Business+Studies+HSC


 * Topic 1 Operations. **

__ Ch1 Role of Operations __

The creation of goods and the provision of services by businesses. The transformation of inputs into outputs or products to be sold. This involves: •planning activities •purchasing inputs •managing inventory •selecting and implementing manufacturing processes •developing strategies to gain a sustainable competitive advantage.

Involves gaining a long-term competitive advantage over its competitors, both local and overseas. May also use either a cost leadership of product differentiation strategy. • Strategic operations decisions focus on: •products to be created •how to produce products •capacity or size of operations •organisation of inputs and equipment in operations •location of operations •employees used in operations •quality. • A strategy where a business aims to obtain an advantage over its competitors by being the lowest cost manufacturer within its industry. • Low cost through operations may be achieved by: •using less expensive inputs •maximising efficiency by minimising waste and save time •maximising productivity producing more outputs from less inputs •using technology •producing faster •having lower quality outputs •increasing size of operations to reduce the average cost of making each item. • Aims to obtain an advantage over its competitors by having outputs that are different to its competitors, unique or leading edge technology. This is achieved through having: •better quality outputs •quicker supply of outputs •custom designed outputs and/or more varieties to suit different needs •more features, applications and versatility •new technology incorporated. • Manufacture - tangible products: •physical appearance, style •can be reused •longer life •quality •energy efficient •Problem - hard to modify once manufactured. • Services - intangible products: •personalise •customer service •faster •quality •Benefit - easier to change and customise.

•Specialisation – where the business is separated into different functions, each of which is highly skilled at its specific task or role. •Interdependence – where the different parts of a business must rely on each other to perform their task or role. •As a result of specialisation, there will be interdependence between the key business functions and a constant flow of information between operations, marketing, finance and human resources. • HR – most staff are usually employed in operations. Marketing – connects the operations function to the consumer. Identifies consumer trends. Finance – fundamental to determining budgets and costs, including capital investment and cost and revenue controls (inputs and outputs). __ Ch 2 Influences. __

Every business is influenced by its dynamic external environment.

The operations manager will need to monitor and anticipate changes in: ·the global business environment ·technology leading to product innovation and new ways of producing ·competitors (especially related to price) ·government laws, regulations and policies ·new pressures from society and stakeholders to limit the negative impact on the environment from business operations. · corporate social responsibility.

Globalisation •The equipment and knowledge that is available to help businesses perform certain functions or make products. •The development of new methods of production or new equipment that helps businesses perform functions more quickly and often at a lower cost. • Technology •There is a heavy reliance on the operations manager to be aware of this technology and assess its application to the business for example: -Computer Aided Design (CAD) -Computer Aided Manufacturing (CAM) • Consumers •A business that is customer focused will produce goods and services that will satisfy the desires of its customers. •Consumers expect a certain level of quality for the price they pay. •Expectations about reliability, durability and how well the product works. • Cost based strategies In an industry where there is little opportunity to differentiate, a business can gain a price advantage over its competitors by using operational strategies that lower costs. Prices can be lowered but profit margins are maintained. This influence may force a business to seek its own cost advantages by: ·controlling research and selling costs such as advertising ·using cheaper inputs ·updating technology in production ·lowering quality ·relocating operations to a cheaper region of the world. · increasing efficiencies to generate economies of scale • Government •Federal, State and Local Governments all impose regulations, taxes and incentives that impact on business operations. •Government policies designed to support Australian businesses that are innovative in their operations and able to develop products to be exported. •Trade policies to promote trade relationships with other nations. •There has been a gradual reduction in ‘protection’ of Australian businesses, forcing them to be more efficient in their operations and reduce costs. •Other policies focus on reducing the negative impacts on the environment from business operations. •List some examples of Federal State or Local Government influence. • Legal Obligations Laws that affect operations of Australian businesses include: •environmental protection •consumer protection •trade practices •occupational health and safety for employees. Laws will impact the operations strategies used. • Environmental •Operations that allow resources to be used by businesses today without limiting the ability of future generations to satisfy their needs and wants. •The natural environment must be protected from resource depletion and pollution. •External stakeholders and government environmental protection laws require operations managers to ensure that the operations strategies use resources sustainably as much as possible. • Corporate Social Responsibility •Business success not just measured in financial terms but also against social and environmental objectives. •A business’s long-term success and profitability is determined by how well it considers the interests of employees, consumers and the community. •CSR recognised more in developed than developing nations. •Many businesses have a code of conduct to guide their social and ethical behaviour. • •Legal compliance – ensuring operations processes and strategies obey the law. •Ethical responsibility – making operational decisions which are not only legally compliant but also morally acceptable to society. • •Social responsibility is when a business that behaves in a socially responsible manner is one that tries to improve the quality of life of both internal and external stakeholders. •This is achieved through efficient operations that do not waste resources, minimises environmental damage and produces products that add value to the lives of customers and other stakeholders.

