OPERATIONS

 
Business  Studies  Topic  One  
Sahil  Bhandula  
 

   
 BUSINESS  STUDIES  HSC  DESTRUCTION  (OPERATIONS)  
 
Role  of  Operations  Management  
 
Operations  refer  to  the  business  processes  that  involve  transformation,  or  more  generally  production.  
 In  manufacturing,  operations  refers  to  the  processes  involved  in  turning  raw  materials  and  
resources  into  outputs  of  finished  goods  or  products.  
 In  services  sector,  operations  refer  to  the  processes  involved  in  actually  carrying  out  the  
service.  
 
Example  of  manufacturing  operations:     Example  of  service  sector  operations:      
A  vehicle  manufacturer  turning  steel   The  provision  of  professional  advice  by  a    
into  cars  or  an  oil  refiner  converting   solicitor  and  the  washing,  cutting  and    
crude  oil  into  petrol  or  paraffin  for   styling  of  hair  by  a  hairdresser.    
candle  making.    
 
 
Operations  involve:  
 The  production  of  goods  and  services  
 Production  controls  and  associated  quality  controls  on  processes  
 Inventory  control  (monitoring  stock  levels)  
 Supply  chain  management  (organising  who  supplies  your  raw  materials)  
 Logistics  and  distribution  (delivery  of  products,  or  retail  set  up)  
 Management  decision  making  in  terms  of  operational  processes  
 
Inputs  and  Outputs:  
Business  inputs  include  tangible  things  such  as  raw  materials,  land,  labour  resources,  capital  in  the  
form  of  machinery  and  technology,  as  well  as  intangible  inputs  such  as  ideas  and  information.  
 
Business  outputs  include  the  products  (goods  and  services)  made  for  the  processes  of  transformation  
–  that  is,  operations.  
 
Strategic  Role  of  Operations  
‘Strategic’  means  the  long-­‐term  planning  performed  by  senior  managers  –  and  the  strategic  goals  are  
to  improve  productivity,  efficiency  and  quality  of  outputs.  The  following  are  the  strategic  roles  of  
operations  which  management  may  implement:  
 
Cost  Leadership:  involves  aiming  to  have  the  lowest  costs  or  to  be  the  most  price  competitive  in  the  
market.  A  key  aspect  to  cost  leadership  is  that  although  trading  with  the  lower  cost,  the  overall  
business  should  still  be  profitable.  This  means  that  operations  managers  must  find  ways  to  minimize  
costs.  
 
Economies  of  scale:  refers  to  cost  advantages  that  can  be  created  because  of  an  increase  in  scale  of  
business  operations.  Typically  the  cost  savings  from  being  able  to  purchase  lower  cost  per  unit  of  
input  and  efficiencies  created  from  the  improved  use  of  technology  and  machinery.  
 
Product  Differentiation:  refers  to  distinguishing  products  in  some  way  from  its  competitors  
 
Product  Differentiation:  Goods  –  varying  the  actual  product  features;  varying  product  quality  
and  varying  any  augmented  features  
 
Product  Differentiation:  Services  –  varying  the  amount  of  time  spent  on  a  service;  varying  the  
level  of  expertise  brought  to  a  service;  varying  the  qualifications  and  the  experience  of  a  
service  provider  and  varying  the  quality  of  materials/technology  used  in  service  delivery  
  
Cross  Branding:  For  both  goods  and  services,  differentiation  can  be  created  from  cross-­‐  
branding  or  strategic  alliances.  This  approach  adds  value  to  products  by  offering  consumers  
added  benefits  from  a  cross-­‐branding  arrangement.  
 
Goods  and/or  Services  in  Different  Industries  
Operations  decisions  will  vary  for  goods  depending  on  whether  they  are  standardised  goods  or  
customised  goods.  
 
Standardised  Goods:  are  those  that  are  mass-­‐produced,  usually  on  an  assembly  line.  Standardised  
goods  are  uniform  in  quality  and  meet  a  predetermined  level  of  quality.  E.g.  Toyota  produce  
standardized  cars  for  the  customers  to  buy  outright  with  no  personal  changes.  
 
Customised  Goods:  are  those  that  are  varied  according  to  the  needs  of  customers.  These  goods  are  
produced  with  a  market  focus  rather  than  a  production  focus.  E.g.  customized  furniture  is  possible  
where  you  can  choose  what  colour,  what  cover  material  to  use  and  the  cushion  selection.  
 
Interdependence  with  Other  Key  Business  Functions  
 
The  operations  department  brings  together  the  materials  and  the  activities  needed  for  the  production  
of  goods  and  services  to  meet  consumer  demand.  It  also  shares  ideas  across  the  business  about  how  to  
improve  processes  or  achieve  cost  savings  to  bring  about  best  practice.  The  operations  manager  will  
liaise  with  the  other  department  in  the  following  ways:  
 
 Discuss  staffing  and  training  and  development  needs  with  the  Human  Resources  
department/manager.  
 Discuss  financing  requirements  with  the  Accounting  and  Finance  department/manager.  
 Discuss  product  design  with  the  Marketing  department/manager.  
 
Therefore,  it  can  be  seen  that  the  Operations  department  carries  out  a  coordinating  role  in  the  
business  to  ensure  that  the  prime  function  (main  activity)  of  the  business  is  carried  out  efficiently  and  
effectively  so  that  consumer  demand  is  met.  In  this  way  the  business  will  be  profitable.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Influences  on  Operations  
 
 
 
Globalisation  

Corporate  Social  
Responsibility   Technology  

Environmentally   Quality  
Sustainablity   InVluences   Expectations  

Government  
Legal  Regulations   Policies  

Cost-­‐Based  
Competition  

Globalisation  
Globalisation  refers  to  the  removal  of  barriers  of  trade  between  nations.  Two  key  features  of  
globalisation  include:  
 Increasing  integration  between  national  economies    
 High  degree  of  transfer  of  capital,  labour,  intellectual  capital  and  ideas,  financial  resources  and  
technology  
 
What  influence  does  globalisation  have  on  operations  management?  
Globalisation  is  a  very  significant  influence  on  operations  management.  Large  businesses  are  
increasingly  orienting  what  they  produce  and  how  they  produce,  towards  the  global  market,  with  a  
view  to  meeting  the  needs  of  global  consumers.  
 
The  supply  chain  refers  to  the  range  of  suppliers  a  business  has  and  the  nature  of  its  relationship  
with  those  suppliers.  For  large  global  businesses  the  integration  of  the  range  of  suppliers  creates  a  
network  sometimes  called  the  global  web.  
 
Global  web  refers  to  the  network  of  suppliers  a  business  has,  chosen  on  the  basis  of  lowest  overall  
cost,  lowest  risk  and  maximum  certainty  in  quality  and  timing  of  supplies.  
 
The  global  web  strategy  is  one  in  which  the  business  aims  to  minimise  cost  across  the  range  of  its  
suppliers.  Thus,  a  business  will  opt  for  a  location  that  places  it  in  appropriate  proximity  to  the  
suppliers.  If  a  high  proportion  of  the  suppliers  are  in  one  particular  region,  this  may  decide  the  
location  of  the  main  operational  processes.  
 
 
 
 
 
Technology  
Technology  is  defined  as  the  design,  construction  and/or  application  of  innovative  devices,  methods  
and  machinery  upon  operations  processes.  
 
