9.

1 Location Decisions:

FACTORS AFFECTING THE CHOICE OF LOCATION FOR BUSINESSES

Quantitative Factors: Qualitative:

-RENT AND COSTS OF LAND -THE OWNER’S PREFERENCE

-WAGE COSTS OF AN AREA -THE SKILL OF THE LABOUR

-THE EXPECTED SALES AND PROFITS -LAW AND ORDER IN THE AREA

-THE SUPPLIERS COSTS -THE TYPE OF CONSUMERS AGE WISE

LIVING IN THE AREA.
- GOVT TAXES AND POSSIBLE SUBSIDIES
- POSSIBLE ETHICAL ISSUES
-THE CONSUMER INCOMES IN THE AREA
- AREA FOR FUTURE EXPANSION

-THE IMAGE OF THE AREA

FACTORS AFFECTING RELOCATION( shifting from current to new location)-

-Businesses have to relocate if the current loaction does not have room for expansion
-Businesses relocate if the current location has a change in govt policies
- Businesses relocate if there is a very large rise in labour costs
- Businesses relocate if in the current location there is now difficult access to raw
material
-Businesses relocate if in the current location there is a change in consumer tastes
-Businesses relocate if in the current location now there are environmental issues
and community pressure against pollution.
-Businesses relocate if rents in the current location are rising

FACTORS AFFECTING THE CHOICE OF INTERNATIONAL LOCATIONS FOR BUSINESSES:

1. Climate changes in certain parts of the world

2. Duties imposed by governments
3. Transport rates between countries
 4. Currency rates between countries
5. Market proximity and nearness to customers
6. Government policies and incentives like subsidies
7. Culture and language that suits the business
8. Availability of raw material in certain part of the world
9. International relations of the country with the outside world.

DIFFERENCES BETWEEN OFFSHORING AND RESHORING

OFFSHORING
the practice of basing some of a
company's processes or services
overseas, so as to take advantage of
lower costs.
.
-it creates jobs in the foreign country
RESHORING
the practice of transferring a business
operation that was moved overseas back
to the home country from which it was
originally relocated.
-it creates jobs in the home country

-businesses do reshoring to access - businesses relocate back to the home

cheap labour and to save transport country to have more control over the
costs when exporting quality of their product

-in certain situations the demand of the -businesses get subsidies for reshoring as
company’s products is in overseas they help the country’s economy
markets so it has to shift production
there - in certain cases the developing countries
may be having political problems and poor
infrastructure so businesses reshore back
to their home country

IMPACT OF GLOBALIZATION ON LOCATION AND RELOCATION DECISIONS

Globalization means the freer movement of goods and people around the world and
this has had a lot of impact on which location a business selects. Some examples are :
Businesses now relocate to countries where they find cheaper and more skilled
labour such as China and India.

Globalization has allowed immigration.Due to large scale immigration of people from

developing countries to Canada and Australia there are areas in Canada that only
have immigrants living there. For example there are neighbourhoods in UK where
asian and arabs live. The shops selling alcohol beverages have to relocate to another
area as asians and arabs do not demand alcohol drinks.

Due to so many pakistanis migrating to Canada and UK many pakistani businesses

have opened their outlets there such as Khaadi, Bundu Khan and J.
In Canada most of the pakistanis live in Missisaga region so many halaal meat shops
have located there.

Due to globalization the demand for global brands like Pepsi, Mcdonalds, Honda is
very high and these global brands have to locate in all the countries of the world by
opening their outlet or setting up factories.

THINK OF MOE WAYS IN WHICH GLOBALIZATION HAS AFFECTED THE LOCATION ND

RELOCATION DECISIONS OF FIRMS

FACTOR AFFECTING SCALE OF OPERATIONS

SCALE OF OPERATIONS REFERS TO THE LEVEL OF SUPPLY A BUSINESS CAN PRODUCE

1. SPECIALIZATION OF ITS WORKFORCE:THE MORE THE WORFORCE IS SPECIALIZED

THE MORE PRODUCTIVE IT WILL BE INCREASING OUTPUT

2. CAPITAL AND FUNDS AVAILABLE

3. TYPE OF TECHNOLOGY AVAILABLE; IF A BUSINESS CAN ACCESS LATEST

TECHNOLOGIES IT CAN INCREASE ITS OUPUT

4. ABILITY AND SKILL OF LABOUR

5. MOTIVATION OF WORKFORCE

6. GOVERNMENT LAWS ON MONOPLY AND COMPETITION: IF THE GOVERNMENT

THINKS A BUSINESS HAS GROWN INTO A MONOPOLY THEN THE GOVET WILL NOT LET
THE BUSINESS EXPAND FURTHER

7. OBJECTIVES OF THE OWNERS: SOME OWNERS PREFER TO HAVE SMALL SCALE

BUSINESSES TO HAVE MORE LEISURE TIME

8. NUMBER OF COMPETITORS IN THE MARKET: THE FEWER THE COMPETITORS THE

GREATER THE OPPORTUNITY FOR A BUSINESS TO INCREASE ITS SCALE

9. SCOPE FOR ECONOMIES OF SCALE: IF RAW MATERIAL CAN BE BOUGHT IN BULK

MAKING THEM CHEAPER THEN A BUSINESS CAN INCREASE ITS SCALE
 Economies of Scale[EOS]:

