Chapter 3
Personal use only
Operations
Processes
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
In the operations process resources or inputs are either transformed, or transform something
else, into outputs called products or services.
THINK, INK, PAIR , SHARE
Work with your learning partner to discover what you already know about this
process. Jot down your thoughts as to what resources would be needed to:
a. Transform a customer in terms of one of the following: a haircut, root canal
treatment at a dentist or a theatre experience.
b. Transform information such as making a bank deposit or a newspaper
reporting on daily events.
c. Transform materials such as manufacturing a Holden car or an iPhone.
‘Transformation’ means
a thorough or dramatic
change in form or
appearance.
‘Input’ means what is put
into an operations process.
‘Output’ means what
comes out of an operations
process.
39
Literacy Development
Originally the Latin prefix ‘trans’ meant across, hence ‘transport’ or ‘transfer’
mean to carry across. In the concept of transformation, ‘trans’ has the meaning
of change, hence: changing the form (of inputs). You are also aware of the term
being used in relation to electricity and toys. Discuss the connection with your
learning partner(s).
Inputs
In the operations process inputs of resources, such as skilled labour, machinery, raw materials
and/or component parts transform customers (as in the haircut example); transform
information (as in the newspaper example) or transform materials (as in the iPhone example).
Transformed resources (customers, information, materials )
Transforming a customer is possibly something you have not often considered. But when you
get your hair styled your physical appearance is transformed. Indeed, were you to get cosmetic
surgery your appearance might be dramatically changed!
We have changed the
sequence for transformed
resources from
information, materials,
customers in the syllabus
because we thought
customers would be easier
to initially understand.
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
‘Appearance’ means the There are also businesses concerned with changing a customer’s physiological condition. These
businesses would include hospitals, dentists, surgeons, fitness instructors and gymnasiums.
way someone looks.
Other businesses transform a customer’s psychological condition. For example, Kayne West, the
‘Psychological condition’ rapper, owns a business that makes his customers feel differently. So, too, do theatres, cinemas,
relates to the mental or and indeed, theme parks such as Sea World, Movie World and Wet and Wild.
emotional condition of
a person.
‘Physiological condition’
means the way in which a
bodily part functions.
These are not the only types of businesses concerned with transforming customers. Buses,
trains, taxis and planes change the location of their customers. Other businesses, such as hotels,
bed and breakfasts and motels accommodate customers. There is a very wide range of service
businesses that transform customers.
The input-transformation-output process
INPUTS
OUTPUTS
40
Transforming
Patient
Employees, Facilities
INPUTS
OUTPUTS
Transformed
Building
LABOUR , Materials
INPUTS
OUTPUTS
Transformed
RedPeg Publishing HSC Business Studies
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
THINK, INK, PAIR , SHARE
Jot down a list of businesses in your local area that primarily transform their
customers. Compare your list with your learning partner and explain why you
consider it is the customer that is being transformed.
Many Australian businesses transform information. This is because the Australian economy has
changed over the last few decades. There is an increasing emphasis on the tertiary, quaternary
and quinary sectors of the economy, and a decreasing emphasis on manufacturing. A large
number of manufacturing businesses have relocated to low-wage countries such as Vietnam,
Bangladesh and China. Businesses transforming information do so by storing the information,
changing the location of the information or changing the properties of the information.
Google is typical of the data storage businesses. Millions of people access this information
every day. Google earns revenue by providing
advertisers access to the people accessing the
information.
41
Other businesses, such as Vodafone and
Telstra, change the location of the information.
When you chat to someone on the phone, you
are changing the location of the information
you are passing on to that person.
THINK, INK, PAIR , SHARE
Jot down any ways the location of information can be changed, other than by
phone. List any businesses you can think of that do this sort of transformation.
Compare your work with your learning partner.
Businesses such as accounting firms transform information by changing the properties of the
information. Accounting businesses, for example, change raw data into reports such as the
Revenue Statement and Balance Sheet.
Usually, when we think about the operations process, we think of a factory manufacturing
products such as shoes, cans of drinks, clothing and electronics by transforming materials. The
operations process that transforms materials does so by changing the physical properties of the
material inputs. When a can of soft drink is manufactured, materials, such as an empty can,
sugar, water and syrup are transformed in the operations process into a can of carbonated soft
drink. Most manufacturing processes change the physical properties of the material inputs.
Getting Better Results
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
Sometimes the operations process changes the physical location of the materials. When you post
a parcel to a friend in Melbourne, Australia Post moves the parcel from your address to your
friend’s. The Australia Post operations process is changing the location of the materials input.
Retail businesses such as Coles and Woolworths change the possession of material inputs. The
operations process in retail stores is concerned with changing the possession of material inputs
such as, for example, a can of Edgell peas from the Edgell factory to your kitchen cupboard.
It is important to realise that the operations process is usually concerned with transforming a
mixture of material resources, information resources and customer resources.
Transforming resources (human resources, facilities)
Two of the inputs to the transformation process are different to the rest. This is because human
resources and facilities do the transforming rather than being transformed. Human resources
refer to the people in the business. Sometimes these people are called employees or staff, but the
syllabus refers to them as human resources and we will generally use that terminology.
42
All human resources in the transformation process are important, even though their skills may
be very different. The Kmart employee, for example, who fails to respond properly to a customer
request, may cause the customer not to return to the business. This is why Kmart management
takes human resource training so seriously. Imagine too, a factory assembly worker who
loses concentration while assembling a part for, say, a mobile phone and does the assembly
incorrectly. The phones these parts go into will not work. Customers will be upset and it will be
expensive to replace the phones.