 Technology  developments  strongly  influence  operations  and  production  management  
 New  technologies  in  production  and  operations  have  redesigned  and  reduced  the  need  for  
energy  and  raw  materials,  and  result  in  less  waste  and  faster  production  
 
‘NEW  TECHNOLOGIES’  REFER  TO:  
 
 
 
 
 
 
 
Computer  Aided  Design  (CAD)  is   Computer  Aided  Manufacture  (CAM)    
software  that  allows  engineers  to   is  software  that  allows  engineers  to    
design  and  change  products.  CAD  is  the   design  and  change  products.  CAM  is    
use  of  computer  systems  to  assist  in   the  use  of  computer  software  to    
the  creation,  modification,  analysis,  or   control  machine  tools  and  related    
optimization  of  a  design.   machinery  in  the  manufacturing  of    
work  pieces.    
 
 
Quality  Expectations  
Quality  is  understood  to  be  a  specific  reference  to  how  well  designed,  made  and  functional  goods  are,  
and  the  degree  of  competence  with  which  services  are  organised  and  delivered.  A  business  that  falls  
short  of  the  customer  expectations  will  suffer  a  long-­‐term  damage  to  its  goodwill  and  reputation  in  
the  market.    
 
Quality  Expectations  with  Goods   Quality  Expectations  with  Services  
Quality  of  design   Professionalism  of  the  service  provider  
Fitness  for  purpose   Reliability  of  the  service  provider  
Durability   Level  of  customisation  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government  Policies  
Since  policies  can  inform  law-­‐making,  and  also  lead  to  business  opportunities,  operations  managers  
need  to  be  fully  aware  of  the  contemporary  government  policies  and  what  they  compromise.  Policies  
below  all  impact  on  business  operations  in  terms  of  costs  and  opportunities:  
 Taxation  rates  
 Required  materials  handling  practices   EXAMPLES  OF  GOVT.  REGULATION  
 OH&S  standards   Workplace  Health  and  Safety  Act  
 Training  and  rules    
 Public  health  Policies   Anti-­‐Discrimination  Act  
 Environmental  Policies    
 Employment  relations   Fairwork  Act  
 Trade  and  industry  policies    
   
Cost-­‐Based  Competition  
The  business  can  reduce  its  prices  lower  than  its  rivals.  Sales  and  market  share  should  increase  as  
well  as  profit.  This  influence  may  force  a  business  to  seek  its  own  cost  advantages  through  sourcing  
cheaper  inputs,  updating  technology  or  outsourcing.  
 
Legal  Regulation  
Compliance  costs  are  the  expenses  associated  with  
Achieve  
meeting  the  requirements  of  legal  regulations.  The  range  
economies  of  
scale  
of  laws  with  which  a  business  must  comply  are  
collectively  termed  compliance.  The  relevant  laws:  
 
Use  automated  
production  
systems  
Bulk  buy  inputs   -­‐WHS  in  the  use  of  machinery  and  in  interacting  with  the  
business  environment  
BUSINESSES  
 
THAT  
REDUCE   -­‐Training  and  development  in  the  use  of  technology  
COSTS  
 
-­‐Fair  work  and  anti-­‐discrimination  laws    
Produce  high  
volume  output   Eliminate  waste    
-­‐Environmental  protection  in  the  use  of  minimising  
pollution,  etc  
Standardised  
products  for  large    
markets  
-­‐Public  health  laws  
 
 
 
Environmental  Sustainability  
Environmental  sustainability  refers  to  the  development  and  use  of  methods  of  production  that  allow  
resources  to  be  used  by  producers  today  without  limiting  the  ability  of  future  generations  to  satisfy  
their  needs  and  wants.  Managers  have  a  responsibility  to  protect  the  natural  environment  and  ensure  
that  their  methods  of  production  incorporate  sustainable  resource  use.  
 
Corporate  Social  Responsibility  (CSR)  
CSR  refers  to  open  and  accountable  business  actions  based  on  respect  for  people,  community/society  
and  the  broader  environment.  It  involves  business  doing  more  than  just  complying  with  the  laws  and  
regulations.  
Crucial  to  the  concept  of  CSR  is  the  idea  of  the  triple  bottom  line.  Business  try  to  achieve  all  three  
aspects  of  the  triple  bottom  line  including:  
 
 Profit  
 Social  Justice  
 Environmental  protection  
  
What  is  the  difference  between  legal  compliance  and  ethical  responsibility?  
Legal  compliance  is  the  requirements  that  a  business  follows  the  letter  of  the  law  –  the  prescribed  
standards  of  behaviour.  
 
Ethical  responsibility  sees  businesses  meeting  all  of  their  legal  obligations  and  taking  it  further  by  
following  the  intention  and  ‘spirit’  of  the  law.  
 
Legal  compliances  include:  
 Labour  law  compliance  (minimum  wages,  awards  etc.)  
 Environmental  and  public  health  compliance  (minimum  pollution,  stopping  dumping,  etc.)  
 Business  licensing  rules  (certain  level  of  training,  etc.)  
 Taxation  (any  levies  and  duties,  etc.)  
 Trade  practices  and  fair  market  dealings  
 Migration  and  rules  around  the  use  of  offshore  skilled  labour  
 Intellectual  property  
 Financial  and  accounting  regulations  and  corporations  law  
 Human  rights  
 
Environmental  Sustainability  and  Social  Responsibility  
There  needs  to  be  a  balance  between  economic  concerns  and  environmental  concerns  –  
environmental  sustainability.  Businesses  are  being  asked  to  take  increasing  responsibility  for  the  
protection  of  the  environment.  Due  to  this,  businesses  have  adopted  policies  of  conservation,  
recycling  and  restoration.  
 
Social  responsibility  is  good  business  –  customers  eventually  find  out  which  businesses  are  acting  
responsibly  and  which  are  not.  Customers  can  react  and  stop  buying  a  business’s  product  if  they  learn  
that  the  business  is  exploiting  employees,  accepting  bribes  or  polluting  the  environment.  At  the  same  
time,  customers  will  reward  socially  responsible  businesses  by  purchasing  more  of  their  products.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operations  Processes  –  Inputs  
 
Inputs  are  the  resources  used  in  the  transformation  (production)  process.  Some  inputs  are  already  
owned  by  the  business,  while  others  come  from  suppliers.  
 
 
 
  TRANSFORMING  
  RESOURCES    
  Human  resources  (labour)    
  Facilities  

Inputs  
 
   
  TRANSFORMED  RESOURCES    
 
  Materials    
  Information    
  Customers  
   
 
 
TRANSFORMED  RESOURCES  
Transformed  resources  are  those  inputs  that  are  changed  or  converted  in  the  operations  process;  they  
are  transformed  by  the  operations  process.  
 
Materials:  Materials  are  the  basic  elements  used  In  the  production  process  and  consists  of  two  types:  
raw  materials  and  intermediate  goods.  
 
Information:  Information  is  the  knowledge  gained  from  research,  investigation  and  instruction,  
which  results  in  an  increase  in  understanding.  Information  acts  as  a  transformed  resource  when  it  is  
used  to  inform  how  inputs  are  used,  where  they  are  drawn  from,  which  suppliers  and  supplies  are  
available,  and  so  on.  
 External  information  is  information  that  comes  from  market  reports.  Stats  and  industry  bodies,  
etc.  
 Internal  information  comes  from  within  the  business  and  is  gathered  from  internal  sources  
such  as  financial  reports,  quality  reports,  and  internal  key  performance  indicators  (KPI’s)  such  
as  lead  times,  etc.  
 
Customers:  Customers  become  transformed  resources  when  their  choices  shape  inputs.  The  
customer  acts  as  an  input  and  their  desires  and  preferences  act  as  a  transformed  resource.  
 
TRANSFORMING  RESOURCES  
The  other  collection  of  inputs  to  any  operations  processes  is  transforming  resources  that  are  those  
inputs  that  carry  out  the  transformation  process.  They  enable  the  change  and  value  adding  to  occur.  
 