Internal EOS:

Internal economies of scale are the benefits of lower average costs a business avails
when it increases its scales of operation.

Types of Internal EOS:

Purchasing EOS: large firms buy their raw material in bulk and get discounts
form the suppliers which lowers the average cost of raw material.

Technical EOS: large firms have the funds to invest in the latest technology and
this lowers the labour costs and greatly reducers the wastage of resources
which helps lower down the overall cost of operations.

Financial EOS: large firms take large loans from the banks and in return the
banks lower down the Interest rates and this greatly reduces the cost of
borrowing for large firms.
large firms are public limited companies and they can avoid the cost of
borrowing entirely by raising finance through the issue of shares rather than
taking bank loans.

Marketing EOS: large firms advertise on very large scale (high advertising
budgets) this leads to a much greater proportionate increase in number of
units sold which lowers advertising cost per unit.For example a large firm like
Addidas pays a footballer $40million dollars to appear in an Addidas T.V
commercial. This commercial helps sells hundreds of millions of Addidas
products which means the average cost of the T.V commercial for Addidas is
very low.

Managerial EOS: large firms can afford the best skilled managers and workers
who provides greater percentage output and less wastage and this reduces the
average cost of labour. Even if the skilled managers and workers are paid high
wages their output is so great that the overall average labour cost per unit is
low.
Research and development EOS: large firms can invest in research and
development as they have the budget. They can invent more cost efficient
production methods and machines which in the long run lowers their average
cost of operations.

4) Internal Diseconomies of Scale:

The disadvantages of rising average costs when a business expands beyond the
optimum size. If the business continues to expand then it needs to hire more
workers and then it becomes difficult to manage such a large workforce. We can
say that internal diseconomies is due to management problems of handling such
a large workforce

1. COMMUNICATION PROBLEMS - DUE TO THE LARGE NUMBER OF WORKERS THE

BUSINESS IS NOT ABLE TO COMMUNICATE THE OBJECTIVES AND INSTRUCTIONS
CLEARLY WHICH LEADS TO THE PRODUCTION OF DEFECTIVE GOODS
INCREASING THE AVERAGE COSTS.

2. POOR COORDINATION -DUE TO THE LARGE NUMBER OF BRANCHES THERE IS

NO CORDINATION BETWEEN THEM AND EACH BRANCH ORDERS ITS RAW
MATERIAL SEPERATELY LEADING TO HIGHER TRANSPORT COSTS AND EACH
BRANCH CARRIES OUT ITS MARKET RESEARCH SEPERATELY RATHER THEN
COMBINED WHICH INCREASES COSTS

3. ALIENATION FO THE WORKFORCE- DUE TO THE LARGE WORKFORCE THE TOP

MANAGERS AND OWNERS ARE NOT IN REGULAR CONTACT WITH THE WORKERS
WHICH DEMOTIVATES THE WORKERS AS THEY FEEL THEY ARE NOT BEING
APPRECIATED AND THIS LEADS TO HIGH LABOUR TURNOVER AND HIG
ABSENTEEISM LEADING TO HIGHER COSTS.

THINKING POINT: HOW CAN LARGE BUSINESSES DEAL WITH DISECONOMIES?

External EOS:

The benefits of lower costs when a business is part of a large industry or an

expanding economy. When the industry is very large then the firms in that
industry benefit from being part of it. Some example of large Industries in
Lahore are the fast food industry , school industry, banking industry.
 1. Firms in large industries have easy availability of experienced labour
and this lowers training Costs. Eg schools can easily find experienced
teachers in Lahore.

2. Firms in large industries can easily find Ancillary firms such as suppliers
and this lowers the cost of supply and repairs. For example a school
inlahore can easily find photocopiers, canteen, van, stationary businesses

3. Firms in large industries set-up in Common locations to create "market

pull" which lowers the advertising and market research Costs. For
example on MM alam road all the expensive restaurants are located
which reduces the need for advertising. Another example is Liberty where
all garment shops are located together.