In other transformation processes the facilities are transforming resources. Facilities refer to
things like the buildings and the machinery. The Coca-Cola factory at Northmead is an example
of a business where the facilities are the transforming resources. The canning line is completely
automated. Empty cans are automatically unloaded from trucks onto the canning line conveyor
belt. The cans are washed, filled and sealed; each can is checked to ensure it is filled correctly,
packed into boxes and stacked, by machines. Each machine is controlled by a programmable
logic centre (PLC) which, in turn, is controlled by the central computer. The human resources
are concerned with the maintenance of the facilities rather than with transforming inputs of raw
materials and component parts into beverages.
THINK, INK, PAIR , SHARE
Think of a business you are familiar with. It may be a sandwich outlet where you
buy your lunch or a fast-food business where you work. Jot down your thoughts
on the resources that actually do the transforming. Share your thoughts with
your learning partner.
RedPeg Publishing HSC Business Studies
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
THINK, INK, PAIR , SHARE
Work in pairs
Uniqlo is a fascinating business. It is one of the fastest growing global
businesses and could be an excellent case study for a variety of topics. Go to
www.uniqlo.com and use the following instructions to research this business.
1. View the introductory slide show to gain an overview or insight into this
business.
2. Click on company on the top navigational bar and then on company
information when the subsidiary navigational bar appears.
3. Then browse
• Business overview, and
• Management policy
4. When you click on Business Overview you have the option of viewing
Business model and Business strategy. Click on Business model.
43
a) List THREE features of the Uniqlo business model.
b) How do the managers of this business differentiate it from its competitors?
c) Pay particular attention to Production Department (Quality and Production
control).
• the 70 partner companies referred to are Uniqlo’s outsourced
manufacturing businesses
• go to the section labeled Partner factories and list where this outsourcing
occurs. Why do you think, Uniqlo has chosen factories in these countries?
5. Now, from what you have read, and with the aid of the diagram on planning,
production, sales create a transformation process diagram for Uniqlo.
6. Now click on Management policy and then The Uniqlo System of Product
and Safety Control. Browse the section and when you study quality
assurance a little later in this topic return to this section and use it as an
illustration.
7. Browse the product lines (either men or women) and decide, through
discussion with your partner, the characteristics of the people who would
purchase these products. List three.
You might also note that the characteristics of the people who buy these
products relate to the characteristics of the fastest growing market in the
world, the middle class in China.
8. Finally, compare the business strategy employed by Uniqlo with that of
Kmart. List a similarity. List a difference.
Getting Better Results
Case Study
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
Case Study
Using an Australian-based global business to illustrate coordination
of the marketing and operations function and the transforming
resources (human resources and facilities): The Wiggles Pty Ltd.
Zeitgeist means a
defining spirit or mood
of a particular period of
history, as shown by the
ideas and beliefs of the
time.
44
It would be very surprising if you were not aware of The Wiggles. They dominate
market share in the preschool entertainment market. However, it is likely you
are not aware of just how significant they are in this marketplace. Since the
establishment of the business they have sold over 23 million videos and DVDs, 6
million books and 7 million CDs. They average 1 million ticket sales to concerts
each year and once sold out 12 shows at The Theater at Madison Square Garden.
There are Wiggles theme parks, play centres and television programs and they
sell their music, drama and consumer products in 80 countries. The Wiggles have
revolutionised preschool entertainment. The managers correctly maintain The
Wiggles are ‘so much a part of the zeitgeist’.
Image 1 - Courtesy of The Wiggles: The Wiggles Big, Big Show in the Round - Sydney, 2009
RedPeg Publishing HSC Business Studies
Case Study
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
The task of coordinating marketing, operations, finance and human resources in a
business like The Wiggles is challenging.
Paul Field, Managing Director - The
Wiggles Productions, has the coordinating
role. The core of this role relates to
decision-making on such things as:
which products will best meet the needs
of customers, how the production of
these products will be financed, the
human resource skills that will be needed
to develop them and the targets and
deadlines that relate to the operations
function.
It is surprising that so many key
people in this business have marketing
qualifications and backgrounds. Marketing
is the business function concerned with
finding out the needs of customers and
developing products to meet those needs
more effectively than competing businesses. And remember The Wiggles are
competing in a global marketplace. Perhaps the key reason the business continues
to grow in value is that the managers understand the importance of the product
life cycle.
The Wiggles have a number of products in the maturity phase of the product
life cycle. Typical of these products are Dorothy the Dinosaur shows and The
Wiggles concerts.
Products like these
are called cash
cows, in the sense
that they generate
significant amounts
of cash without the
need to be strongly
promoted.
The Dorothy the
Dinosaur show, for
example, has been
developed into
one-hour, halfhour and quarter-hour products. Variations of this show are in almost continuous
production. There are frequent tours of regional centres in Australia as well as
many capital city shows. Most of the children going to these shows know most
of the songs and sing along with the actors. It is important to remember that the
maturity phase does not imply a time period (Weetbix, for example, has been in
this phase for more than 50 years).
45
Image 2 - Courtesy of
The Wiggles: Photo shoot
for ‘You Make Me Feel Like
Dancing’
Image 3 - Courtesy of
The Wiggles: The 2009
Wiggles Big Show in
Sydney
Getting Better Results
Case Study
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
2011 was the 20th
anniversary of the founding
of The Wiggles
Image 4 - Courtesy of
The Wiggles: Filming
‘Ukulele Baby!’
46
Image 5 - Courtesy of
The Wiggles: Live studio
audience at a shoot for
‘Dorothy the Dinosaur’s
Rockin’ Christmas’
Other products, such as The Kingdom of Paramithi, are in the growth phase of the
product life cycle. The Kingdom of Paramithi was developed initially for television.