Human  Resources:  Staff  that  is  well  qualified,  hard  working  and  disciplined  can  bring  great  
productivity  and  efficiency  to  business  operations.  The  effectiveness  with  which  human  resources  
carry  out  their  work  duties  and  responsibilities  can  determine  the  success  with  which  transformation  
and  value  adding  occurs  
 
Facilities:  Facilities  refer  to  the  plant  (factory  or  office)  and  machinery  used  in  the  operations  
processes.  Major  decisions  include  the  design  layout  of  the  facilities,  the  number  of  facilities  to  be  
used,  their  location  and  their  capacity.  
Operations  Processes  –  Transformation  Processes  
 
The  main  concept  of  operations  processes  is  transformation,  which  is  the  conversion  of  inputs  
(resources)  into  outputs  (goods  or  services).  The  operations  process  of  a  manufacturer  tends  to  be  
highly  automated  or  mechanised.  
 Manufacturers  use  machinery,  robots  and  computers  to  convert  inputs  into  outputs  
 Service  providers  rely  heavily  on  interaction  with  the  customer  

ELEMENTS  OF  THE  TRANSFORMATION  PROCESS:  

o The  influence  of  volume,  variety,  variation  in  demand  and  visibility  (customer  contact)  
o Sequencing  and  scheduling  –  Gantt  charts,  critical  path  analysis  
o Technology,  Task  design  and  Process  layout  
o Monitoring,  Control  and  Improvement  

 
THE  4  V’S  INFLUENCES  

InVluences  on  the  

Transformation  
Processes  

Volume   Variety   Variation   Visibility  

Depending  on  which  of  the  4V’sis  considered  the  most  important  to  the  business,  this  will  affect  the  
type  of  production  method  used.  
 

Types  of  Production  

Job:  Producing  a  single   Batch:  Producing  a  small  

Flow:  Producing  a  large  
unique  item;  suits  those   number  of  the  same  item;  
number  of  items  at  the  
products  and  services   using  the  same  process  
same  time;  Products  tend  
that  require  more  than  a   and  produced  in  batches  
to  have  little  variation  
standard  product   of  50-­‐200  

 
 
The  Influence  of  Volume  
Volume  refers  to  how  much  of  a  product  is  made.  A  business  using  mass  production  will  produce  a  
high  volume  with  a  high  degree  of  process  repetition.  A  low  volume  business  will  use  a  production  
process  that  allows  lots  of  stoppages  and  adjustments.  
 High  volume  =  large  amount  of  capital,  facilities,  technology  and  materials  
 Low  volume  =  focus  more  on  multi-­‐skilled  labour  
 
Volume  flexibility  refers  to  how  quickly  the  transformation  process  can  adjust  to  increases  or  
decreases  in  demand.  The  responsiveness  to  the  required  changes  in  volume  is  essential  to  effectively  
managing  lead  times.  Lead-­‐time  is  the  time  it  takes  for  an  order  to  be  fulfilled  from  the  moment  it  is  
made.  If  businesses  cannot  quickly  adjust  to  changes  in  market  demand,  it  can  over  produce,  which  
will  lead  to  wastage  and  an  increase  in  inventory  costs.  Alternatively,  if  back  orders  cannot  be  quickly  
fulfilled,  it  can  lead  to  lost  sales.  
 
The  Influence  of  Variety  
Variety  refers  to  the  number  of  different  models  and  variations  offered  in  the  products  or  services.    If  
the  business  has  customers  with  different  needs,  goods  and  services  will  have  to  be  modified  or  a  
wide  variety  of  models  and  options  will  be  provided.    
 
Mix  flexibility  is  known  by  consumers  as  product  range  or  variety  of  choice.  
 
The  Influence  of  Variation  
Where  demand  for  the  product  or  service  fluctuates  during  the  year,  variations  in  labour  inputs  may  
be  needed.  Variation  can  change  according  to  time  of  day,  season,  holidays  and  time  of  year.  
 
An  increase  in  demand  will  require  increased  inputs  from  suppliers,  increased  inputs  from  suppliers,  
increased  human  resources,  increased  energy  use  and  increased  use  of  machinery  and  technology.  
 
A  decrease  in  demand  will  also  require  operational  flexibility  as  staff  may  need  to  have  their  hours  
reduced,  production  may  need  to  slow  to  avoid  inventory  build  up  and  suppliers  may  put  on  pressure  
due  to  contractual  agreements.  
 
The  Influence  of  Visibility  
Operations  will  also  be  influenced  by  the  degree  to  which  customers  can  see  the  operations  in  action.  
Service  based  businesses  (e.g.  school)  will  have  a  high  level  of  visibility,  while  customers  will  rarely  
see  the  operations  process  of  a  manufacturing  based  business.  If  a  business  is  of  high  visibility,  the  
quality  of  labour  must  be  at  an  adequate  level  so  that  the  solid  customer  base  is  maintained.  
 
SEQUENCING  AND  SCHEDULING  
 
Scheduling  and  sequencing  tools  are  used  to  identify  all  steps  in  the  operations  process  and  organise  
them  into  the  most  efficient  order  to  complete.  
 
Sequencing  refers  to  the  order  in  which  activities  in  the  operations  process  occur.  
 
Scheduling  refers  to  the  length  of  time  activities  take  within  the  operations  process.  The  two  main  
scheduling  tools  are:  
 Gantt  Charts  
 Critical  Path  Analysis  (CPA)  
 
TASK  ANALYSIS  IS  THE  BREAKDOWN  OF  EXACTLY  HOW  THE  MANUFACTURE  OF  A  GOOD  OR  
ACTIVITIES  TO  PROVIDE  A  SERVICE  IS  TO  BE  ACCOMPLISHED.  
 
 
Gantt  Charts:  The  Gantt  chart  outlines  the  activities  that  need  to  be  performed,  the  order  in  which  
they  should  be  performed  and  how  long  each  activity  is  expected  to  take.  There  are  two  main  
advantages  of  using  Gantt  charts:  
 Firstly,  they  force  a  manager  to  plan  the  steps  needed  to  complete  a  task  and  to  specify  the  
time  required  for  each  task.  
 Secondly,  they  make  it  easy  to  monitor  actual  progress  against  planned  activities.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Critical  Path  Analysis  (CPA):  The  CPA  is  a  scheduling  method  or  technique  that  shows  what  task  
needs  to  be  done,  how  long  they  take  and  what  order  is  necessary  to  complete  those  tasks.  The  critical  
path  is  the  shortest  length  of  time  it  takes  to  complete  all  tasks  necessary  to  complete  the  process  or  
project.  
 
 

 
 
 
 
TECHNOLOGY,  TASK  DESIGN  AND  PROCESS  LAYOUT  
 
Technology  
Every  business  uses  some  form  of  technology  to  transform  its  inputs  into  outputs.    
 
Why  use  technology  in  operations  processes  of  a  business?  
 Technology  can  improve  the  competitiveness  of  operations  by  giving  it  more  flexibility  as  it  
allows  the  business  to  respond  to  changes  in  the  market  more  easily.  
 The  business  can  change  volumes  to  meet  a  sudden  increase  in  demand  or  produce  different  
variations  of  products  to  satisfy  changing  consumer  demands  and  produce  non-­‐standardised  
versions  of  its  standard  product  to  satisfy  individual  clients.  This  is  to  improve  to  productivity,  
less  waste  and  more  efficient  use  of  time.  
 
Business  technology  involves  the  use  of  machinery  and  systems  that  enable  business  to  undertake  the  
transformation  process  more  effectively  and  efficiently  Business  technology  items  that  are  
commonplace  today  includes:  
 Computer  
 Keyboard  
 CD  ROM,  USB  
 Modem  
 Mobile/telephones  etc.  
 
