MNO2601_Exam_summary With Revision Questions.

MNO2601_Exam_summary. Production And Operations Management. What is operations management o The activity of managing the resources which are devoted to the production and delivery of products and services. It is a core function of any business although it may not be called operations management o It is concerned with managing processes. Because all management functions manage processes it is relevant to all managers  What do operations managers do and why is it so important o Translation of strategy into operational action o Design, planning, controlling and improvement of operation/processes o Can aid in reducing of costs, increasing revenue and reducing the investment cost for future innovation o Because of the a turbulent and dynamic business environment operations managers need to think on their feet o Improving operations can be the most effective way to improve financial performance  Input and Outputs o The process of operations to produce products and services by changing inputs to outputs. o The Transformation process model. Transformed resources –  Materials – process which materials transform their physical properties, shape or composition such as manufacturing operations. Other change location(logistic companies), position (retail), storage(warehousing)  Information – Operations that transform their informational properties such as accountants and marketing companies  Customers – Process where customers may change their physical properties (hairdressing), storage (hotels) and locations (transportation) Transforming resources –.  Facilities – The buildings, equipment, plant and process technology of the operation  Staff -The people at any level who operate, maintain, plan and manage the operation Tangible products, you can physically touch such as television or newspaper. Intangible products or services cannot be touched such as consultancy services or a haircut, although you can see the results. 1.4 Operation processes have different characteristics (Different characteristics of production/operation processes) All operations are similar but they do differ slightly in different ways, four of the following are important: 1. Volume – The level or rate of output from a process, a key characteristics that determines process behaviour. 2. Variety – The range of different products and services produced by a process, a key characteristic that determines process behaviour. 3. Variation – The degree to which the rate of level of output varies from a process of time. 4. Visibility – The amount of value added activity that takes place in the presence, in reality or virtually, of the customer also called customer contact. 1 | P a g e Transformed resources Materials Information Customers Transforming resources Facilities Staff THE TRANSFORMATION PROCESS Customers Input resources Output products and services The implication of the ‘four v’s’ of operations. A Typology of Operations 1.5 The activities of operation management (Activities of production/operation management)  While the exact nature of operations management may vary within different organizations, the following general activities apply to all types of operation o Understanding the operations strategic objectives – First responsibility of any management team is to understand what it is trying to achieve i.e. developing a clear vision. o Developing an operations strategy for the organization – Managers need to have a set of general principles to guide decision making. o Designing the operation’s products, services and processes – The activity of determining the physical form, shape and composition of products and services. o Planning and controlling the operation – What the operations resources should be doing and making sure that they are doing it. o Improving the performance of the operation o The broad responsibilities of operations management – Five responsibilities that are particular relevant: 1. The effects of globalization 2. The pressures of environmental protection 3. The increasing relevance of social responsibility 4. The need for technology awareness 5. How knowledge management is becoming an important part of operations  An effective and efficient operation will give a business the following types of advantages among others: a) Reduced costs of production through less waste, reworking, etc. b) increased revenue from increased customer satisfaction with better quality c) reduced investment in facilities and equipment through better utilization d) set the platform for future innovation by acquiring new knowledge and developing new skills 2 | P a g e Low repetition. Each staff member performs more of a job. Less systemisation High unit costs Flexible Complex Much customer needs High unit costs Changing capacity Anticipation In touch with demand High unit costs Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs. High repeatability Specialisation Systemisation Capital intensive Low unit costs Well defined Routine Standardised Regular Low unit costs Stable Routine Predictable High utilisation Low unit costs Tim lag between production and consumption Standardised Low contact skills High staff utilisation Centralisation Low unit costs. LowVARIETYHigh LowVARIATIONHigh LowVOLUMEHigh LowVISIBILITYHigh TOPIC 2: Performance objectives of ops management 2.2 Performance objectives for achieving production/operations based advantages.  