4. Generic Advertising - Firms in large Industry combine together to create

awareness about their product. For example all the pharmaceutical firms
have made calcium awareness advertisements and milk industry has
made packaged milk is safe advertisement so that the sales of all firms in
these industries go up.

5. It is easy to enter joint venture agreements in the large industries and

share the costs of production.

EXTERNAL DISECONOMIES OF SCALE

When an industry keeps growing and there are so many firms

producing the same type of product then the demand for the same type of
resources and labour will definitely rise. For example if the hotel industry is
expanding and new hotels are being set up there will be a huge demand by
hotels for land in prime locations and the land owners will raise the cost of
land. If the school industry is growing then there will be greater demand for
teachers and the teachers will raise their salary demand. Such rise in costs are
the external diseconomies of scale.

9.2 QUALITY MANAGEMENT

WHAT IS QUALITY?
Quality of most products is a relative concept and depends on consumer
expectation and the price the consumer pays for it.
A very cheap priced shirt that lasts for a year without shrinking or losing colour
will be considered good quality for the low price paid but a very expensive
laptop that gets spoiled after 3 years will be considered poor quality due to the
high cost to the consumer of buying it.
In certain industries there can be no compromise over quality and the
standards are extremely high. For example in medicines and airplane engines
because in these type of products there can be deaths in case of poor quality.

IMPORTANCE OF QUALITY

-INCREASES CUSTOMER LOYALTY AND THERE ARE REPEAT PURCHASES OF THE SAME
BRAND

- HIGH QUALITY BRAND NEED LESS ADVERTISING COSTS

-LESS CUSTOMER COMPLAINTS AND COST OF REFUND AND REPLACEMENT

- HELPS TO PROLONG THE LIFE OF A PRODUCT

- HIGH QUALITY BRANDS GIVE HIGH PROFIT MARGINS AS THEY CAN BE SOLD AT HIGH
PRICES

-DUE TO GLOBALISATION CUSTOMERS HAVE ACCESS TO PRODUCTS FROM AL THE

WORLD AND THE LEVEL OF COMPETITION HAS INCREASED SO HIGH QUALITY IS THE
ONLY WAY TO FIGHT COMPETITION

- CONSISTENT QUALITY IS THE BEST WAY TO CREATE A BRAND IMAGE

WAYS A BUSINESS CAN MAINTAIN/ENSURE QUALITY

1. QUALITY CONTROL:

THIS METHOD HAS 3 ASPECTS

A- PREVENTION- THE PRODUCT SHOULD BE DESIGNED PROPERLY SO THAT IT MEETS

CONSUMER DEMAND AND CAN BE ACCURATELY PRODUCED.

B- INSPECTION-CHECKING/INSPECTING THE PRODUCTS DURING OR AFTER

COMPLETION.( RANDOM CHECKS, SYSTEMATIC CHECK, FINAL INSPECTION)

C- CORRECTION- NOT JUST CORRECTING THE FAULTY PRODUCT BUT ALSO

CORRECTING THE REASON WHY THE FAULTY PRODUCT WAS MADE

IN QUALITY CONTROL METHOD IT IS THE INSPECTION PART THAT HAS THE MOST
FLAWS. MOST OF THE TIMES THE QUALITY INSPECTOR MISSES THE DEFECTIVE
PRODUCTS AND THEY GO TO THE MARKET.
IT CAN ONLY REDUCE L THE NUMBER OF DEFECTIVE PRODUCTS FROM REACHING THE
MARKET BUTCANNOT ELIMINATE .

CONS OF QUALITY INSPECTION

1.IT INCREASES THE AVERAGE COST AS THE DEFECTIVE PRODUCT HAS BEEN MADE
WHEN THEY ARE SPOTTED BY THE QUALITY INSPECTORS.
2. WORKERS ARE NOT RESPONSIBLE FOR THE QUALITY
3. TOO MUCH BURDEN ON THE QUALITY INSPECTOR
4. BAD RELATIONSHIP BETWEEN WORKER AND QUALITY INSPECTOR
5.IT IS COSTLY TO HIRE QUALITY INSPECTORS

2.QUALITY ASSURANCE PROGRAMMES

- IN THIS METHOD THE QUALITY PROCEDURES AND RULES ARE SET AND AGREED
UPON BEFORE THE PRODUCTION STARTS
AND THIS METHODS IS ABOUT GETTING IT RIGHT THE FIRST TIME. THERE IS NO
FINAL INSPECTION AS IN QUALITY ASSURANCE THE EMPHASIS IS ON ZERO DEFECTS.
-EXAMPLES OF QUALITY RULES ARE:
-THE RAW MATERIAL WILL BE CHECKED BEFORE PURCHASING
- THE WORKERS MUST BE WEARING SAFETY EQUIPMENT OR ELSE CANNOT ENTER
THE FACTORY FLOOR.
- THE PRODUCT DESIGN MUST BE TESTED AT LEAST 100 TIMES BEFORE BEING
FINALIZED

THE WORKERS ARE THEN THOROUGHLY TRAINED ON THESE RULES AND HAVE TO
FOLLOW THEM AND THIS MAKES THE WORKERS RESPONSIBLE FOR THE QUALITY SO
THERE IS NO NEED FOR THE FINAL QUALITY INSPECTORS.