It is a song, dance, story theme that preschool children love because it involves
dressing up, castles and fairy tales. Of course this program generates a lot of
consumer products such as crowns, capes and other clothing children of this age
use to ‘dress up’. The product was developed with a focus on narration so that
dubbing into foreign languages could be more effective. It is products like this that
generate the growth in revenues.
The most difficult phase of the product life cycle is the establishment phase, as
establishing new products in the
marketplace tends to be very
expensive and many new products
fail. Often managers make the
mistake of not trying. This is
certainly not the case with The
Wiggles’ management. Currently
they are working, for example,
on The Wiggles subscription
television in a partnership with
Sony. A great deal of content has
been accumulated over the 20
years the business has existed. The
Wiggles subscription television
provides the opportunity to effectively use that content.
The task of the operations manager in this business is incredibly challenging. The
task is to ensure that the transforming resources (facilities and human resources)
effectively create the products developed by the marketing function so that
RedPeg Publishing HSC Business Studies
Case Study
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
everything happens on
time and with the highest
levels of consistency, or
quality. The operations
manager is Kate Alexander
and one of her strengths
is a high level of skill in
organisation.
The transforming facilities
at The Wiggles’ production
centre are ‘state of the art’
and central to the overall
transformation process. The facilities consist of things such as a recording studio,
sound stage with sophisticated lighting, green and blue screen capabilities to
allow for compositing (combining separate visual elements together), make up
and costume areas, a green room, post production suite and so on. The facilities are
capable of producing high definition video productions of the highest standards.
Image 6 - Courtesy of
The Wiggles: The Wiggles’
production facilities
47
Image 7 - Courtesy of The Wiggles: Dorothy the Dinosaur in front of a blue screen
Getting Better Results
Case Study
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
The transforming human resources are diverse. They include actors, dancers,
singers, choreographers, composers, sound technicians, camera operators,
video editors and so on. In addition, there are people who oversee the sale
of consumer products and people employed as road crew to transport and
assemble the equipment needed in a range of venues.
The following is a simplified example of the operations process using the
standard operations symbols for a product such as The Kingdom of Paramithi.
Beginning of the process. The creative team
has developed the product specifications song and dance routines have been determined
and a detailed script has been written.
Product specifications sent to operations
manager
48
Dancers, singers and actors employed
Practise songs, choreography, etc
Quality check to ensure high standard
Songs and music recorded in recording studio
Video recording - songs mimed to previously
recorded music
Video editing
RedPeg Publishing HSC Business Studies
Case Study
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
Remember this is a much simplified flow process
chart designed to show you the general idea. The
actual process is much more complex. However
the core of the operations function at The Wiggles
is the use of transforming resources (facilities and
human resources) to create products. In this sense
the operations process is very different from a
typical factory where inputs of raw materials and
component parts are assembled in the operations
process.
Image 8 - Courtesy of
The Wiggles: The Hot Potato
Studios facilities are also
hired to other users
Group Work
Assume Paul Field has made one of the few catastrophic mistakes of his career
and appointed you and your group to be the operations managers of a proposed
Dorothy the Dinosaur tour of regional shopping centres in NSW. The two main
characters in your 15 minute show are Dorothy the Dinosaur and Captain
Feathersword. Do some research to find out about these characters and a typical
song and dance routine for the characters.
49
1. Decide on 10 regional centres in NSW that would be suitable in terms of
demographics and numbers.
2. Develop a 15 minute product with a narrator, the characters and an outline of
what they will do and when they will sing, dance and talk to the audience.
3. Develop ONE original song for either Captain Feathersword or Dorothy.
Remember that your audience consists of preschool children who like
to sing along (so it is important to have a chorus) and jump out of their
seats and do things. (A bit like year 12!). Another hint is that the music
of Gilbert and Sullivan is out of copyright so you can put your words
to the music of such productions as the Pirates of Penzance. You can
easily download this sort of music.
Image 9 - Courtesy of
The Wiggles: Paul Field,
Managing Director - The
Wiggles Productions.
4. Audition members of the group so your singers and dancers are the
most talented people in the group.
5. Appoint some people to innovate props and costumes.
6. Put the whole show together.
7. The following period have each group present their 15 minute show.
8. Vote on which group is likely to dominate the marketplace and
which group is doomed to failure.
Getting Better Results
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
Transformation processes
There is a great deal of similarity in operations processes. In all operations processes inputs of
resources are transformed into outputs called products or services. But there are also differences.
The differences are in terms of the 4Vs: volume, variety, variation in demand and visibility.
The influence of volume
The most effective way to ensure low costs is to make a large amount of the same thing. A
business such as Domino’s Pizza, for example, manufactures a pizza more cheaply than a
restaurant that occasionally serves a pizza. There are several reasons for this, but the most
important are the specialised facilities and the way the staff are trained to do the same
thing over and over again. Every task has been carefully analysed to ensure it is
carried out in the most cost-effective way.
The low unit cost of a Domino pizza is the result of several factors. The tasks
people in the business do are repeated. Employees become very competent
in carrying them out. Standard procedures have been developed for every
task so the particular task is carried out in the most efficient way. Highly
specialised equipment such as continuous operation ovens has been
developed. The high cost of this specialised equipment is spread with
output so, the greater the volume, the lower the cost of each unit.
