First Partial  

5.1 The role of operations management 

 
Operations management and business functions 
Operations management, often referred to as production, Is concerned with providing the right goods and 
services in the right quantities and at the right quality level in a cost-effective and timely manner.  
 
The role of operations management impacts on all functional areas of a business like production methods.  
These changes,whatever the reasons, have a direct impact on the other functional areas of the 
organization.  
- Marketing implications: ​The production method used will affect both the quality and the individuality of the 
product. The ​output of an exclusive product​ means (high price due to its uniqueness and high quality). 
Packaging, physical evidence and people also play an important part in the overall marketing mix. CUANTAS 
UNIDADES PRODUCIR. 
- HRM implications​ The role of operations management has a direct impact on human resource management. 
For example number of workforce and training. 
- Finance implications:​ Capital intensity and lean production require heavy investment in machinery and 
equipment. ​Capital-intensive firms ​use investment appraisal techniques to assess whether the risks are 
worthwhile, and sometimes they need external sources of finance to fund the investment projects for 
example a ​contingency fund​ (finance kept for emergency use).  
 
Operations management and the provision of goods and services 
Operations management does not only apply to manufacturing because production is concerned with all four 
sectors of the economy:  
- Primary sector ​( raw materials ) ex. agriculture, mining, fishing 
- Secondary sector ​(turning natural resources into processed or finished goods) ex. manufacturing 
- Tertiary sector ​( provision of services) ex. tourism, transportation 
- Quaternary sector​ (provision of intellectual, knowledge-based activities) ex. consulting services 
 
Good​: Need storage, Capital intensive 
Service​: Labour intensive 
 
The ​factors of production​ (land, labour, capital and enterprise) are 
commonly known to marketing and production managers as the​ Five 
Ms​ ( materials, manpower, money, machines and management).  
 
The 5Ms can be a useful tool in marketing and production plans. They 
are combined in a way to ensure that there is ​value-added ​(greater 
output than cost) during the production stage of the transformation process (inputs into outputs).  
 
To ensure that output can be sold for more than the input costs, production managers need to deal with 
several ​key aspects of operations management​, including: 
- Methods of production. 
- Size, scope and timing of production  
- Production planning, e.g. stock control  
- Quality control systems 
 - Research & development and innovation  
 
Operations management strategies and practices 
Operations management has an important role in ensuring sustainability by creating a balance between the 
ecological, social and economic needs of people today and those of future generations.  
 
Sustainability​: a concept that promotes intergenerational equity, production enables consumption of goods 
and services for the people of today without compromising the consumption for the people of tomorrow. 
USAR GOODS Y SERVICES SIN COMPROMETER A LAS PERSONAS DEL FUTURO. 
 
The pillars of sustainability:  
Ecological sustainability:​ the capacity of the natural environment to meet the needs 
of the current generations. A​ lack of ecological sustainability ​means that production 
can exhaust (deplete) the earth's natural resources for future generations. NOT 
DAMAGE THE PLANET. 
 
Social sustainability:​ examines social interactions and structures that are 
necessary for sustainable development. It is the ability of the society to develop in 
such a way that it meets the social wellbeing needs of the current and future 
generations. It enables society to optimize the quality of life for people and their 
descendants. JOBS, GENDER EQUALITY, DISCRIMINATION. 
 
Economic sustainability​: the development that meets the economic needs of the present 
generation using existing available resources without compromising the ability of future 
generations to meet their needs. RESOURCES USED IN EFFICIENT WAY.  
 
 

5.2 Production Methods 

 
Job Production 
Job production involves ​customizing ​an individual product from 
start to finish, tailor made to meet the specific requirements of 
the client. ​Job production (or customized production)​ covers a 
whole range of tasks from those that are small scale involving 
little or no technology to complex jobs that cannot be completed 
without high technology. EXAMPLE: WEDDING CAKE ORDER 
 
Batch Operations 
Batch production ​involves simultaneously producing a limited number of identical products (known as a 
batch). Work on each batch is fully completed before production switches to another batch using the same 
staffand machinery. EXAMPLE: PANADERÍAS. 
 
