flexibility
Through Service Level Agreements (SLA’s) – specified standards
Access to process/knowledge experts
Strategic benefits (eg British Airways ticketing with WNS)
• Disadvantages
•
•
•
•
•
•
Possible loss of privacy
Cost of outsourcing
Negotiating SLA’s
Loss of control of business processes
Cost of organisational redesign
Loss of corporate memory
Case studies: Mattel and Apple – breaches to SLA’s..?
Insourcing trend - cosourcing
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OPERATIONS STRATEGIES
Inventory management (stock management)
• Advantages and disadvantages of holding stock
• Warehousing and attendant costs (leasing, rent or interest,
security, insurance, refigeration/air temp and quality controls,
logistics management)
• JIT and the interaction between the holding of stock and
distributing stock (they are NOT mutually exclusive)
• LIFO (last-in-first-out), FIFO (first-in-first-out)
• Inventory costing techniques
• JIT (just-in-time)
• Assumptions: Periodic period (rather than perpetual), matching
principle is CRUCIAL
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2013 AND 2014 HSC
18 A business is experiencing increasing costs for its stock over time. It is
seeking to maximise its profit for the current financial period.
Which strategy should it adopt to value its inventory?
(A)
(B)
(C)
(D)
First in first out
Just in case
Just in time
Last in first out
7 A car assembly plant had to shut down operations for a day because
tyres had not been delivered.
What inventory management strategy at the car assembly plant may have
caused this situation?
(A) Just-in-case
(B) Just-in-time
(C) First-in-first-out
(D) Last-in-first-out
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OPERATIONS STRATEGIES
Quality management
• International quality principles (ISOs)
• Dynamic NOT static processes
• TQM: Product excellence and Sigma Six: Process excellence
• Both are old…and new again
• Control (QC)
• Predetermined quality - random sampling
• Assurance (QA)
• Pre-determined quality standards
• International Standards Organisation (ISOs)
• Improvement (QI)
• Continuous not discontinuous
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OPERATIONS STRATEGIES
Overcoming resistance to change
• Financial costs*
•
•
•
•
purchasing new equipment
redundancy payments
retraining
reorganising plant layout
• Inertia
• Psychological resistance to change
• Case studies
• David Jones and e-commerce, News Limited and Fairfax
* Note the implied bias towards manufacturing
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2014 HSC
Question 21 (10 marks)
(a)Explain why managers may be resistant to
change. 4
(b)Analyse the use of sequencing and scheduling to
improve business operations.
6
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OPERATIONS STRATEGIES
• Global factors
• Global sourcing:
• K-Mart and Bunnings
• Testrite
• Economies of scale:
• CostCo, Walmart, Aldi
• Scanning and learning:
• Ladbrokes and Tom Waterhouse
• Research and development (R&D)
• Case study: CSL
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2014 HSC
15 What is the most likely result of a business
achieving economies of scale?
(A) Greater flexibility
(B) Higher sales price per unit
(C) Greater efficiencies in production
(D) Higher average costs of production
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HSC 2013 - Q23 (9 MARKS)
Casey owns and operates an independent discount f
uel and convenience store.
(a)Outline ONE way that ecommerce could assist Casey with supply chain
management. 2
(b)Explain ONE performance objective that is relevant
to the operations function of the business. 3
(c) Is supply chain management important to Casey’s
business? Justify your answer. 4
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HSC 2012 –REPORT
Question 25 (20 marks)
Sunshine Fruit Juices employs 100 people in its Queensland
factory and supplies juice to large supermarket chains in Asia
and North America. Customers have recently complained that
the product has been damaged and bottles have been
wrongly labelled. An increase in industrial disputes has also
occurred due to a number of recent workplace accidents and
demands from employees for higher wages.
You have been employed by Sunshine Fruit Juices to prepare a
report for management on the issues outlined above. In your
report, recommend strategies for human resources and
operations that the firm could implement to improve its business
performance.
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2014 HSC REPORT
Question 25 (20 marks)
Emu Uniform Manufacturers Pty Ltd are a successful business based in NSW. They
currently supply a range of school, sport and work uniforms to a large number of
customers throughout Australia. They are known for their outstanding customer
service and high quality products.
Sales have been increasing for many years and they have recently received a large
long-term contract to supply uniforms to a major company.
This will require them to significantly expand their output. To do this, the business will
have to outsource overseas or spend $5 million to expand its existing factory in NSW.
You have been hired as a consultant to write a report to the management. In your
report:
• recommend a source of finance for the factory expansion
• discuss outsourcing overseas compared with the factory expansion
• explain the global factors that need to be considered if they decide to use
outsourcing as an operations strategy.
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HSC QUESTIONS - SECTION IV
20 marks
Attempt either Question 27 or Question 28
Allow about 35 minutes for this section
Answer the question in a SEPARATE writing booklet. Extra writing booklets are available.
In your answer you will be assessed on how well you:
• demonstrate knowledge and understanding relevant to the question
• apply relevant business case study/studies and contemporary business issues
• communicate using relevant business terminology and concepts
• present a sustained, logical and cohesive response
Question 27 (20 marks)
How does an understanding of the influences on operations contribute to business
success?
HSC 2013 Question 27 (20 marks)
Assess strategies that management may use to respond to influences on operations.
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