The influence of variety
Sometimes customers want variety or flexibility rather than the lowest
cost. Imagine, for example, the flexibility required in the operations
process of a reception centre. The managers of a restaurant usually have
a set menu to limit the variation and customers understand and accept
the limitations. But the reception centre may have to cater for weddings,
graduation functions, christenings, birthday parties and reunions. There will be
enormous variations in things like the type of music, menus, level of service and
the quality of the surroundings customers require. The cost of providing the variation
will be considerably greater than a standardised service in a restaurant or a hotel.
THINK, INK, PAIR , SHARE
Think about transport in your local area and imagine you want to go from a
particular point to another point. Jot down any ideas you have on what the
standardised low-variety service options would be. Now try and think of a highvariety service and jot down your thoughts. What would you expect from the
high-variety service? What difference in costs and prices would you expect?
RedPeg Publishing HSC Business Studies
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
The influence of variation
Are you familiar with the range of businesses providing accommodation at Thredbo? Thredbo
is a mountain resort primarily catering for snow skiing during the winter season. During that
season every lodge and hotel is full to its capacity. During the summer accommodation is often
at 20%, or less, of capacity. Each lodge or hotel will have totally different labour requirements
in winter and summer. It will be difficult to predict the demand in the summer. Consequently,
there will be additional costs of recruiting staff if the prediction is wrong, as well as the problem
of additional costs of overtime. It is much easier to plan if demand is relatively stable.
Case Study
Using a global business to explain the importance of variation: Pacific
Brands
Pacific Brands’ half-year profit for June to December 2010 was a loss of $166
million. Pacific Brands is an Australian clothing and textile manufacturer. The
business has a license to manufacture brands such as Yakka workwear, Sheridan
and Perri bedding and Bonds underwear. The business has a high level of debt
because purchasing the right to manufacture and sell some of these brands in
the Australian market was expensive. The Yakka work wear brand, for example,
cost Pacific Brands $250 million.
Initially, the focus was on manufacturing in Australia and a great deal of
consideration was given to variation. The Bonds factory at Wentworthville
(a Sydney suburb) was an example of an operations process with a focus on
variation. The factory had spent some $2 million to revamp the machines so that
anything from 500 to 50 000 garments could be manufactured.
Bonds Underwear is regarded as a fashion item rather than a generic garment.
The designers are constantly trying new designs and new colours. There is a
risk in marketing a new design. The market research may get an encouraging
response for a purple garment. But no one is really certain until the actual sales
figures come in. This was the advantage of variation in the Wentworthville
factory. The facility had the advantage of trying the new design with a run of 500
and had the capacity to ramp up the production to 50 000 if sales went well. The
300 employees were multi-skilled and could quickly move from manufacturing
to packing and various other activities when this was required.
51
‘Generic’ means belonging
to a large group or class
of objects. It has evolved
from the Latin word
‘genus’ meaning class or
classification.
Once the operations function was sent to China, the unit cost for each garment
was lower but the flexibility was lost. Every production run had to be large to
cover the increased transportation costs. In addition, the warehousing costs
were significant because large volumes of each style of garment had to be
imported at the one time. It was uneconomic to try small runs of 500 garments
to test the market.
Getting Better Results
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
Research activity
When the previous case study was written in early 2011 the share price for
Pacific Brands was 80 cents a share. If the move to China is successful, this will
be reflected in an increase in the share price. If variation is more important than
lower unit costs, the share price will fall even further. Check out the price of
Pacific Brands’ shares at the time you are reading this. Go to the Pacific Brands
website and also checkout this iconic Australian clothing manufacturer.
The influence of visibility (customer contact)
52
Businesses like Myer and the Athlete’s Foot offer their customers a product that we will call a
‘shopping experience’. If you want a pair of shoes you can go to the Athlete’s Foot, sit down, and
a customer service employee will measure your foot and fit you with the size that best meets
your needs. The operations process at the Athlete’s Foot is completely visible.
On the other hand you could go to www.shoes.com and order the same pair of shoes from
a very comprehensive on-line catalogue, make your purchase of the shoes and have them
delivered to your door a week later. In this case the influence
of customer contact is more limited; the influence of visibility
is less.
Even though the product is the same, the cost of the
operations process in the two shoe examples will be very
different. The Athlete’s Foot employees will have extensive
training to ensure their customer contact skills are strong.
The training is expensive. Another concern is customer
dissatisfaction. If the store is busy, the customer service
assistant might not be able to provide high levels of customer
assistance to every customer and some may walk out if they
are not served in what they regard as a reasonable time and
others might think the employee is discourteous. This is why
high-visibility operations are relatively high-cost operations.
The www.shoes.com operations function is able to operate
more like a factory. Customer contact skills are not required
and this very high cost of training is avoided. The operations
process can be standardised to ensure the greatest productivity
and efficiency. The time lag between the customer ordering
the product and the dispatch of the product is not minutes but
rather hours or days. The on-line business can centralise its
operations function in low-cost areas, while the Athlete’s Foot
pays high rents in shopping malls near its customers.
RedPeg Publishing HSC Business Studies
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
THINK, INK, PAIR , SHARE
Can you think of any businesses that have a mix of high- and low-visibility
processes? In these businesses some parts of the operations process are totally
‘visible’ to the customer and other parts are not seen at all. Jot down any you can
think of and explain to your learning partner why you think they have a mix of
visibility.
Group Work
•Select a large Australian business that transforms resources (materials,
information and/or customers). Obviously if you know someone who works in
a business, this person would be a valuable resource. The aim of this task is to
find out about the transformation process in your selected business.
53
•Allocate tasks to each group member, for example researching suitable images
and a brief overview of the business, developing a flow chart of the operations
process, developing a presentation using Activinspire software for the IWB or a
Powerpoint presentation, constructing a worksheet for the class.