Chapter 3 - Operations Processes Operations processes are the activities involved the transformation of inputs into outputs. **The inputs into an operations system are the**:

•physical raw materials and components used to make a good

•the skills, efforts and knowledge of employees

•the facilities such as office equipment, the factory and land.

The resources that remain in the business and are applied to the inputs to change them to add value. These includes:

•Human resources – mental and physical labour who apply their knowledge, skills and effort.

•Facilities – buildings, land, equipment and technology (also known as non-current assets).

**The transformation processes** are those activities that determine how value will be added. The include:

•Physical altering of the physical inputs:

–production method using a combination of labour, equipment and technology

–type of production method: job, batch, flow.

•Changes that happen to people when they receive a service.

•Transportation of goods or services.

•Manipulating and changing information to produce a service.

• •Volume – number of products or services that operations needs to produce.
 * Influences**

•Variation – the number of different models and variations in services that operations needs to create.

•Variation in demand – the variation in demand over time; operations needs to be flexible to increase or decrease output.

•Visibility to customers – the degree to which customers can see the operations in action.

The 4Vs will influence the type of production:

•Job – producing individual unique outputs.

•Batch – producing in groups or bundles.

•Flow – production that is continuous.

As well as influence the combination of labour and/or equipment used in production.

**Scheduling and sequencing** tools are used to identify all steps in the operations process and organise them into the most efficient order to complete. This may be called task analysis. Two tools to determine the most efficient and effective sequence of tasks are:

•Gantt charts •Critical path analysis.

- Once task analysis has been completed, task design is performed. The operations manager determines how the task will be completed to produce the output.

-This involves classifying job activities to maximise productivity.

- This overlaps with HR when recruiting people for each job.

For example, task analysis would determine the ingredients and the order of the steps to make biscuits. Task design will determine how the biscuits can be made, using human labour to make each single biscuit separately or incorporating equipment and a production line


 * The process layout** is where all the machinery and operations activities are arranged, by what they do and the function they perform to make the good or provide the service.

The inputs are transported to an area of the factory or office where a specialised function is performed to add value or process the input.

- varied depending on industry and scale of production.

eg. production line, office layout, large building project.


 * Monitoring Controlling Improving **

**Monitoring**: collecting information about the performance of operations process to ensure:

•quality (defects, warranty costs) •speed (process flow rates, units produced) •costs (direct and indirect) •capacity of production. •Key Performance Indicators (KPIs) are predermined variables

**Controlling**: comparing observed performances against what was planned.

**Improving**: analysing the operations process and determining what can be changed to improve quality, speed, dependability, flexibility, customisation and cost.

are the final product.
 * Outputs **

Products are a combination of good and services, and outputs may be inputs used by other businesses or final products to be distributed to consumers.


 * Customer service** is an intangible output that requires customer contact. It can increase consumer satisfaction and contribute to competitive advantage. It may include:

•answering questions and providing after sales advice •frequent and meaningful communication •anticipating customer needs •following up customer enquiries and complaints.

= = = Chapter 4 - Operations Strategies = •The activities involved in the production of goods and supply of services. •Specific decisions about what and how the business produces goods and supplies services. •The influences on operations strategies must be considered by operations managers.
 * Warranties:** Under Australian law, all business must ensure that the goods they sell:

•Performance Objectives
These are key areas of focus for operations and therefore part of a business’s competitive strategy: •Quality – having the highest quality goods and services. •Speed – producing goods faster and delivering services faster. •Dependability – being reliable in providing what outputs were needed and when they were required. •Flexibility – being more flexible than competitors and being able to make changes to operations. •Customisation – offering customised products to meet specific customer needs. •Cost – producing cheaply and lower than competitors.

