A Level Business Studies - Operational Management.

Concerned with ensuring the P/S of te company are produced efficiently , on time, to the required quality expected by the customer, and within set budgets.

Responsible for making the decisions in conjunction with his/her team, reagrding how business processes are carried out.

- What production methods should be used?
- What products should be designed and made? (based on MR)
- What are the standards of quality required, and if there are industry quality standard benchmarks, which if any should be adopted?
- What plans should be in place to ensure their is sufficient production capacity to meet future customer demand?
- What are the requirements for input stock and supplies to make sure there are no delays in production as a result of shortages in supply?

1) Assets - materials, plant, machinery, buildings
2) Costs - controlling production costs as well as ensuring input stocks and materials are also controlled to make sure the business remains profitable.
3) People - how many people are required, what are their essential skills, and what are the required productivity levels.
Overall these responsibilties focus on decisions covering:
- Operational targets
- Capacity utilisation
- Matching production to demand

An operations manager is the responsible for the function of the following key ares:
Productivity
Reliability and efficiency of production
Suppliers and purchasing
Product Range
Quality
Flexibility of production.

Each of these ares is intelinked with one another. This clearly makes operations management a complex set of activites and these are target led.

If the targets are related then as an example if a target was to increase productivity by 20% then an operations manager will have implications linked to :
- Ensuring suppliers can deliver the raw materials in the quantites needed, at a price that is acceptable, to the quality required and at the time required.
- Ensuring the production process is setup to deliver the production targets - ie have sufficient workers and there is sufficient capcacity in the production line (plant and machinery) to cope with the levels needed.
- Ensuring the quality of the product is maintained to a high standard, especially in a situation where productionis increased to meet growth in demand.

The key target relates to output - essentially source of revenue - and other targets relating to the business processes are then set to ensure the target is met.

Is the proportion of the max capacity in use by the current level of out put. CU = current output/maximum output X 100%

- Operating at a low capacity utilisation is inefficient. The plant, machinery and premise represent fixed costs to the business which means that potentially these cost will not going to be covered. - Operating at 100% capacity means it is impossible to take on addtional work at that time without expanding ie investing in new plant, machinery and larger premises. So while 100% appears good at first, the realisation is that there is no flexibilty to deal with an unexpected surge in demand. - Operating at 80-90% capacity allows for a temporary surge in demand, while at the same time ensures the efficient and economical use of plant and machinery. This is linked to the relationship between capacity utilisation and unit cost of production

Total cost of production (fixed+variable)/ output If capacity utilisation is 50% then output is 50% max output.

1) What are the addtional costs of manufacturing and supplying the order? - the need to modify machinery or purchase new ones ei are there capital costs that would need recouped? - Addtional labour may be needed with addtional training costs - Opportunity costs presented by diverting managers and other staff in analysing and preparing plans and costing the processes, without any guarntee that the quotation will be accepted. 2) It is likely that the costs of developing the manufacturing process to complete the order will result in a signiificantly higher price to the customer than for the standard designs, is it worth it? - Is this an important client, or potiential client, from whom there will be repeat orders of the same product? - Is the demand for this product design likely to increase. If it is innovative and popular, the demand may increase so the company will have some competitive advantage, at least for a while. - Is it possible for the company to negotiate and exclusive manufacturing deal with its customer?

- Size of customers orders may vary throughout the year. - Customers may require different delivery times. - Customers making addtional requests to orders already submitted ( increasing in quantities)

Workforce flexibilty - Overtime - Use of P/T, temp or agency staff - Sub-contract some areas of work to outworkers Advantage is that staff can be deployed as and when needed. Disadvantages are the increase in costs for hiring agaency staff, paying overtime rates, and training costs as well as lower productivity levels However it is better to call in staff when needed than to bear the cost of having staff with little work during slack periods. Stock management - Input buffer stock - Output buffer stock - Just in Time ordering (JIT) The pupose is to have more input materials than is need by current demand to be able to meet an unexpected surge. The same applies to output stock. Maintaining a buffer stock of finished products in storage will help the company meet unexpectedly high demand. The disadvantage is the increase in fixed costs for warehousing buffer stocks. Buffer stocks tie up capital that may not see a return for some time. JIT is a method used universally by retail chain stores, as stock passes through the tills, a record is kept and when it reaches a pre-determined low point it triggers an order to replace stock which then arrive 'just in time'. The advantage is that storage costs are reduced as is the capital tied up in stock. Managing capacity - Rationalisation When there is a downward trend in demand, an organisation will be left with excess spare capacity. This represents fixed costs burdens that a business may feel it does not wish to bear. Rationalisation is the process of reducing capacity (selling outlets, and reducing staff levels) to match current and foreseeable future demands, while allowing for some spare capacity to meet fluctuations.

It is the expected levels of service and performance that is expected by the customer, and applies not only to the finished product or service delivered, but also to the business processes that are required to make the product or develop and deliver the service.

This is the process of inspecting the P/S to check that it meets the required levels of quality expected by the consumer, and that it is 'fit for purpose'

Is concerned with preventing business processes producing quality failures. This is achieved by putting in place a set of quality standards that are agreed and put in place at all stages of production.

- The financial case of fewer errors in production and low wastage rates with the risk that some faulty products may reach customers. - The repuatation of the company with customers - customers are more likely to have confidence in a company that applies recognised quality standards than one that does not!