Sequencing and scheduling
It is worth starting this section with a thinking activity.
THINK, INK, PAIR , SHARE
You are the head nurse at the Westmead Children’s Hospital. There is a waiting
room with thirty sick children. The parents of the children are totally focused on
their own child and want the child to be seen by a doctor immediately. You have
six emergency room doctors available and you cannot get any more. How will
you deal with this situation? Jot down your thoughts and discuss them with your
learning partner.
Research activity
Research the meaning of triage and how the process is used in hospitals and
emergencies.
Getting Better Results
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
It should be obvious that all the children cannot be attended to at once. The operations manager
needs to make decisions on the order in which the work will be done. This decision-making
activity is called sequencing. Sequencing is the planning activity that decides on the order in
which the work is to be performed.
Operations managers decide how they will prioritise the work. In your thinking activity it is
likely you made your decision on the basis of criteria such as how life-threatening the child’s
condition was, and you sent the children with the most critical conditions to the doctors first.
Operations managers also often sequence work on the basis of customer priority, where the
most important customers have their work processed first, regardless of where they are in the
queue. Of course customer priority sequencing is great for the important customers, but it may
well lead to dissatisfaction of other customers. The overall operations process may suffer if
workflows are disrupted by pushing an urgent order to the top of the queue. For this reason, the
most common way of sequencing is on the basis of due date.
54
THINK, INK, PAIR , SHARE
Jot down how you use sequencing to organise your homework, assessment tasks
and other commitments.
When work is sequenced on the basis of due date, it means the sequencing is always according
to when the work is due to be finished, regardless of the size of the order or the importance of
the customer. Each customer is told up-front when the finished work will be available. But it
does depend on the nature of the operations process. A printing business, for example, may find
costs are lower if different types of work, such as magazines, are grouped together.
Scheduling is closely associated with sequencing. Scheduling is a term used in operations
planning to indicate a detailed timetable of what work is to be done, when it is to be done and
where it is to be done. You are very familiar with this idea because your school timetable is a
schedule. The timetable tells you what activities will take place during the day, when they will
take place, and who will be involved in those activities.
Scheduling can be quite complex in a large business because it usually involves matching things
like employee skills, machine capacity and completion times. Imagine some of the difficulties
faced by a very large commercial printer in scheduling the work. Printing jobs are constantly
received. The printing machines have different capacities, such as the ability to print colour or
black and white at different speeds, and customers are promised completion times.
There are two common approaches to scheduling printing jobs like this. The first is called
forward scheduling where the work is scheduled to start as soon as it is received. The second
approach is called backward scheduling. In this case the job is started just in time to meet the
delivery time. If the work will take four hours to complete and has been promised for 5 pm then
RedPeg Publishing HSC Business Studies
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
the job will be started at 1 pm. The choice of backward or forward scheduling depends on the
circumstances in the business.
Gantt charts, critical path analysis
The most common method of scheduling is a Gantt chart. A Gantt chart represents an activity
as a bar on a chart. The start and finish times for an activity (and often the progress of an
activity) can be clearly shown. The great strength of the Gantt chart is the way it effectively
communicates the progress of activities to employees. Everyone knows what needs to be done
because the chart is easy to understand and has an excellent visual impact.
The following Gantt chart illustrates a week’s work for our imaginary printer.
Monday
Tuesday
More example of
Gantt Charts are
available from our website:
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Wednesday Thursday
Friday
Customer places order
Graphic designer prepares
material for printing
Customer approves final copy
Copies printed
Deliver finished product to
customer
While the Gantt chart is the simplest technique to schedule a project such as building a house,
for example, the Gantt chart has limitations when the project becomes more complex. When
this occurs critical path analysis may deal with complexity more effectively. Imagine, for
example, that instead of building a house we are scheduling the activities for a major housing
development of four hundred houses. The plasterers can only start work after the roof and walls
have been completed and the painters can only start after the plasterwork has been completed.
Research activity
Research the life and legacy of Henry Gantt (1861-1919), the American
management consultant.
Gantt charts can help you complete an assessment task. The chart enables you to take a big task
and chunk it down into manageable steps. Go to http//docs.google.com, register your email and
browse the Google template gallery. The Gantt chart template can be used effectively for a whole
range of tasks such as exams, presentations and assessments. Another important planning tool
for your HSC is the Google Calendar template. You can use this to backward plan a task. Put in
the finishing date and then plan the steps that need to be done to get the task done by that date.
Getting Better Results
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The Calendar also has an important reminder feature. The Google Wonder wheel is also a great
tool to help you brainstorm creative tasks.
Large projects usually involve a network. A network is a group or system of interconnected
people or things. In our previous example of a housing project, the interconnected people
include builders, carpenters, electricians, plumbers, roofers and so on. Planning a project
network requires a more complex planning tool, such as critical path analysis. Critical path
analysis is concerned with the longest sequence of activities through a project network. If there
is any delay in these activities the whole project will be delayed. This is why it is called the
critical path.
THINK, INK, PAIR , SHARE
56
Imagine you were the engineer in charge of Sydney’s long-awaited NW rail line
where it had to be finished in two years or there would be financial penalties
that would significantly reduce your profit. Can you think of an event that might
delay the whole project? Jot down any ideas and discuss them with your learning
partner.
Technology, task design and process layout
Perhaps the most significant change in operations management over the last couple of decades
is the way technology is used in the transformation process.
The machines and equipment that actually create or deliver the
product are called process technology. Process technology has a
very significant effect on the operations performance objectives
of quality, speed, dependability, flexibility, customisation and
cost. We will have a look at these ideas in the next section.
