Introduction Operations Management Intermediate Business Management

IntroductionOperations Management

Intermediate Business Management

2

The Role and Importance of Operations

Role of Operations

Purchasing of Raw Materials to meet Production requirements

Managing Stock

Using quality techniques to ensure

maximum quality output is achieved

from minimum inputs

Warehousing and distribution of

finished products

Ensuring appropriate methods of

production are used

3

The Role and Importance of

OperationsOperations is important because:

• it is one of the CORE activities of any business

• It produces the products and services which enable the business to make a profit

April 19, 2023 R Alexander March 2009 4

Role & Importance of OPERATIONS

Operations is the name given to the process of transforming INPUTS into FINISHED GOODS.

An organisation’s product is the goods or services it supplies to customers.

One of the main aims of an organisation is to ensure that they satisfy their customers by providing them with a high quality good or service.


Production Systems

An organisation will use a mix of labour and machinery to produce their good or service – the Production System

The nature of the good/service will determine what type of production system is used:

Capital intensive: mostly machines are used in production

Labour intensive: mainly people are involved in

production

Automation: production is controlled by a computer


Questions1. Describe the role and importance of operations in an

organisation. (2 marks)

2. Distinguish between a capital intensive production system and a labour intensive production system.

(1 mark)

3. For each of the following businesses, identify whether they are capital intensive, labour intensive or automated and outline why.

(8 marks)

• Coca Cola bottling factory• Wedding dress maker• Car manufacturing plant• Olive picking in Tuscany

4. Describe an automated production system. (1 mark)


Solutions

2. Mostly machines are used in capital production whereas mainly people are involved in labour intensive production.


SolutionsFor each of the following businesses, identify whether they are capital intensive, labour intensive or automated and outline why.

(8 marks)

• Coca Cola bottling factory - AUTOMATED• Wedding dress maker – LABOUR INTENSIVE• Car manufacturing plant – CAPITAL

INTENSIVE• Olive picking in Tuscany – LABOUR

INTENSIVE


Operating System

In order to ensure that a product is produced efficiently, the organisation must organise its raw materials, labour and machinery.

The method of organising these resources to get a desired outcome is known as an Operating system.

COPY THE DIAGRAM ON THE NEXT SLIDE INTO YOUR JOTTER

Input Process Output

Raw Materials

+Labour

Using differentamounts of

different resources to produce a

different endproduct

The actualgoods

orservice


The Operations Department’s Interaction with other Departments

In order to work efficiently it is important that the Operations department communicates with other key functional areas in the organisation.


OPERATIONS LINKING WITH ……

MARKETING DEPARTMENT Inform where to distribute products What type of packaging to use Carry out research and development of products

FINANCE DEPARTMENT Departmental budgeting Determine methods of payment to be used for

employees Suggest which supplier to use

HUMAN RESOURCE DEPARTMENT Responsible for recruiting the right people Provide training for staff

Don’t copy this yet!


Task

Create a mind map in your jotter showing how the Operations Department links with each of the following departments:

Marketing Department Finance Department Human Resources Department

Use page 69 of your notes to help


Elements of the operations function

The work of the Operations Department in a business consists of a number of different elements.

Purchasing System design System operations


Purchasing

Responsible for buying materials and resources used in production Important to buy the right quantity and quality of materials and resources at the right

time. A very important role of Purchasing is to choose a suitable supplier. They must ensure

that the supplier:

Is reliable Can deliver the correct quantity Can deliver on time


Purchasing

The Finance department will work with Purchasing to make sure that they are buying at the best price and getting the best terms e.g. discounts, credit

Often a firm will buy in bulk to get better discounts.

Important to get good value for money.


THE PURCHASING MIX –THE FACTORS THAT SHOULD BE CONSIDERED WHEN PURCHASING STOCK OR NEW EQUIPMENT

Alternative suppliers Are suppliers dependable? Local or national suppliers? Extra

costs?Delivery time Lead times long or short? Reliability and keeping promises.Price Cash discounts, trade discounts, bulk buying, credit termsQuality Supplier guarantee of consistent quality materialsQuantity Can supplier guarantee required quantities. Cost of extra

storage for bulk buying. Storage Facilities How much storage space is available? Safety and security.

COPY THIS SLIDE TO YOUR NOTES


System design

The Operations department must decide on the best operating system:

Most suitable factory layout? Flow of work? How to distribute finished goods? Labour requirements? Best combination of machinery and people? Best to invest in machines or humans in the long term?


Elements of Operations

System Operation The Operations department must control the flow of stocks to ensure that the

correct quantity is available at all times to keep production going.

Developing New Products The Operations department must develop and design new products to allow

production to take place. In order to achieve this is, it is important for them to communicate with the

marketing department.


QuestionsExplain the importance of the purchasing mix.

(6 marks)

Describe 4 things a business must consider when deciding on an operating system

(4 marks)

Outline why the Operations Department must control the flow of stocks.

(1 mark)

April 19, 2023 J Whiteley March 2009 21

Solutions - Explain the importance of the purchasing mix. (6 marks)

Price – this is important because the firm must get value for money. They will want to receive discounts for bulk buying.

Quality – if the quality of the supplier is not good they the finished product will also be poor.

Quantity – the supplier must be able to supply the necessary quantities to allow the business to continue trading.

Location of supplier – a local supplier is less likely to have delivery problems due to weather etc

Reliability of supplier – will they deliver on time/ correct amount

Storage facilities available – does the firm have enough storage space to buy in bulk.


Describe 4 things a business must consider when deciding on an operating system. (4 marks)

4 things a business must consider when deciding on an operating system are: The most suitable factory layout so that the stages of

the production process are in a logical order. Distribution of finished goods – will the firm be able to

distribute itself or will it outsource distribution? Labour requirements – how many workers are needed

where and when? The organisation will need to consider the combination

of machinery and people that best meets its needs. Is it best to invest in machines or humans in the long

term?


Outline why the Operations Department must control the flow of stocks. (1 mark)

The Operations department must control the flow of stocks to ensure that the correct quantity is available at all times to keep production going. Running out of stock means that production will come to a halt.

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Introduction Operations Management Intermediate Business Management