Manufacturing  technology  can  be  used  to  speed  up  (shorten)  processes  and  enable  fuller  utilisation  of  
raw  materials.  This  makes  the  operations  processes  more  cost  effective.  Key  manufacturing  
technologies  include:  
 Robotics  
 Computer-­‐aided  design  (CAD)  
 Computer-­‐aided  manufacturing  (CAM)  
 
In  the  services  sector,  office  and  communications  technology  have  enabled  whole  markets  to  open  up  
and  allow  for  a  small  to  medium  business  to  trade  globally.  
 
Task  Design  (Deciding  how  a  task  will  be  completed)  
Task  design  involves  classifying  job  activities  in  ways  that  make  it  easy  for  an  employee  to  
successfully  perform  and  complete  the  task.  Each  individual  task  is  analysed  and  broken  down  into  
separate  steps  and  allocated  to  machines  and  employees  with  the  appropriate  skills,  knowledge  and  
capabilities.  
 
Plant  (Factory/Office)  Layout  
Plant  layout  refers  to  the  plan  of  the  physical  layout  of  the  business’s  factory  or  office  and  is  the  
arrangement  of  equipment,  machinery  and  staff  within  the  facility,  which  obviously,  has  an  impact  on  
the  efficiency  of  the  operations  function.  
 
Types  of  factory  layouts:  
 
 
 
  PROCESS  LAYOUT   PRODUCT  LAYOUT  
 
 
 
  FIXED  POSITION  LAYOUT  
 
 
  
Process  Layout:  
The  process  layout  is  the  arrangement  of  machines  such  that  the  machines  and  equipment  are  
grouped  together  by  the  function  they  perform.    
 
Product  Layout:  
Product  production  is  characterised  by  the  manufacturing  of  a  high  volume  of  constant  quality  goods.  
An  assembly  line  is  the  most  common  layout  for  this  type  of  production.  This  type  of  layout  is  referred  
to  as  product  layout.  
 
Fixed  Position  Layout:  
Project  production  deals  with  layout  requirements  for  large-­‐scale,  bulky  activities  such  as  the  
construction  of  bridges,  ships,  aircraft  or  buildings.  A  fixed  position  layout  is  where  a  product  remains  
in  one  location  due  to  its  weight  or  bulk.  
 
Office  Layout:  
The  focus  of  an  office  layout  is  to  enable  the  work  to  be  performed  efficiently  in  a  safe  office  
environment.  
 
MONITORING,  CONTROLLING  AND  IMPROVEMENT  
 
 
  Monitoring  

  Controlling  

 
  Improvement  

 
 
 
 
  BUSINESS  SUCCESS  
 
 
 The  purpose  of  monitoring  and  control  is  to  ensure  the  operations  process  runs  efficiently  and  
effectively,  producing  the  goods  and  services  it  was  designed  to  do.  
 
 Monitoring  is  the  process  of  measuring  actual  performance  against  planned  performance.  
 
 Control  occurs  when  KPIs  are  assessed  against  predetermined  targets  and  corrective  action  is  
taken  if  required.  
 
 Improvement  refers  to  the  reduction  of  inefficiencies  and  wastage,  poor  work  processes  and  
the  elimination  of  any  bottlenecks.  
 
 Improvement  through:  
o Quality  
o Speed  
o Dependability  
o Flexibility  
o Cost  improvements  
Operations  Processes  –  Outputs  
 
Outputs  are  the  final  goods  or  services  that  are  delivered  or  provided  to  the  consumer.    
 

OUTPUTS  FROM  DIFFERENT  INDUSTRIES  

   
Financial  services  such  as  home  loans  and  investment  advice,  security  for  
Banking   savings.  

   
Socially  responsible  young  adults  with  knowledge  and  skills  to  learn,  adapt,  
Education   work  and  related  abilities.  

   
Buildings,  homes,  roads  that  meet  the  specifications  of  architects,  designers  
Construction   and  engineers  

Customer  Service    
Customer  service  refers  to  how  well  a  business  meets  and  exceeds  the  expectations  of  customers  in  all  
aspects  of  its  operations.  
 
 For  manufactured  goods,  customer  service  is  provided  through  replacing  the  good  if  it  is  faulty,  
providing  education  on  its  use,  repairing  the  good  if  it  is  not  working  properly  and  maintaining  
and  servicing  it.  
 In  the  service  industries,  where  the  service  is  often  provided  and  consumed  at  the  same  time,  
customer  service  will  reflect  more  how  the  service  is  customised  and  provided.  
 
Warranties  
Warranties  are  businesses’  promises  to  correct  any  defects  in  their  products  or  in  the  services  they  
deliver.  
 
Fair  Trading  Act  1987  (NSW)  and  Competition  and  Consumer  Act  2010  (Cth)  require  businesses  to  
ensure  that  the  goods  they  sell:  
 
 Have  a  level  of  quality  that  is  comparable  to  the  price  and  product  description  
 Are  suitable  for  the  purpose  or  job  they  will  be  used  for  
 Match  the  product  description  in  any  advertising  or  promotion  
 Are  free  from  defects  or  faults  
 
Operations  managers  need  to  trace  the  source  of  the  fault  in  manufacturing  and  solve  it.  In  this  way,  
the  warranty  claims  lead  the  business  to  improve  transformation  processes.  
 
 
 
 
 
 
 
 
 
 
 
Operations  Strategies  
 

Performance  
objectives  
New  product  
Global   or  service  
factors   design  and  
development  

Overcoming  
Supply  chain  
resistance  to  
management  
change  
Operations  
Strategies  

Quality  
Outsourcing  
management  

Inventory  
Technology  
management  

 
 
 
PERFORMANCE  OBJECTIVES  
Performance  objectives  are  goals  that  relate  to  particular  aspects  of  the  transformation  processes.  The  
six  main  performance  objectives  that  can  be  allocated  to  particular  key  performance  indicators  (KPIs)  
are:  

Quality   Speed   Dependability   Customisation   Cost   Flexibility  

Quality  
As  a  performance  objective,  consumer  expectations,  which  are  used  to  inform  the  production  
standards  applied  by  the  business  often  determines  quality.  Quality  performance  objectives  include:  
 
 Quality  of  design:  arises  from  an  understanding  of  consumers  and  their  preferences  –  also  
includes  how  well  a  product  is  made  or  a  service  is  delivered.  
 Quality  of  conformance:  focus  on  how  well  the  product  meets  the  standard  of  a  prescribed  
design  with  certain  specifications.  
 Quality  of  service:  In  this  sense  quality  refers  to:  how  reliable  the  service  is;  how  well  the  service  
meets  the  specific  needs  of  the  client;  how  timely  or  responsive  the  service  delivery  is.    
 
Speed  
Speed  refers  to  the  time  it  takes  for  the  production  and  the  operations  processes  to  respond  to  
changes  in  market  demand.  Speed  aims  to  satisfy  customer  demands  as  quickly  as  possible.  Therefore,  
goals  for  speed  include:  
 Reduced  wait  times  
 Shorter  lead  times  
 Faster  processing  times  
 
Dependability  
Dependability  refers  to  how  long  the  products  are  useful  before  they  fail.  One  measure  of  
dependability  is  measured  by  warranty  claims.  In  respect  to  services,  dependability  refers  to  
consistency  of  service  standards  and  reliability  –  a  measure  for  service  dependability  is  the  number  of  
complaints  received.  
 
Flexibility  
Flexibility  refers  to  how  quickly  operations  processes  can  adjust  to  changes  in  the  market.  Flexibility  
can  be  best  achieved  by  increasing  the  capacity  of  production.  With  services,  flexibility  can  be  
achieved  through  increasing  the  number  of  service  providers.  
 