Batch production tends to be used when the​ level of demand ​for 
a product is not clear. Instead, estimates of sales volumes are 
made and carefully monitored. Output can then be adjusted accordingly. Production of one product line can 
be stopped if necessary, perhaps to work on another more urgent batch. 
 
Mass Production 
Mass production​ is the manufacturing of large amounts of a standardized product. It often involves the 
assembly of individual components, with parts bought from other companies. It tends to be 
capital-intensive with many tasks relying on automation. Therefore unit costs of production are relatively 
low. EXAMPLE: ZAPATERÍA, H&M  
 
An essential part of mass production is ​SPECIALIZATION- 
specialized capital equipment and people are used at each 
workstation to carry out a different function essential to 
the overall production process, resulting in high levels of 
productivity.  
 
Flow Production 
Flow production (or process production)​ focuses on a 
continuous production process of manufacturing products 
that are standardized (or homogeneous) in large 
quantities. Flow production relies entirely on automated systems with very few workers required. EXAMPLE: 
COCA COLA, PERIÓDICO. 
 
 
BASIC FLOW 
PRODUCTION 
PROCESSES 
 
 
 
 
 
Cellular manufacturing 
Cellular manufacturing​ (or cell production) is a modern 
adaptation of assembly line production whereby sets of tasks 
are completed by teams (or cells') by splitting the production 
process into a number of self-contained units. Each cell, with 
its specialized grouping of machines, materials and manpower, 
is given responsibility for completing a part of the overall 
production process. This ​create opportunities of rotation​ and 
multitasking​.  
 
Whether it is more appropriate for a business to adopt more capital or labour intensive methods of 
production depends on several factors, including:  
- The relative cost of labour and capital 
- The size of the market 
 - The aims and objectives of the organization  

 
5.3 Lean production and quality management 
Features of lean production 
Lean production​ is the process of streamlining operations and processes to ​reduce all forms of waste​ and 
to achieve ​greater efficiency​. Thus, lean production should lead to improved quality and reduced costs. It 
was first used in Japan during the 1950s. Businesses are increasingly trying to reduce waste (or muda,  
the Japanese term for 'waste) in the production process.  
 
Different examples of muda exist, such as: 
- Materials and resources​ ( wastage of materials and 
resources) 
- Time​( delays in the production) 
- Energy ​(save energy for financial resources)  
- Human effort​ (Tasks need to be reworked) 
 
Methods of lean production 
Andon:​ ​a lean production method that uses visual control systems to indicate the status of an aspect of the 
production process. example: machinery, production line or work process.  
Andons are typically colour-coded using a traffic light system: ​Green ​(normal operations in progress) ​Yellow 
(attention will be needed) ​Red ​(immediate attention is required) CONTROL DE MANUFACTURA.  
EXAMPLE: FOCOS DEL CARRO QUE TE DICE QUE HAY UN PROBLEMA. 
 
Kaisen​: the Japanese term for 'continuous improvement', a lean production philosophy where workers and 
managers continually try to find ways to improve work processes and efficiency. KAI SIGNIFICA CHNAGE AND 
SEN BETTER 
 
Just in time:​ an inventory management system based on stocks being delivered as and when they are 
needed in the production process. As stocks are delivered just before they are used, there is no need to 
have buffer stocks. 
 
Kanban​: a method of lean production used to ensure that inventory is based on 
actual customer orders​ using a card system with an inventory number attached 
to each component in the production process. ORDEN Y CONTROL.  
EXAMPLE: GORDITAS DOÑA TOTA (ORDER EN TICKET) 
 
 
Cradle to cradle design manufacturing 
Cradle to cradle​ is a sustainable model of production based on ​natural processes​. The underlying principle of 
C2C is that there is no waste in nature, making production sustainable for future generations. NO 
CONTAMINACIÓN Y SE REUSAN.  
EXAMPLE: BOTELLAS DE VIDRIO DE COCA Y LOS POPOTES DE AGUACATE  
By contrast, ​cradle to grave​ refers to one time use, which is the most common form of manufacturing.NO SE 
REUSAN, CONTAMINAN.  
 
