OPERATIONS STRATEGIES

Performance Objectives

Performance objectives are about gaining a competitive advantage on your competitors. This can be done through:Quality – Of the product and the process used to make itSpeed – refers to productivity and can be improved with tech.Dependability – Reliability of product and ability to deliverFlexibility – In production (type of product and volume)Customisation – How a product can be made uniqueCost – Key indicator of profit

New Product or Service Design and Development

New product design is a lengthy process because initial research may indicate a high number of possible products that could be commercialised into a final product. Cost benefit analysis, design, testing, construction of prototypes and market development will eliminate those ideas that are: too expensive to make – a financial filter beyond the capabilities of operations to make – a

capability filter have problems with design – a technicalfilter will not be received well in the market –a

commercial filter.

Supply Chain Management

Businesses need to acquire various resources necessary to produce a good or supply a service. Suppliers need to be found that can provide the most appropriate inputs at the best price and reliably supply the required quantity with the appropriate quality.

The time between when the order is taken by the supplier and when it is delivered is called the lead time. The smaller the lead time the more flexible a business can be with when they order their stock.

Businesses see it as beneficial to have to deal with as few suppliers as suppliers as possible so that they can then look at using long term contracts to secure discounts.

In this there are other factors like:Logistics – Transport of physical raw materials, inputs and distribution of finished goods to market.E-Commerce – The use of the internet to both buy and sellGlobal Sourcing – Countries throughout the world have different resources which businesses can now access.

Outsourcing

Outsourcing is when a business secures or purchases products and/or services from a third party, as opposed to creating them in-house.

Technology

One of the major external influences on business is technological change. Technology is the equipment and knowledge that are available to help businesses perform certain functions or make products.

Technology can result in the development of new methods of production or new equipment that helps businesses perform functions more quickly and often at a lower cost.

Important terms when dealing with technology are:

Leading Edge – Can also be known as being at the cutting edge. One step further is the bleeding edge – this is technology that is so new that investing in it is a huge risk. Businesses that are early adopters can pick up a huge competitive advantage.

Established – When considering already established technology, a business is able to research the costs and benefits of technology more accurately by drawing on the experiences of other businesses.

Inventory Management

The term inventory and stock are often used interchangeably but both refer to a business’s transformed resources. Nearly all businesses have an inventory of rawmaterials, work-in-progress and finished goods, as well as information resources and customers.

Inventory Management (Cont)Holding stock – also known as just-in-case (JIC) or buffer stock. This is done to cover any interruptions to supply or unexpected increase in demand.

The advantages are there for businesses that have a long lead time or if there are discounts for buying in bulk.

The disadvantages are that stock can become obsolete due to the increasing pace of technology developments.

Inventory Management (Cont)LIFO (Last In, First Out) – This is used for stock that has no

use by date like machinery parts or building materials. Can be used as rising cost of stock can mean new materials cost more and can infringe on profit.

FIFI (First In, First Out) – Used for perishables so that stock doesn’t go out of date and have to be thrown out.

JIT (Just In Time) – The aim here is to hold the bare minimum stock necessary and to have stock delivered just in time to sell to customers.

Quality Management

To achieve a competitive advantage over other businesses in the same market, a business may choose as its performanceobjective to have products of a superior quality. If not superior quality, a business will strive for a certain standard of qualitybecause poor quality will be an operations cost.

Customer returns, poor service, product recalls and repairs as well as being a significant expense will also damage the value of the business.

Quality Management (Cont)

Quality Control - involves checking transformed and transforming resources in all stages of the production process. These controls can take place at three different stages: feed-forward (Planning), concurrent and feedback controls. These will be measured against a benchmark

Quality Assurance involves establishing and using a set of procedures and/or processes that will prevent productdefects from occurring or errors in delivering services.

Quality Management (Cont)

Quality Improvement - Through world’s best practice the firm can compare its productivity or performance with the highest standards achieved by businesses worldwide and select businesses to use as models.

Overcoming Resistance to Change

Driving forces are those that push towards the need for change. Restraining forces are those that hold the business back and resist any change that is attempted. The challenge for management is to identify and develop strategies to overcome the resistance to change.

Overcoming Resistance to change (Cont)

The financial cost for these things can be huge and so a cost benefit analysis will need to be done to see whether the outlay will result in greater productivity and profit.

Common areas looked include: Purchasing new equipment Redundancy packages Retraining Reorganising plant layout

Overcoming Resistance to change (Cont)

An important factor to always remember in this is inertia.

Internal stakeholders such as owners, managers and employees can become comfortable in a stable environment as there is a feeling of security and predictability.

Change can create uncertainty and risk and therefore employees may resist change, owing to fear of deskilling, job loss, higher workloads and loss of their familiar work environment.

Global Factors

Globalisation can present many cost saving opportunities for managers if they choose to expand operations.

Global Sourcing - the opportunity for businesses to acquire inputs from other countries or a low-cost region (LCR) in order to reduce overall costs.

Economies of Scale - The larger the size of the business, the actual cost of making each individual product decreases, until the business becomes too big. By increasing in size, the business spreads its costs over more units.

Scanning and Learning - Businesses must be aware of developments and changes in global demand for their product, supplies, manufacturing processes and emerging products, competitors and manufacturing processes.

Research and Development - an innovation strategyassociated with the creation of new products and the improvement of existing ones. This type of innovation is crucial to the long term survival of any business.