•Design & Develop new products
•All products have a life cycle. New products must be developed for a business to maintain competitive advantage or a version of a competitor’s new product. •3 key stages: •1) Identifying opportunity – either consumer or technology driven. •2) Designing a product that will appeal to the market. •3) Testing and refining a product until it is ready for production. This includes marketing and production planning. •Service design differs as it is intangible and can be explicit (application of expertise) or implicit (feeling of being looked after).

•Supply Chain Management
•Includes all businesses directly linked to the supply of goods or services to the business and to the customer. •Involves the coordination of all these businesses so that inputs and outputs are delivered in the quickest, most dependable and cost-effective manner. •Lead time is the time it takes for a supplier to provide its customer with the goods ordered.

•Outsourcing
Advantages: •access to a specialist knowledge and expertise •more efficient methods •better access to IT, technology and equipment •experience at solving complex problems •lower costs •increased speed and quality of outputs. • Disadvantages: •breakdowns in the business outsourced to will affect the entire operations •loss of control over quality, reliability and even costs •possibility that rivals discovering commercial secrets •slower lead times and response to changes in the market •relationship breakdown with stakeholders, e.g. redundant employees.

•Technology
•Technology helps business develop a competitive advantage. •Leading edge – newly developed innovations create new products more efficiently. Could give a business an advantage over competitors, but could be costly investment with potential implementation problems. •Established – tried and proven technology that is standard practice. •Inventory Management Inventory (stock) is the total stock of goods and material held by a business. Inventory management aims to: •have enough stock available as it is needed but not too much •avoid accumulating dead stock that cannot be sold •identify stock that is not selling well •maximise sales •minimise costs of managing inventory •identify stock losses through theft or damage

•Holding stock / Buffer stock – stock as a reserve to cover interruptions to supply or an unexpected increase in demand. Inventory Valuation methods •LIFO – (last in first out) Stock more recently purchased sold first.. •FIFO – (first in first out) Products purchased first sold first. (oldest) •WAC – weighted average costs. To eliminate or minimise inventory some businesses use: •JIT – just-in-time: holding minimal stock and relying on prompt deliveries of stock as it is needed.
 * Inventory management **


 * **Advantages ** || **Disadvantages ** ||
 * * Consumer demand can be met when there is stock available. This may prevent the consumer from seeking to buy from an alternative business.
 * It reduces lead times between order and delivery.
 * Stocks give the opportunity for a business to generate immediate revenue. (It is very hard to generate revenue from partially transformed inputs).
 * Stocks can be distributed to distribution centres, which then rapidly transport the products to places as indicated by demand.
 * Older stock can be sold at reduced prices and thereby encourage cash flow.
 * Stocks are an asset and are of value to the business, reflecting well on the balance sheet.
 * Making products in bulk may reduce costs as there are economies of scale in purchasing inputs.
 * || * the costs associated with holding stock, including storage charges, spoilage, insurance, theft and handling expenses.
 * the invested capital, labour and energy cannot be used elsewhere as it has been used to create the stock
 * the cost of obsolescence, which can occur if stock remains unsold. ||

•Quality Management
For a consumer, it can mean that the product provided by a business: •is well made, not defective and lasts a long time •does everything that advertising claims •has good customer service.

For a business, quality means: •quality of outputs meet the quality standard stated in the operations plan •outputs are of a consistent quality. •

•Global Factors
•Sourcing inputs – there is the opportunity to acquire less expensive but similar quality inputs from other countries or a low cost region (LCR) but there are other risks. A business may use a global web strategy to reduce operations costs. •Economies of scale – the larger the size of the business operations, the lower the costs of producing each product, until the business becomes too big. • •Scanning and learning – scanning the global environment to identify and learn the critical global trends that may impact on the business. For example: –changing consumer demands –new products and services developed in other countries –new manufacturing processes available –technological innovations. •