Recycling​ enables old materials to be reprocessed into new products, with the aim of preventing waste. 
Reuse ​is different from recycling as the product is not made into a new material or product.  
Reusing ​resources also prevents waste 
 
Quality control and quality assurance 
Quality ​means that a good or service must be fit for its purpose by meeting or exceeding the expectations 
of customers.  
 
Quality assurance​ are the methods used by a business to reassure customers 
that its products meet certain quality standards, such as the ISO 9000. 
Advantages: employees participate and give new ideas CULTURA DE HACER LAS 
COSAS SIEMPRE BIEN A LA PRIMERA. 
 
 
 
Quality control ​is the traditional way of quality 
management that involves checking and reviewing 
work processes. This is usually carried out by quality 
controllers and inspectors. INSPECTOR Y BUSCAS 
DEFECTOS 
 
Professor W. Edwards Deming​, considered by many as the ​father of quality management​, argued that QC 
methods are ineffective and costly.  
Deming's philosophy for quality improvement is based around four key phases: ​PLAN- DO- CHECK- ACT 
 
Methods of managing quality 
Quality circles​ are ​groups of workers that meet on a regular basis to identify problems related to quality 
assurance, to consider alternative solutions to the identified problems and to make feasible 
recommendations for improvement. GRUPOS DE EXPERTOS PARA BUSCAR MEJORÍA. 
 
Benchmarking or Best Practice benchmarking ​is the process of identifying best practice in an industry, in 
relation to products, processes and operations. It sets the standards for other firms to emulate. 
COMPARARTE CON EL LÍDER DEL MERCADO. 
 
Total Quality Management 
Total Quality Management (TQM)​ is the process that attempts to 
encourage all employees to make quality assurance paramount in 
the various functions (production, finance, marketing and HRM) 
of an organisation. The ​purpose ​is to achieve zero defects in the 
organization. TODOS SE COMPROMETEN A LLEGAR A LAS METAS. 
 
Zero defect ​is the goal of producing each and every product without any mistakes or imperfections, thereby 
eliminating waste and reworking time (the time taken to correct faults).  
  
A Total quality culture (TQC)​ is a philosophy that embeds quality in every business operation and process. It 
places quality as the core focus in all functional areas, i.e. every employee is responsible for quality 
assurance, rather than it being the traditional role of the quality control department. LA CULTURA, LA 
MENTALIDAD 
TQC is a prerequisite to achieving TQM. 
 

5.5 Production planning 

The supply chain process 
The​ supply chain (or logistics)​ refers to the sequence of activities from the production of a good or service 
to it being delivered to the end customer. Supply chain management (SCM) is the art of managing and 
controlling these logistics, which must be efficient and cost effective for a business to be profitable. 
SECUENCIA DEL PRODUCTO 
 
SCM will usually involve several key functions: 
- Stock control 
- Quality control 
- Supplier networks 
- Transportation 
 
Just in time and Just in case 
Just in Case (JIC) ​Holding high stock levels 'just in case' 
there is a production problem or an unexpected upsurge in 
demand. EXAMPLE: ZARA 
 
 
 
Just in Time(JIT)​ A stock control method that aims to avoid 
holding stocks by requiring supplies to arrive just as they are 
needed in production and completed products are produced to 
order. Lean production EXAMPLE: PORSCHE 
 
It requires a buffer stocks because: 
- failure of supplying firm to deliver on time 
- production problems halting output 
- increased consumer demand. 
 