Customisation  
Customisation  refers  to  creation  of  individualised  products  to  meet  the  specific  needs  of  the  
customers.  
 
Cost  
Cost  refers  to  the  minimisation  of  expenses  such  that  operations  processes  are  conducted  as  cheaply  
as  possible.  Over  time,  businesses  seek  to  become  more  efficient  and  thus  allocate  costs  better  by  
 Acquisition  of  new  technologies;  use  inputs  better  and  minimise  wastage;  reduce  
supplier/inventory/distribution  costs.  
 
NEW  PRODUCT  OR  SERVICE  DESIGN  AND  DEVELOPMENT  
A  business  needs  to  design  and  develop  new  products  and  services  –  the  designs,  development,  launch  
and  sale  of  new  products  enables  a  business  to  grow  and  to  attain  a  competitive  advantage.  
 
Product  Design  and  Development  
There  are  two  main  approaches  to  product  design  and  development:  
 
 Consumer  approach  –  the  preferences  and  desires  of  consumers  determine  which  products  
are  designed  and  developed.  
 
 Changes  and  innovations  in  technology  –  they  enable  new  and  appealing  products  to  be  
made  because  they  use  advanced  technologies,  which  give  products  greater  functionality.  
 
The  steps  in  the  product  design  and  development  process:  

Concept   Cost  BeneVit   Production   Product  

Development   Analysis   Design   Testing  

 
Important  considerations  when  designing  and  developing  a  product  
 Quality  is  a  factor  because  the  customers  will  demand  a  particular  quality,  and  certain  
attributes  and  features.  
 
 Supply  chain  management  is  an  important  factor  because  a  new  product  will  draw  suppliers  
and  may  extend  the  range  of  supplies  sought,  the  timing  or  the  volume  of  supplies.  
 
 Capacity  management  is  a  factor  as  a  new  product  may  increase  the  use  or  range  of  present  
resources,  or  require  an  investment  in  new  technology  and  machinery.  
 
 Cost  must  be  considered  as  it  determined  from  the  amount  of  inputs,  time  and  energy  used  in  
processing.  
 
Service  Design  and  Development  
Service  design,  being  customised  in  nature,  has  always  taken  the  position  of  the  customer  or  client  as  
the  starting  point  in  design.  In  services  design,  both  the  explicit  and  implicit  aspects  need  to  be  
addressed.    
 
 Explicit  service  is  also  known  as  
the  tangible  aspect  of  the  service  
being  provided  such  as:  the  
application  of  time;  expertise;  
skill  and  effort.  
 
 Implicit  service  is  based  on  a  
feeling  and  is  therefore  
intangible.  The  implicit  aspects  
of  a  service  are  the  psychological  
wellbeing  –  the  feeling  of  being  
looked  after  –  that  comes  with  
the  provision  of  the  service.  
 
SUPPLY  CHAIN  MANAGEMENT  
Supplies  are  an  essential  input  into  operations  processes.  Supply  Chain  Management  involves:  
 Integrating  and  managing  the  flow  of  supplies  through  the  inputs  
 Transformation  processes  (Throughput  and  value  adding)  
 Outputs  to  best  meet  the  needs  of  customers  
 
  Throughput:  the  amount  of  material  or  items  passing  through  a  system  or  process  
   
The  supply  chain  includes  all  businesses  directly  linked  to  the  supply  of  goods  or  services  to  the  
consumer.  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   Transformation  
quality.   Inputs   Outputs  
Process  
 
The  key  aspects  to  supply  chain   • Sourcing     • Throughput   • Finished  or  
management  are:   • E-­‐commerce   • Value  adding   semi-­‐Vinished  
 Sourcing   goods  or  
 E-­‐commerce   • Raw  Materials  
services  
 Logistics  and   • Other  inputs  
Distribution   (energy)   • Logistics  
  • Distribution  
 
Sourcing  
Also  called  ‘procurement’  or  ‘purchasing’,  sourcing  refers  to  the  purchasing  of  inputs  for  the  
transformation  process.    
 
In  recent  years,  there  have  been  four  
particular  trends  in  SCM:  
 
Supplier  Rationalisation:  involves  a  business  
assessing  the  number  and  diversity  of  its  
Consumer  
suppliers  –  helps  determine  which  suppliers   Demand  
are  least  effective  and  which  can  be  better  
utilised.  
 
Backwards-­‐Vertical  Integration:  purchasing  
through  mergers  or  acquisitions  of  suppliers.  
Factors  
As  a  strategy,  this  guarantees  supply  for  the   InVluencing   Quality  of  
Cost  of  
transformation  processes,  as  the  supplier  is   Supplier   Choice  of  
Sources/
Inputs  
Required  
then  owned  by  the  business.   Suppliers  
 
Cost  Minimisation:  this  strategy  is  focused  on  
cost  minimisation.  As  new  offshore  markets  
develop,  there  is  increasing  access  to  low-­‐cost  
resources/inputs   Flexibility  and  
  Timeliness  of  
Supply  
Flexible  or  Responsive  Supply  Chain  Processes:  
“lean  processes”  is  relevant  for  
manufacturing  businesses.  A  lean  
organisation  is  one  that  minimises  waste,  
seeks  to  continually  lower  costs  or  improve    
processes  and  processing  speed.    
   
Global  Sourcing  
Global  sourcing  is  a  broad  term  that  refers  to  businesses  purchasing  supplies  or  services  without  
being  constrained  by  location.  In  the  supply  chain  management  activity,  global  sourcing  means  buying  
or  sourcing  from  wherever  the  suppliers  are  that  best  meet  the  sourcing  requirements.  
 
Benefits  of  Global  Sourcing:  
 Cost  and  expertise  advantage  
 Access  to  new  technologies  and  resources  
 
Challenges  Arising  from  Global  Sourcing:  
 Possible  relocation  of  operations  
 Increased  cost  of  logistics,  storage  and  distribution  
 Managing  different  regulatory  conditions  between  nations  
 Increasing  complexity  of  overall  operations  when  sourcing  from  diverse  locations  
 
E-­‐Commerce  
E-­‐commerce  involves  the  buying  and  selling  of  goods  and  services  via  the  Internet.    
 
Business  Sourcing  and  E-­‐Commerce  
E-­‐procurement,  or  the  use  of  on-­‐line  systems  to  manage  supply,  allows  suppliers  to  direct  access  to  
the  business’s  level  of  supplies.  When  stock  falls  to  a  pre-­‐determined  point,  the  supplier  will  supply  
even  without  a  formal  request  from  the  buyer.  This  process  is  called  business-­‐to-­‐business  arrangement  
(B2B).  
 
B2B  =  allowing  the  supplier  to  assess  the  needs  of  the  buyer  and  meet  them  in  a  timely  manner  
 
E-­‐Commerce  and  the  Consumer  
The  increasing  use  of  e-­‐commerce  by  consumers  also  has  an  effect  on  the  supply  chain.  A  business  
that  sells  direct  to  consumers  (B2C)  via  the  internet  or  that  allows  other  internet-­‐based  businesses  to  
do  so  clearly  must  be  able  to  manage  supplies  that  are  affected  by  this  diversity  of  ordering  options.  
 
Benefits  of  E-­‐Commerce  
• 24-­‐  hour  advertisement  for  their  products  
• Inventory  management  can  be  improved  also  with  e-­‐commerce  –  it  can  set  up  so  that  an  
email  to  a  supplier  is  automatically  generated  when  inventory  levels  are  getting  close  to  
buffer  stock  levels  (minimum  stock  business  likes  to  keep  at  a  time)  
• Improves  efficiency  in  the  supply  chain  because  the  supplier  receives  the  message  and  
can  deliver  more  stock  just  as  the  business  needs  it  for  JIT  inventory  management.  
 