The process technology that has had the largest effect on the
transformation process is computerisation. A simple example
is the operations process at Coca-Cola’s canning line at their
Northmead factory. Process technology is used to unload and
wash the empty cans, fill and seal the cans, quality check and
load the cans into boxes before the boxes are stacked. The central
computer, with the aid of programmable logic centres on each of
the processing machines, instructs the operation of the process.
People are there to supervise and maintain the machines.
The process technology at Coca-Cola is a form of robotics.
Robotics refers to the design and construction of machines that
automate a task. Sony, for example, uses robots to manufacture
and assemble their television sets. The quality managers at
Sony do not need to check if the set works. They know it works
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because the robots never get tired or lose concentration. They always produce a quality product
that meets the specifications given the machine. Robots have become so sophisticated that
the automatic pilot in an A380 aircraft flies the plane 99% of the time. It is capable of landing
the plane and flying it at the most economical speed necessary to meet its schedule between
airports. (This robot is also capable of taking off, but that would require airports to install very
expensive equipment.)
Literacy Development
Interestingly, ‘robot’ comes from a Czech word ‘robota’ meaning conscription or
compulsory service. You might like to reflect on how it came to mean, from 1925,
a machine performing human activities.
Process technology is pervasive. It includes milking machines, mobile phones, automatic
bread ovens, the scanning machines at airports and - most pervasive of all - the informationprocessing technology usually called information technology (IT). Information technology
refers to any device used to collect, store, manipulate and distribute information.
57
Group Work
Allocate one of the process technologies listed to each member of the group
(or pairs of people in the group). If you have people in the group who study IT
or Industrial Technology ensure they get the technology they are expert in. Do
some research to discover the characteristics of the technology and find out
how the technology applies to the transformation process.
•Computer-aided design CAD
•Computer-aided manufacturing CAM
•Information processing technology IT
•Automated guided vehicles AGV
•Networked information technology such as WAN
•The internet
•Robots
•Flexible manufacturing systems FMS
Put together a simple presentation to show the other members of your group
how the technology applies to the transformation process. Try and find an
example of the technology in the operations function of an actual business.
Getting Better Results
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Task design should really be developed at the same time as product design. Task design is the
way the overall transformation process is broken down into manageable activities. It would be
a difficult and time-consuming activity for one person to assemble an iPad from start to finish.
But when the overall task is broken into small bits and a person with the right equipment with
the right skills does just one bit, a really complex activity can be done quickly and easily.
Task design is concerned with working out the most efficient and effective transformation
process. The designer will need to consider very carefully ways of ensuring error-free
processing, minimum time for the transformation to take place, at the lowest cost and with as
much flexibility to respond to changes in demand as possible.
Once the overall task is broken into manageable bits the task design focuses on the skills and
equipment needed to do each task. For example the plant operator at a motor vehicle assembly
plant who has the task of putting the engine into the vehicle will need lifting equipment with
the flexibility to pick up the engine and manoeuvre it into place. The operator will need both the
skills to operate the equipment and the skills to attach the engine to the car body.
58
We started this section with the statement that task design and product design should be
developed together. The reason is to ensure maximum efficiency and effectiveness in the
transformation process. Careful consideration needs to be given when a product is designed
as to how it will be produced. If, for example, a product such as an iPad is to be transformed
by generally unskilled labour to ensure low cost, it is wise to ensure the components can be
assembled this way as the product is being designed. The product designers and the operations
designers should work together on both the product design and the task design.
THINK, INK, PAIR , SHARE
Imagine you were given the task of establishing a factory producing sandwiches
for takeaway outlets and service stations in a busy city. List 4 types of sandwiches
you would design and explain the technology and the task design that would
enable you to produce thousands of sandwiches in protective coverings at
minimum cost and maximum speed. The sandwiches need to be fresh and
available for midday demand. Jot down your ideas and discuss them with your
learning partner.
Careful consideration also needs to be given to the process layout. Process layout refers to the
physical location of the transforming resources. The layout determines the way the transformed
resources (materials, information or customers) flow through the operation. Have you noticed,
for example, that grocery essentials such as milk and bread are never located at the front of the
store? The physical location of these products is designed to ensure customers walk through
most of the store to get them and hopefully buy other products on impulse on the way through.
The objective of process layout is to allocate the tasks needed to transform the resources in
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the most efficient and effective way. It is an important decision because if resources (such as
machines) are positioned in the wrong place, it can increase the processing time and lead
to queues of materials waiting to be processed. In the example of the car assembly plant, it
would be obvious that there is a flow or sequence of tasks that follow in a logical manner and
the equipment needed to do each task is positioned in a way that enables the flow to proceed
efficiently and effectively. For example, the equipment to position the doors would not occur
before the car body was attached to the frame.
A number of things have to be considered for good layout. Occupational health and safety
(OHS) has to be carefully considered when there is a potential danger associated with a
particular process. For example pedestrian traffic has to be removed in operations where
forklifts are operating. Machines that will need regular maintenance need to be positioned so
there is easy access and the distance materials need to move in the flow should be minimised.
Flexibility is also important, because equipment will possibly need to be upgraded, and this
needs to be considered when the layout is designed.
59
THINK, INK, PAIR , SHARE
Imagine you were designing the layout for a car assembly factory. Detail is
not important. Jot down a sketch to show the flow of materials (as you would
imagine them to be) and about five main tasks that would be performed on the
materials to transform them into a car. Discuss your sketch with your learning
partner.