Stock Control 
Stocks or inventories​ are materials and goods required to allow for the production of and supply of products 
to the customer. There are 3 categories: 
- Raw materials​ - These are the natural resources used for production 
 - Work-in-progress​ - These are semi-finished (unfinished) products 
- Finished goods​ - These are complete units of output that are ready for sale 
 
Stockpiling​ (holding too much stock) and ​stock-outs​ (holding in NOT sufficient stocks) create problems for 
a business. Stockpiling can be caused by overproduction and/or falling demand.  
Optimus stock level​ MAYOREO 
Lead time:​ DIA EN QUE LO PIDES HASTA EL DIA EN QUE TE LLEGA 
Reorder quantity:​ MAX- MIN reorder 
Buffer stock:​ Tener por si acaso JIC 
 
Capacity utilization 
Capacity utilization​ measures a firm's existing​ level of output as a proportion of its potential output​. 
High capacity utilization means that the level of output is close to its maximum (known as the ​productive 
capacity​). 
 
 
 
 
 
 
Potential ​drawbacks ​to operating at full capacity for a long period of time: 
- Staff may feel under pressure 
- Regular customers who wish to increase their orders will have to be turned away or kept waiting 
for long periods.  
- Machinery will be working flat out  
 
Excess capacity:​ ​Exists when the current levels of demand are less than the full capacity output of a 
business - also known as spare capacity. 
 
Full capacity:​ When a business produces at maximum output. 
 
Capacity shortage:​ when the demand for a business's products exceeds production capacity. 

Productivity 
Productivity​ is h​ow well a firm is using its resources in the process of producing its goods or services is 
measured by its productivity rates. 
 
Productivity rate measures how well  resources 
are used in the production process. 
 
Productivity rate formula:  
Total output/Total input x 100 
 
 
Higher productivity rates are important to businesses for several reasons, which can be remembered using 
the '4 Es': 
- Economies of scale​ (higher output, less cost of production) 
- Earnings​ (higher profits and earning) 
- Efficiency​ (improved competitiveness) 
- Evolution ​(growth) 
 
Labour productivity​ is measuring the output per worker. A good indicator of the current skills and motivation 
within the workforce. 
 

 
The​ five key determinants of productivity rates​ can be remembered using the acronym “​TRIES​”: 
- T​echnology 
- R​ivalry 
- I​nnovation 
- E​ntrepreneurship 
- S​kills and experience 
 
Cost to buy- Cost to make 
Cost-to-Buy formula: ​Price x Quantity 
Cost-to-Make formula: ​Fixed costs + (average variable cost x quantity) 
 
Make-or-buy decision:​ A judgment made by management whether to make a component internally or buy it 
from the market. 
 
When deciding whether to make or buy, four key variables must be known: 
- The expected ​sales volume​ or ​quantity ​(Q) 
- The ​fixed costs​ (FC) associated with making the product 
- The ​average variable costs​ (AVC) of making the product 
- The​ price​ per unit (P) charged by the supplier 

5.7 Crisis management & contingency planning

 
Crisis​: is a situation of instability that results in major problems for a business.  
 
Crisis management 
Crisis management​ also known as ​disaster recovery​ are s​teps taken by an organisation to limit the damage 
from a significant, damaging events by handling, containing and resolving it. 
 
Effective crisis management contains which steps: 
- Transparency​ (open and honest) 
- Communication ​(effective and proactive) 
 - Speed ​(time and fast) 
- Control ​(leadership and confidence) 
 
Contingency planning​ is preparing the immediate steps to be taken by an organisation in the event of a 
crisis or emergency. Developing a plan BEFORE and unwanted event occurs using “What if”. Helps crisis 
management by preparing for an event of a crisis.  
 
Key steps in contingency planning:  
1. Identifying potential disasters (relevant) 
2. Assessing the likelihood of these occurring (issues chosen carefully) 
3. Minimising the potential impact of the crisis (eliminating potential risks) 
4. Planning for continued operations of the business (operating again) 
 
The difference between these two is that ​contingency ​is planning the process of preparing for emergencies 
while ​crisis ​is the overall management of emergencies 
 
Cost, time and risks can be either advantages or disadvantages according to how contingency planning is 
used.