Logistics  
It  is  part  of  the  supply  chain  that  focuses  on  moving  inputs,  resources  and  outputs  through  the  supply  
chain  as  quickly  as  possible.  Logistics  is  a  term  broadly  referring  to  distribution  but  also  includes:  
• Transportation  
• The  use  of  storage,  warehousing  and  distribution  centres  
• Materials  handling  and  packaging  
 
Distribution  refers  to  the  ways  of  getting  the  goods  or  services  to  the  customer.  
 
Distribution  Centres  are  not  intended  for  long  term  storage  but  they  are  strategically  located  so  as  to  
minimise  the  time  it  take  to  supply  stock  to  retail  outlets.  
 
Transportation  refers  to  the  modes  of  moving  the  goods  either  by  van,  truck,  train,  airplane  or  ship.  
 
Storage  involves  finding  a  secure  place  to  hold  stock  until  it  is  required.  
OUTSOURCING  
Outsourcing  involves  the  use  of  external  providers  to  perform  noncore  business  activities.  When  an  
external  provider  that  specialises  in  a  particular  business  function  performs  a  service,  it  will  do  so  at  a  
lower  cost  and  with  a  greater  effectiveness.  These  activities  include:  
   
Transport              Security  
Supply  Chain  Management   Logistics  
Maintenance   Servicing  of  equipment  
Producing  components   Supplying  materials  
 
Advantages  of  Outsourcing   Disadvantages  of  Outsourcing  
Simplification   Breakdown  in  the  business  operations  
Efficiency  and  cost  savings   Loss  of  control  over  quality,  reliability,  costs  
Increased  process  capability   Slower  lead  time  and  response  to  changes    
Increased  accountability   Loss  of  corporate  memory  and  vulnerability  
Access  to  skills/resources  lacking  within  business   Issues  with  communication  and  language  
Capacity  to  focus  on  core  business  activities    
 
TECHNOLOGY  
Technology  may  be  defined  as  the  
design,  construction  and/or  application  
of  innovative  devices,  methods  and  
machinery  upon  operations  processes.  
The  thoughtful  application  of  
technology  allows  businesses  to  gain  a  
competitive  advantage.  
 
Leading  Edge  Technology  
Leading  edge  technology  is  the  
technology  that  is  the  most  advanced  or  
innovative  at  any  point  in  time.  Using  
leading  edge  technologies  can  help  
businesses  to:  
 Create  products  more  quickly  
and  to  higher  standards  and  with  less  waste  
 Operate  operations  process  more  effectively  
 
Established  Technology  
Established  technology  is  the  technology  that  has  been  developed  and  widely  used.  Established  
technologies  are  functionally  sound  and  help  to  establish  basic  standards  for  productivity  and  speed.  
Examples  of  established  technologies:  
 Barcoding  
 Robotics  
 CAD  
 CAM  
 Computer-­‐integrated  manufacturing  (CIM)  
 Flexible  manufacturing  systems  (FMS)  
 
BOTH  FORMS  OF  TECHNOLOGY  LEAD  TO  AN  EFFICIENT  AND  EFFECTIVE  OPERATIONS  PROCESS    
 
 
 
 
INVENTORY  MANAGEMENT  
Inventory  or  stock  refers  to  the  amount  of  raw  materials,  work-­‐in-­‐progress  and  finished  goods  that  a  
business  has  on  hand  at  any  particular  point  in  time.  
 
Inventory  management  involves  making  decisions  regarding  how  much  stock  to  have  on  hand  at  any  
one  time  and  the  most  appropriate  systems  of  storage  and  methods  of  handling.  
 
Holding  stock  is  also  known  as  just-­‐in-­‐case  (JIC)  or  buffer  stock  –  where  a  business  holds  a  certain  
level  of  stock  as  a  reserve  to  cover  interruptions  to  supply  or  an  unexpected  increase  in  demand.  
 
Advantages  of  Holding  Stock  
 Consumer  demand  can  be  met  when  there  is  stock  available  
 Reduces  lead  times  between  order  and  delivery  
 Stocks  =  immediate  revenue  
 Rapid  distribution  and  transportation  of  products  as  indicated  by  demand  
 Making  products  in  bulk  =  reduction  in  costs  
 No  need  to  rely  on  suppliers  for  prompt  deliveries  
 
Disadvantages  of  Holding  Stock  
 The  costs  involved  including  storage  charges,  spoilage,  insurance,  theft  and  handling  expenses  
 Products  may  come  obsolete  –  occurs  if  stock  remains  unsold  
 
Inventory  Valuation  Methods  
‘Last  in,  first  out’  (LIFO)  means  that  stock  purchased  most  recently  is  sold  first.  This  method  can  be  
used  for  goods  that  have  no  use-­‐by  date  such  as  machinery  parts  or  canned  food.  
 
‘First  in,  first  out’  (FIFO)  assumes  that  the  first  stock  that  has  been  purchased  is  the  oldest  and  will  be  
sold  first.  FIFO  is  more  appropriate  for  perishable  
times  such  as  food  and  drink.  
 
‘Just-­‐in-­‐time’  (JIT)  inventory  management  is  to  hold  as  
minimal  stock  as  possible  and  only  bring  in  stock  from  
suppliers  as  required.  Advantages  of  JIT  are:  
 Reduced  costs  of  storage  and  securing  stock  
 Increases  the  liquidity  of  working  capital  as  
less  cash  is  tied  up  as  stock  
 Reduces  the  chance  of  stock  becoming  obsolete  
 Reduces  the  chance  of  perishable  food  spoiling  
 Less  warehouse  space  allows  room  for  more  
activities  
 Less  time  is  spent  on  checking  products    
 
The  disadvantage  is  that  if  a  supplier  experiences  a  
problem  and  stock  is  not  delivered  on  time,  the  entire  
production  schedule  is  disrupted.  
 
THE  METHOD  OF  VALUATION  AFFECTS  THE  CALCULATION  OF  THE  VALUE  OF  THE  GOODS  SOLD,  
THE  VALUE  OF  THE  UNSOLD  STOCK  AND  THE  GROSS  PROFIT  -­‐-­‐-­‐-­‐  SO  STUDY  AND  KNOW  HOW  TO  
CALCULATE!  
 
 
 
 
 
QUALITY  MANAGEMENT  
Quality  management  refers  to  those  processes  that  a  business  undertakes  to  ensure:  
 Consistency  
 Reliability  
 Safety  
 Fitness  of  purpose  of  product  
 
Quality  Control  –  (inspection,  measurement  and  intervention)  
Quality  control  reduces  problems  and  defects  in  the  product   Quality  
Assurance  
by  using  inspections  at  various  points  in  the  production  
process.    
Quality   Quality  
 Pre-­‐determined  quality  targets  would  be  set  and  any   Control   Improvement  
failure  to  meet  the  targets  would  need  to  be  assessed  
and  appropriate  action  taken  to  correct  any  issue  that  
Approaches  
has  caused  quality  standards  to  fall  below  expectation.   to  Achieving  
 Quality  control  management  may  require  that  labour   Quality  
be  appropriately  trained  to  apply  quality  standards  
throughout  working  processes.  
 
Quality  Assurance  –  International  Quality  Standards  
Quality  assurance  involves  the  use  of  a  system  to  ensure  that  set  standards  are  achieved  in  
production.  This  is  done  through  taking  a  series  of  measurements  and  assessing  them  against  pre-­‐
determined  quality  standards.  
 
