Operations Management

Planning

Monitoring

Being Efficient

Business IGCSE

The fantastic Mr Ahern

Lesson objectives

• In this lesson we will look at1. The AIMS of operations management2. The main tasks of operations

management3. Economies & diseconomies of scale4. Production methods5. Links to other functions6. Pros and cons of changing production

methods

What does operations management aim to do?• To produce the RIGHT

QUALITY of goods and services

• To produce them as QUICKLY as possible

• To produce them as CHEAPLY as possible

However……………….

• If you try and get all 3 at once

• Something has to give• Because–Quality–Speed and –Cheapness

• Don’t go together well!

Operations managers decide• Where to produce

– (location)– Resources– Human resources– Customers– Markets

• Scale of production– Achieve

• Economies of scale

– Avoid• Diseconomies of scale

• Manufacturing methods– Methods

• Flow• Batch• Job etc

• Supplies of materials– Where from– Best price– Best terms

Economies/Diseconomies of Scale• Economies

– Large businesses can• Buy bigger/better

machinery• Employ more

specialists• Negotiate better

discounts• Borrow money

more easily• Bear risk better

• Diseconomies• Drawbacks of size

– Harder to manage– Departmental

coordination more difficult

– Long chains of command

– Employee motivation harder – reduced feeling of ‘belonging’

Production methods

• Job production

• Batch production

• Flow production

• One-off - skilled workers

• Batches of identical items

• Continuous mass production

So What is Operations Management REALLY about?

• MANAGING a business

• To produce QUALITY goods and/or services

• At LOW Costs per unit

• At the RIGHT time

• To meet customer NEEDS

Production Ops Planning Link To Business Operations• Examples -

– A corporate objective for GROWTH will be followed by increased production (if we want to get bigger we must make more)

– A corporate objective for INCREASING MARKET SHARE will also mean• either more production of the same thing• or, changing to a new product

Links To Other Functions

• Finance– Cash for equipment/wages– Cost of equipment

justified?– Worth the cost?

• Marketing– What customers want– What they'll pay for it– High price impact on

demand (price elastic?)

• Human resources– How many

employees?– What skills needed?– What training needed?

– If less staff needed• Redundancies?• Redeployments?

Pros and Cons of Changing Production Methods• batch - flow - lean= more efficiency • Cost per unit lower, more made in same

time• But…..

– Can be inflexible– Cannot tailor product to specific need– Not good for ‘niche’ manufacturer

• Example – Henry Ford – “any colour as long as it’s black”

Overall Aim Of Production Planning• A business needs to get output

to levels where economies of scale make unit costs as low as possible, without letting it get to the point where diseconomies of scale start pushing costs up again

Lesson objectives revisited• In this lesson we looked at1. The AIMS of operations management2. The main tasks of operations

management3. Economies & diseconomies of scale4. Production methods5. Links to other functions6. Pros and cons of changing production

methods

Tasks (prefix your answer with the question)• Short questions

1. What are the aims of operations management?

2. What must a business do before switching to cell from flow production?

3. Give an example of economy of scale

• Long question• Analyse the pros

and cons to a food manufacturer of operating flow production on a large scale

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