Monitoring, control and improvement
So far we have been discussing the planning aspects of the transformation processes – all the
things that need to be done to transform materials, information or customers. The plans set
out in a formal way what the managers intend to happen in the future. But just because we plan
for something to happen is no guarantee it will. Think of your study plans! As the operations
managers focus on the day-to-day activities in the business, it is easy to get off track. It is quite
possible, for example, for a key piece of equipment to break down or an order from a supplier to
not arrive on time, and a particular section of the operations function, or work station, is unable
to achieve the output it had planned to achieve.
Plans need to be monitored. Every part of the operations function needs to be formally
monitored to make sure the planned activities are actually happening in the way they were
planned. The output from each section or work centre should be compared to the planned
output for that centre. Control is the process of comparing actual output with what was planned.
Control is concerned with making the adjustments when things go wrong. It may mean that the
plans have to be worked out again in the short term. A piece of equipment, for example, may
have to be hired to temporarily take the place of equipment that is being repaired.
Getting Better Results
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
No matter how well the operations function has been planned or managed, it will always be
possible to improve it. In the past the focus of the operations manager was on quality. Today the
focus is very much on improvement. One of the main ways a business can gain a competitive
advantage is by doing something better than its competitors. Even when competitors improve
some aspect of their operations function, it is important to catch up as soon as possible. It is
most important the operations manager not only produces the products and services but also
improves the overall operations function.
There are different types of improvement. Sometimes the improvement is radical. Pacific Brands
decided on radical improvement when they closed their Australian factories and established
the operations function in China. This was initially a very expensive change and resulted in
the redundancy of 3 000 employees. Redundancy occurs when the work people do is no longer
available. Pacific Brands believe the cost of the operations function will be much cheaper in the
future because they decided on this improvement.
60
The most common type of improvement is continuous improvement. Continuous improvement
is the continuous search for small incremental steps that improve the operations function. It is
the sort of thing you could do when you write an English essay. You could improve the spelling
and the cohesion between the paragraphs for example. You might need to do this because your
classmates are improving their work and you will fall behind in the ranking if you too don’t
improve. It is the same with operations.
Operations managers develop strategies to improve the overall operations function. One of
the most common strategies is total quality management (TQM). This is an approach that
puts improvement, particularly improving quality, at the core of every activity in the business.
Employees at Toyota factories are constantly looking for ways of doing their work more
efficiently. If they find a way to make an improvement, they are rewarded with what are often
significant amounts of money. TQM is a strategy designed to continually improve the operations
function.
Another interesting strategy is called just-in-time JIT or lean. Lean is designed to meet the
customer’s requirements immediately with
a quality product and no waste. It is costeffective because there are no storage costs.
Coca-Cola Amatil follow this method of
improvement. The operations function at
Coca-Cola manufacture today precisely the
customer demand for the next day’s delivery.
There is no warehouse. Inputs such as empty
cans are delivered every 20 minutes as they
are needed in the transformation process.
Lean production enables Coca-Cola to
significantly reduce their costs. The search for
ways to improve the operations process never
ends.
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Outputs
The outputs from the transformation process are products and services. We have already dealt
in some detail with the distinction between products and services and you will recall that the
most obvious difference is tangibility. You can touch your mobile phone but you can’t touch a
consultation with a lawyer or dentist. Another aspect is storage. You can store products but a
service, such as a consultation with a doctor, can’t really be stored.
However, we also explained that there is not a lot of value in making the distinction, because
most products are a mixture of product and service. Your mobile phone probably has a warranty
and, if you need help, you will have access to customer service.
Customer service
Customer service is an increasingly important aspect of delivering a product or service to a
customer. It can often be the reason a customer chooses one product rather than its competitor.
Customer service refers to the customer and product or service provider interactions. Those
of you who have part-time work would be aware of the importance managers place on things
like greeting the customer, smiling, assisting the customer to find things or explaining how
things work. Customer service is concerned with things like resolving problems the customer
is experiencing, answering their questions effectively and making the interaction between
customer and service provider pleasant.
THINK, INK, PAIR , SHARE
Jot down two personal experiences of customer service – one positive, one
negative. Reflect on why/how they were different and discuss with your learning
partner.
61
Car dealers rely heavily
on customer service. They
not only need the initial
purchase, but want the
customer to purchase
upgrades and service
their vehicle through the
dealership.
Getting Better Results
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ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
Customer service should be built into the task or process design, but it is difficult because it
refers to attributes such as responsiveness and friendliness. These are difficult to measure and,
for this reason, sometimes ignored. The managers of Kmart, however, are always on the lookout
for these attributes in their employees and reward employees who display such attributes
with things like store vouchers and cash bonuses. The management focus is to maximise the
reliability of customer service so that every customer experiences these attributes all the time.
Even online stores are
increasing their focus
on customer service via
website chat, email and
phone support
62
Customer service is an integral part of what is generally called customer relationship
management. Customer relationship management
is all about understanding customer needs and
working out ways to meet those needs. Of course, at
the same time, it is important to meet the business’s
profit objectives. If this is done well, existing
customers will be retained and the business will
also gain new customers. This is what is happening
at Kmart. The business is offering a shopping
experience that meets the needs of their customers
in terms of the surroundings, the products offered
for sale, the pricing and the high levels of customer
service.
Customer service is important because it is one
of the key considerations for customers deciding
on further purchases from the business. It is also
important in terms of positive word-of-mouth
promotion and it is really important in creating
customer loyalty. It is interesting to talk to the
users of Microsoft products and Apple products.
Apple customers tend to be fiercely loyal and the loyalty is an important reason for Apple’s quite
remarkable success.
A 5 year warranty helps
Hyundai overcome
perceptions about the
quality and reliability of
their cars.
