operations as business. as text chapter 23 lesson objectives explain operations management and its...
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Operations
AS Business
AS text Chapter 23
Lesson Objectives
Explain operations management and its targets, specifically unit costs.
Assess the importance of quality and how businesses can measure it
Leading onto capacity utilisation and its importance
AS text Chapter 23
Efficiency
Production decisions involve deciding methods for new production runs and analysis of existing methods.
Decisions may include: Substitute machinery for labour? Use of new technology? Organisation of the production layout? Change of production method?
AS text Chapter 23
Production Methods
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Whilst all output can be classed as production, different production methods may be more appropriate for different products or services.
Agriculture tends to be very land intensive – efficiency could be measured in terms of output per acre/hectare
AS text Chapter 23
Production Methods
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As technology and analysis of production methodology has improved, methods have changed dramatically – what used to be labour intensive production methods are now capital intensive
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AS text Chapter 23
Production Methods
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The choice of production method and the factor inputs depends on such things as:
• the nature of the product
•factor costs
•the scale of production
AS text Chapter 23
Resources
B …………. & L …….
P …………..
M ………………
C …………
Buildings & Land
People
Materials
Capital
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Obtaining resources.
Owners / Managers when business established
HR / Departmental Mgrs
Operations
Owners
Buildings & Land
People
Materials
Capital
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Materials.
Purchasing of materials is often a task undertaken by the operations function.
Quantity Quality Price Delivery Display & sell Use & sell Monitor Replenish
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Productive Capacity
Productive capacity measures how much a business can produce during a specific period of time
Usually measured in production units (e.g. 1,000 cars per month)
Productive capacity can change: E.g. when a machine is having maintenance, capacity is reduced Capacity is linked to labour: e.g. by working more production shifts,
capacity can be increased
Capacity needs to take account of seasonal or unexpected changes in demand E.g. Chocolate factories need capacity to make Easter Eggs in
November and December before shipping them to shops after Christmas
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Ways to Measure Productive Efficiency Productivity
Measures the relationship between inputs into the production process and the resultant outputs.
Unit costs Divide total costs by the number of units produced. A falling
ratio would indicate that __________________________________
Formula = Total Cost / Output
Lower unit cost the better! Increased productivity..
AS text Chapter 23
Unit cost calculations
Based on the data above, calculate the unit costs of products A to D.
Assuming these products are of the same quality, which product is manufactured most efficiently?
Total costs (£)
Units of output
Unit costs (£)
Product A 470 20
Product B 558 30
Product C 1,060 50
Product D 1,945 100
AS text Chapter 23
What is Meant by Quality?
Quality is about meeting the needs and expectations of customers
Think about your needs and expectations as a customer when you buy a product or service. These may include Performance Appearance Availability Delivery Reliability Price
If a product or service meets all those needs - then it passes the quality test. If it doesn't, then it is sub-standard.
AS text Chapter 23
Key aspects of quality for the customer include:
Good design – looks and styleGood functionality – it does the job wellReliable – acceptable levels of breakdownConsistencyDurable – lasts as long as it shouldGood after sales serviceValue for money
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Toyota Prius recall
ActivityIn pairs, discuss why quality is important and identify as many reasons as you can.
http://news.bbc.co.uk/1/hi/business/8506179.stm
http://news.bbc.co.uk/1/hi/8497471.stm
AS text Chapter 23
Quality helps determine a firm’s success in a number of ways:
Customer loyalty Strong brand reputation Retailers want to stock the product If perceived to be better value for money, it may command a
premium Fewer returns and replacements lead to reduced costs Attracting and retaining good staff
Why is quality important?
AS text Chapter 23
How is quality measured?
Standards eg BSI (more later….)Failure of reject ratesLevel of product returnsCustomer complaintsCustomer satisfactionCustomer loyalty
AS text Chapter 23
Capacity Utilisation
Maximising your productive capacity is important for businesses operations management
AS text Chapter 23
Lesson Objectives
Explain operations management and its targets, specifically unit costs.
Assess the importance of quality and how businesses can measure it
Leading onto capacity utilisation and its importance