Aspects  of  quality  that  are  important  to  QA  include:  
 The  notion  of  ‘fitness  for  purpose’  or  how  well  a  product  does  what  it  is  designed  to  do  
 The  desire  to  achieve  ‘right  first  time’  so  that  products  do  not  need  to  be  reworked,  which  
wastes  time,  energy  and  other  resources  
 
A  widely  used  international  standard  is  the  International  Organisation  for  Standardisation  9000  (ISO  
9000).  
 
Given  that  the  production  of  components  for  a  manufactured  good  such  as  a  TV  may  come  from  
different  suppliers  from  different  countries,  such  standards  are  an  important  quality  control  
mechanism  for  ‘global’  companies.  This  ensures  that  the  quality  of  the  components  from  one  nation  is  
also  equal  to  the  components  of  another  supplier  in  another  nation.  
 
Quality  Improvement  
Quality  improvement  focuses  on  two  aspects:  continuous  improvement  and  total  quality  management.  
 
Continuous  Improvement:  is  an  ongoing  commitment  to  improving  a  business’s  goods  or  services.  That  
is,  all  staff  is  encouraged  to  demonstrate  initiative  and  to  suggest  areas  where  improvements  can  be  
made  in  improving  the  quality  of  the  products  being  produced.  
 
Total  Quality  Management:  this  concept  focuses  on  managing  the  total  business  to  deliver  quality  to  
customers.  It  is  an  ongoing,  business-­‐wide  commitment  to  excellence  that  is  applied  to  every  aspect  of  
the  business’s  operation.  To  achieve  TQM  objectives  requires  four  elements:  benchmarking,  employee  
empowerment,  a  focus  on  the  customer  and  continuous  improvement.  
 
  Benchmarking:  evaluate  (something)  by  comparison  with  a  standard  
   
 
 
 
OVERCOMING  RESISTANCE  TO  CHANGE  
All  businesses  are  subject  to  change  from  the  external  environment  such  as:  
• Legislative  and  regulatory  changes  
• Changes  in  economic  conditions  
• Social  changes  over  time  
• Technological  breakthroughs  
 
Changes  can  often  be  resisted  as  occasionally  change  causes  uncertainty  and  uncertainty  can  be  
stressful.  Resistance  to  change  arises  from  two  principal  sources  with  a  business:  
 Financial  
 Psychological/emotional  
 
Financial  Costs  
  Cost  of  
Purchasing  New  Equipment:  The  purchase  of   purchasing  
new  
equipment  such  as  machinery  and  technology   equipment  

is  considered  a  capital  cost.  Despite  the  high  

costs,  there  can  be  advantages  from  making  the  
capital  investment:  
 Improved  processing  flexibility  
 Improved  processing  speeds  
 More  consistency   Costs  of  
structural  
Financial   Cost  of  

Costs    
redundancies  
 Higher  overall  quality   reorganisation  

 Reduced  wastage  and  losses  

 
Redundancy  Payout:  Redundancy  is  defined  as  
a  loss  of  work  arising  from  job  skills  that  are  no  
longer  required  or  relevant  to  the  workplace.  
Redundancy  payouts  is  the  money  that  is  given   Costs  of  
retraining  
to  employees  when  they  are  forced  out  of  work   employees  

because  their  job  skills  are  no  longer  relevant.  

 
Retraining:  This  cost  arises  from  change  that  causes  a  reorganisation  of  the  business’s  internal  
hierarchy  or  from  the  acquisition  of  technology.  
 
Reorganising  Plant  Layout:  There  can  be  high  costs  involved  when  reorganising  plant  layout,  such  as:  
 Downtime  when  transferring  from  the  old  machinery  to  the  new  machinery  
 Testing  new  equipment,  machinery  and  technology  
 Transporting,  placing  and  bringing  power  to  new  plant  
 Loss  of  productivity,  arising  from  re-­‐orientation  of  staff  with  new  work  processes  etc.  
 
Psychological  Costs  
 INERTIA  OF  OWNERS,  MANAGERS  AND  EMPLOYEES  
Inertia  is  a  tem  that  describes  a  psychological  resistance  to  change.  A  feeling  of  uncertainty  or  fear  of  
the  unknown,  when  change  is  about  to  happen  or  pressing,  can  lead  people  to  resist.  
 
 
 
 
 
Forces  driving  change  
Forces  resisting  change  
   
 
 
 
Overcoming  Resistance  to  Change  
Step  1:  Identifying  the  need  for  change  
It  is  important  to  identify  the  need  for  change  –  once  it  has  been  identified,  it  is  necessary  to  develop  a  
plan  for  how  to  change  the  change  will  be  achieved.  To  do  so  the  need  for  change  needs  to  be  
communicated  to  all  relevant  stakeholders.  
 
Step  2:  Setting  achievable  goals  
A  key  aspect  of  the  plan  will  be  the  setting  of  achievable  objectives.  The  goals  need  to  be  realistic,  
measurable  and  achievable.  A  number  of  things  need  to  be  done  in  setting  the  objectives:  
 
 Preparing  people  for  the  change  and  trying  to  get  acceptance  for  the  need  to  change  from  as  
many  staff  as  possible.  This  is  called  ‘unfreezing’.  
 Including  the  changes  that  will  have  to  take  place  in  people’s  behaviour  and  the  values  they  
share  
 Include  in  the  objectives,  the  resources  and  support  systems  that  will  be  needed.  

E.g.  implementing  a  new  computer  system  will  require  not  just  the  computers  but  continuing  
technical  support  while  staff  adjust  to  and  learn  the  new  skills  required  to  operate  the  new  system.  

Step  3:  Creating  culture  of  change  (encouraging  teamwork  approach  using  change  agents)  
Change  agents  are  the  key  group  of  influential  people  in  a  business  who  much  be  convinced  to  support  
the  change  and  who  then  manage  the  change  process  –  change  agents  facilitate  the  change  process  as  
they  effectively  lead  and  influence  other  workers  along  the  desired  path  for  change.  
 
Some  things  to  effectively  target  these  people:  
 Convince  them  of  the  need  for  change  
 Get  these  people  to  agree  on  the  nature  of  the  changes  that  have  to  happen  
 Give  these  people  the  power  to  implement  the  change  effectively  
 
Step  4:  The  use  of  change  models  
(i) Force-­‐field  analysis  
Refers  to  an  environment  in  which  there  is  continuous  and  unexpected  change.  This  system  has  two  
sets  of  forces:  
 Driving  forces  –  forces  pushing  for  the  change  
 Resisting  forces  –  forces  against  the  change  
 
FOR  CHANGES  TO  OCCUR,  THE  DRIVING  FORCES  NEED  TO  BE  STRONGER  THAN  THE  RESISTING  
FORCES.  THIS  CAN  BE  ACHIEVED  BY  EITHER  ACCEPTING  THE  NEED  FOR  CHANGE  OR  REMOVING  
RESISTING  FORCES.  
 
(ii) Unfreeze/change/refreeze  model  
Unfreezing  is  establishing  readiness  for  change.  The  change  has  to  be  made  attractive  that  people  
accept  it.  
 
Change  is  implementing  the  change.  For  the  change  to  be  affective,  employees  will  have  to  adopt  new  
values  and  behavioural  patterns.  
 
Refreezing  is  locking  the  new  behaviour  into  place  by  means  of  supporting  mechanisms  such  as  
training  and  incentives  to  ensure  that  employees  do  not  return  to  their  old  ways.  
 
ADAPTING  TO  CHANGE  THROUGH  OVERCOMING  THE  FINANCIAL  AND  PSYCHOLOGICAL  
RESISTANCE  CAN  HELP  BUSINESSES  TO  CREATE  SUSTAINABLE  COMPETITIVE  ADVANTAGE  EVEN  
WHEN  FACEDD  WITH  WHAT  APPEAR  TO  BE  THREATS.  
 