Warranties
Potential customers often find that a number of competing products will effectively meet their
needs. This is particularly so with products such as cars and white goods such as refrigerators,
televisions, dish washers and so on. In this case post-sale factors, such as the availability of parts,
customer service, maintenance and particularly warranty, become important considerations in
the customer’s choice.
Of all the post-sale considerations,
warranty is perhaps the most
important for a wide range of
products. A warranty is a contractual
agreement between the manufacturer
of the product and the customer.
The agreement typically requires the
manufacturer to rectify any failures
in the product during the warranty
RedPeg Publishing HSC Business Studies
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period. You would be familiar, for example, with the typical 3-year 100 000-kilometre car
warranty. However, sometimes a car manufacturer might make the product more competitive by
offering a 5-year warranty.
Most products offered for sale have a warranty. The warranty might be implied if not specifically
stated because the consumer protection laws insist that a product is fit for the purpose it is sold
for. Implied warranties are unwritten promises that are created by common law where customers
have to get ‘fair value’ for their purchases. Look at the packet of the next packet of chips you
purchase. There will be a statement that the manufacturer will replace the product if there is a
fault, such as an incorrectly filled packet.
The warranty is not just a marketing tool to increase sales. It also protects both the customer
and the manufacturer by specifying the details of what will be replaced and what will not. If
the problem is caused by the customer’s actions rather than the product characteristics, the
warranty may be void.
Warranties give the customer an assurance that the product will perform satisfactorily
throughout its expected life. The warranty can be used by the business to assure the customer
that the product will be fixed if it fails because it was manufactured poorly and it can also assure
customers that they will be satisfied if they have to make a warranty claim. However, there is a
link between what the business can
63
Processing the work for the unit on
Operations processes
At the outset, focus on your HSC. Carefully review the unit of work. Practise potential multiple
choice and short responses. Most importantly learn from business. Adopt the basic principles
the most successful businesses have adopted.
Russell and Taylor (2005) have set out the following principles for implementing a continuous
improvement effort.
1 Create a mind-set for improvement. Do not accept that the present way of doing things is
necessarily the best.
2 Try and try again. Don’t seek immediate perfection but move to your goal by small
improvements, checking for mistakes as you progress.
3 Think. Get to the real cause of the problem. Ask why - five times.
4 Work in teams. Use the ideas from a number of people to brainstorm new ways.
5 Recognise that improvement knows no limits. Get in the habit of always looking for better ways
of doing things.
Getting Better Results
Operations Processes
ISBN 978-0-9775849-7-0 © 2012 Don Sykes & Kim Crawford - www.redpeg.com.au
Memory Work
Carefully review the work you have done in this section
Describe the variety of inputs in the operations process. Ensure you distinguish between
transformed and transforming resources.
The image of a factory transforming raw materials (aluminium) into a finished product (cans)
needs to be broadened to include the realities of changing information and customers. Global
businesses are continually changing and relocating data, while there are many businesses
dedicated to transforming customers, ranging from Jenny Craig to hairdressers. Human
resources (employees) and facilities (such as buildings and machinery) actually do the
transforming, rather than being transformed themselves. Because of this role, they are crucial
inputs.
Discuss how the transformation processes may be affected by volume, variety, variation in
demand and visibility.
64
* Volume – economies of scale, specialisation
* Variety – flexibility and responsiveness to customer needs
* Variation in demand – how production of goods and/or provision of services can respond or
adapt to seasonal change or fluctuations in consumer demand
* Visibility – traditional street or shopping centre exposure is being supplemented by internet
hits.
Define the following terms and learn their meanings:
* Sequencing: the order in which the tasks will be done
* Scheduling: a detailed timetable of what work is to be done, when and where it will be done
* Gantt chart: shows the start, planned finish and progress of tasks on a chart
* Critical path analysis: a flow chart of the interdependence of tasks involved in the production
of a good or service
* Task design: breaking down the transformation process into manageable activities
* Process layout: the design of the physical location of the transforming resource
* Monitoring: measuring actual performance
* Control and improvement: comparing actual output with what was planned and
implementing adjustments if necessary.
Discuss the importance of customer service and warranties as outputs in the operations
process.
Customer service refers to the interactions between customers and the product or service
provider. These interactions vary from eye contact through to resolving problems and may be
the competitive advantage a business requires. Warranties are the contractual agreements that
require the manufacturer to rectify any failures in the product during a specified post-sale time
period. This ‘insurance’ will greatly influence customer choice.
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Topic Test - Chapter 3
Operations processes
1. Which of the following would be regarded as an input in the transformation process for
a soft drink company?
(a)
(b)
(c)
(d)
A can of soft drink
The automatic canning line that fills and seals cans
The delivery truck that takes the finished cans to the retailers
An empty can just delivered from Alcoa
2. Which of the following would be regarded as transforming resources?
(a)
(b)
(c)
(d)
Materials
Facilities
Information
Customers
3. Which of the following is an influence on the transformation processes?
(a)
(b)
(c)
(d)
Customer contact
Technology
Task design
Process layout
65
4.Which of the following is an output?
(a)
(b)
(c)
(d)
Materials
Customer service
Variety
Visibility
5.Which of the following is a Gantt chart designed to assist?
(a)
(b)
(c)
(d)
Transforming resources
Task design and process layout
Sequencing and scheduling
Supply chain management
6. Which of the following compares actual performance to planned performance?
(a)
(b)
(c)
(d)
Monitoring
Control
Improvement
Critical path analysis
7. Which of the following is concerned with continuous improvement?
(b)
(c)
(d)
Monitoring
Control
Total quality management
Task design and process layout
Answers (upside down)
1d,2b,3c,4b,5c, 6b,7c
(a)
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