The Five performance objectives for production/operations management are: o Quality – A consistence conformance to customer expectations o Speed – The elapsed time between customers requesting products or services and their receiving them. o Dependability – Delivering or making available products or services when they were promised to the customer o Flexibility – The degree to which an operations process can change what it does, how it is doing. o Cost – The ability to produce goods and services at costs to enable them to be priced appropriately. 5 Benefits associated with the performance objectives (page 21 studyguide) The quality objective – reduces costs and increases dependability; The speed objective – reduces inventories and risks; The dependability objective – saves time and money, and provides stability; The flexibility objective – speeds up response, saves time, and maintains dependability The cost objective – a universally attractive objective because “every unit of money less to cost is a unit added to profit” 3 | P a g e TOPIC 3: Productivity management STUDY UNIT 3: Macro perspective on productivity management  Productivity from a macro-economic perspective encompasses the whole economy (i.e. all sectors that make up the economy of a country, such as agriculture, mining, manufacturing, electricity, government, construction, commerce, transport, finance, etc.)  Productivity from a micro-perspective, where the emphasis falls on the individual firm, business, enterprise etc. 1.1 Macro-productivity defined. Economic definition: the ability to combine and convert inputs of labour, materials and capital into outputs of goods and services. Economically, a higher productivity rate will be achieved by doing more with less, or at least accomplishing more, with constant inputs Multifaceted definition: creating wealth through generation and application of knowledge to make available products and services that meet the needs of the user and are consistent with social, environmental, and economic goals of the PRODUCTIVITY SA DEFINITION - (NPI 2006:1) Productivity SA defines productivity as “the efficiency with which inputs of capital, materials and labour are used in the conversion of inputs (resources) into outputs (goods and services) as efficiently and effectively as possible, with the optimum use of human capital and physical resources for the benefit of society, the economy and the environment”. The following are the key elements of productivity (Productivity SA 2011a): 1. The outcome of productivity is continuous improvement of performance. 2. The improvement must be measurable. 3. Key drivers of productivity are: a. Effectiveness (doing the right things) b. Efficiency (doing things the right way) c. Utilisation (optimum use of human capital and physical resources) d. Elimination of all forms of waste. 4. The beneficiaries of productivity must be: a. the environment b. the economy c. society. 1.2 Importance of macro-productivity. Productivity SA (2011b) notes that a comparison of national economies has shown that the more productive the national economy becomes, the higher the personal income of its workers and the lower the rate of inflation in the long run. A productive enterprise or organisation leads to competitiveness, which raises incomes and saving for investment, which lead to growth, job creation and ultimately a decline in the unemployment rate. 1.2.1 Sectoral structure in South Africa 1) The primary sector consists of:  Agriculture, forestry and fishing (dominated by the agricultural sector)  Mining and quarrying (dominated by the mining sector) 2) The secondary sector consists of:  Manufacturing (the most dominant)  Electricity, gas and water  Construction 3) The tertiary sector consists of:  Wholesale, retail trade, catering and accommodation  Transport, storage and communication  Finance, real estate and business  Community, social and personal  General government services 3.7 IMPROVING MACRO-PRODUCTIVITY IN SOUTH AFRICA 4 | P a g e What are the suggestions from the NPI (the former Productivity SA) regarding policies for productivity growth? 1. A market-friendly social environment. This market-friendly social environment should be combined with stable macro-economic conditions (i.e. with inflation under control 2. Investment and savings. i. government investment in infrastructural programmes,. 3. Trade and Exports Trade stimulates productivity growth 4. The labour market An efficiently functioning labour market boosts growth directly since labour is a major production input. 5. Education and skills. A high proportion of productivity growth stems from advances in knowledge 6. Technology, research and development. This should be enhanced by developing technologies that are suited to the country’s own resource base 7. Small, medium and micro-enterprises (SMMEs). These will probably be the main source for the creation of new jobs in the economy STUDY UNIT 4: Micro-perspective on productivity. Because ultimately the whole economy (with all its sectors) is made up of individual firms and businesses, and the overall productivity of the country is the sum of the productivity of all its individual enterprises The more recent definition: is namely the efficient and effective use of all resources in the production or conversion process in order to produce outputs that can satisfy market, consumer, customer/client needs.