 GLOBAL  FACTORS  
There  are  several  global  factors  that  present  opportunities  when  assessing  the  operations  strategies  
available  for  operations  managers.  
 
Global  Sourcing  
Global  sourcing  is  a  broad  term  that  refers  to  
businesses  purchasing  supplies  or  services  without  
Global  
being  constrained  by  location.  Global  sourcing  as  an  
Sourcing   operations  strategy  involves  the  sourcing  of  any  
business  operations  that  gives  the  business  cost  
advantages.  
 
Benefits:  
Research  and  Global   Economies  of  
 Cost  advantages  
 Access  to  new  technologies  
Factors  
Development   Scale  
 Advantages  of  expertise  and  labour  
 Specialisation  
 Access  to  other  resources  
 Ability  to  operate  extended  hours  
 
Scanning  and  
Learning  
Disadvantages:  
 Storage  and  distribution  
 Different  regulatory  conditions  between  nations  
 Increasing  complexity  of  overall  operations  
 
 
Economies  of  Scale  
Economies  of  scale  refer  to  cost  advantages  that  can  be  gained  by  producing  products  on  a  larger  
scale.  This  means  that  business  can  lower  their  per  unit  input  costs  and  therefore  increase  their  
profits.  
 
There  are  clear  production  advantages  of  producing  high  volumes.  Typically  the  cost  savings  come  
from  being  able  to  purchase  lower  cost  per  unit  input  costs  due  to  bulk  purchases  of  stock,  and  the  
efficiencies  created  from  the  improved  use  of  technology.  
 
Scanning  and  Learning  
All  businesses  can  benefit  from  scanning  (searching  or  looking)  the  global  environment  and  learning  
from  the  best  practice  of  businesses  around  the  world.  People  and  places  to  learn  include:  
 Management  journals  
 Industry  and  business  associations  
 Conferences  
 Other  forums  
 Staff  members  
 Managers  
 
Research  and  Development  
R&D  helps  businesses  to  create  leading  edge  technologies,  and  to  create  innovative  products  and  
solutions.    A  central  aspect  of  R&D  is  ascertaining  what  consumers  want  and  assisting  to  create  
products  that  meet  their  needs.  
 
 
 
 
 
OPERATIONS  TOPIC  GLOSSARY  
 
 
TERM   DEFINITION  
Inputs   Are  the  resources  used  in  the  transformation  process  
Capital-­‐Labour  Substitution   Means  that  machinery  and  technology  displace  (put  out  of  place)  people  
by  doing  the  work  they  do  
Transformed  Resources   Are  those  inputs  that  are  changed  or  converted  in  the  operations  
processes  such  as  materials,  information  and  customers  
Materials   Are  the  basic  elements  used  in  the  production  process  and  consist  of  two  
types:  raw  material  and  intermediate  goods  
Raw  Materials   Are  the  essential  substances  in  their  unprocessed  state  
Intermediate  Goods   Are  finished  or  semi-­‐finished  products  that  are  used  in  further  
manufacturing  or  processing  
Information   Is  the  knowledge  gained  from  research,  investigation  and  instruction,  
which  results  in  an  increase  in  understanding  
KPIs   Are  specific  measures  used  to  assess  the  efficiency  and  effectiveness  of  
the  business’s  performance  
Govt.  Relations  Management   Refers  to  the  systems  that  businesses  use  to  maintain  customer  contact  
to  improve  customer  service,  increase  competitiveness  and  identify  
changes  in  customer  tastes  
Transformation  Process   Is  the  conversion  of  inputs  (resources)  into  outputs  (goods  &  services)  
Transforming  Resources   Are  those  inputs  that  carry  out  the  transformation  process  such  as  
human  resources  and  facilities  
Human  Resources   The  employees  of  a  business  
Facilities   Refer  to  the  plant  (factory  or  office)  and  machinery  used  in  the  
operations  processes  
Volume   Refers  to  how  much  of  a  product  is  made  
Mix  Flexibility   Is  the  mix  of  products  made,  or  services  delivered  through  the  
information  process  
Lead  Time   Is  the  time  it  takes  for  an  order  to  be  fulfilled  from  the  moment  it  is  
made  
Predicting  Demand   Is  forecasting  demand  so  that  adjustments  can  be  anticipated  and  a  
business  can  act  accordingly  
Sequencing   Refers  to  the  order  in  which  activities  in  the  operations  process  occur  
Scheduling   Refers  to  the  length  of  time  activities  take  within  the  operations  process  
Gantt  Charts   Is  a  type  of  bar  chart  that  shows  both  the  scheduled  and  completed  work  
over  a  period  of  time.  It  is  often  used  in  planning  and  tracking  a  project  
Critical  Path  Analysis   A  scheduling  method  or  technique  that  shows  what  tasks  need  to  be  
done,  how  long  they  take  and  what  order  is  necessary  to  complete  those  
tasks  
Telecommute   Is  to  commute  or  travel  to  work  electronically.  This  means  that  home  or  
another  location  becomes  the  worksite  and  work  is  delivered  via  email  
or  the  internet.  
Robotics   Are  highly  specialised  forms  of  technology  that  can  shape  transformation  
processes  so  that  they  are  very  high  quality,  efficient  and  minimise  
waste.  
CAD   Is  a  computerised  design  tool  that  allows  businesses  to  create  product  
possibilities  from  a  series  of  input  parameter  (limitation)  
CAM   Is  a  software  that  controls  manufacturing  processes,  and  can  be  used  
more  broadly  to  calculate  how  much  of  each  input  recourse  would  be  
required  
Task  Design   Is  breaking  down  the  work  into  a  series  of  jobs  that  make  it  easy  for  an  
employee  to  successfully  perform  and  complete  the  task.  
Skills  Audit   Is  a  formal  process  used  to  determine  the  present  level  of  skills  and  any  
skill  shortfalls  that  need  to  be  made  up  either  through  recruitment  or  
through  training  
Plant  Layout   Is  the  arrangement  of  equipment,  machinery  and  staff  within  the  facility  
Process  Layout   Is  the  arrangement  in  which  machines  and  equipment  are  grouped  
together  by  the  function  they  perform  
Product  Layout   Is  when  the  equipment  is  arranged  into  sequence  of  tasks  performed  in  
manufacturing  a  product  
Product  Production   Is  the  manufacturing  of  a  high  volume  of  constant  quality  goods  
Product  Production   Deals  with  layout  requirements  for  large  scale  bulky  activities  such  as  the  
construction  of  bridges  or  aircrafts  and  ships  
Fixed  Position  Layout   Is  where  a  product  remains  in  one  location  due  to  its  weight  or  size,  
employees  and  equipment  are  brought  to  the  site  
Workstation   Are  the  desk  areas  required  by  office  workers  usually  fitted  with  all  the  
office  work  equipment  such  as  a  computer,  telephone  and  printer  etc.  
Monitoring   Is  the  process  of  measuring  actual  performance  against  planned  
performance  
KPIs   Are  predetermined  variables  that  are  measured  so  appropriate  controls  
to  operations  processes  can  be  made  
Controlling   Occurs  when  KPIs  are  assessed  against  predetermined  targets  and  
corrective  action  is  taken  if  required  
Improvement   Refers  to  systematic  reduction  of  inefficiencies  and  wastage,  poor  work  
processes  and  the  elimination  of  any  bottleneck  
Bottleneck   Is  an  aspect  of  the  transformation  process  that  slows  down  the  overall  
processing  speed  or  creates  an  impediment  (obstruction)  leading  to  a  
back  of  incompletely  processed  products.