PRO
1. ELIMINATES THE PRODUCTION OF DEFECTIVE GOODS BECAUSE PRODUCTION IS
STARTED ONLY WHEN ALL PROCEDURES ARE IN PLACE.
2. NO NEED TO HIRE COSTLY FINAL INSPECTORS
3. INTERNATIONAL QUALITY CERTIFICATIONS CAN NOW BE ACHIEVED
4. NO NEED FOR A FINAL INSPECTION
5. WORKERS ARE TRAINED AND TAKE RESPONSIBILITY AND THIS MOTIVATES THEM

CON.
1 HIGH INVESTMENT IN TRAINING AND STAFF
2. SLOWER RATE OF PRODUCTION

3.TOTAL QUALITY MANAGEMENT(TQM)

THIS IS THE EMTHOD IN WHICH QUALITY IS RESPONSIBILTY OF EACH WORKER AND
MAINTINING THE HIGHEST QUALITY STANDARDS ARE PART OF THE JOB DESCRIPTION
OF EACH WORKER.
WORKERS ARE ALSO EXPECTED TO HELP IMPROVE QUALITY CONSTANTLY THROUGH
SUGGESTIONS.
TQM HAS THE PHILOSPHY THAT EACH DEPARTMENT IS THE INTERNAL CUSTOMER OF
THE PREVIOUS ONE AND SHOULD REPORT IF THE QUALITY OF THE PREVIOUS
DEPARTMENT IS POOR. THIS IS CALLED A QUALITY CHAIN
EXAMPLE OF A QUALITY CHAIN

SUPPLIER--WAREHOUSE--FACTORY--TRANSPORTER--OUTLET--FINAL CONSUMER

WHEN THE WAREHOUSE RECIEVES THE RAW MATERIAL FROM THE SUPPLIER IT WILL
CHECK THE QUALITY THOROUGHLY AND IF IT IS POOR WILL REPORT THE SUPPLIER TO
THE SENIOR MANAGEMENT. LIKEWISE THE TRANSPORTER WILL THROUROUGHLY
CHECK THE FINAL PRODUCT AND PACKAGING BEFORE RECEEIVING IT FROM THE
FACTORY. IN TQM QUALITY IS CHECKED AT EACH STAGE BEFORE THE PRODUCT
REACHES THE FINAL CONCUMER.

TQM MOTIVATES THE WORKERS AS IT GIVES THEM MORE RESPONSIBILITY AND IT IS

A TYPE OF JOB ENRICHMENT.

TQM MAKES HIGH QUALITY A CULTURE AND PART OF THE MINDSET OF THE
WORKERS BUT IT IS ONLY POSSIBLE TO DO TQM IF THE WORKERS ARE MOTIVATED
AND THEY ARE WILLING TO COPERATE. ALSO DUE TO THE CONSTANT QUALITY
CHECKS AT EACH STAGE THE PRODUCTION CAN BE SLOWED DOWN .

4.BENCHMARKING
ANALYSING WHY THERE IS A GAP IN QUALITY BETWEEN THE BUSINESS AND THE
MARKET LEADER OF THAT INDUSTRY. THE GAP IS ANALYSED AND CLOSED UP BY
COPYING THE MARKET LEADERS PROCEDURES.

-THE BUSINESS FINDS OUT WHICH AREAS/PRACTICES IT WANT TO IMPROVE QUALITY

AND SETS THE BENCHMARK PERFORMANCE INDICATORS[BMI]

- IT THEN SELECTS WHICH BUSINESS WHICH IS THE BEST AND IS THE MARKET
LEADER AND STUDIES IT PRACTICES
- THE BUSINESS THEN COPIES THE MARKET LEADER’S PRACTICES TO IMPROVE THE
QUALITY
PROS
1. IT IS A VERY QUICK WAY TO
IMPROVE QUALITY BY COMPARING
THE BUSINESS TO THE THE MARKET
LEADER
CONS
1. IN TRYING TO COPY THE QUALITY
STANDARDS OF THE MARKET LEADER
THE BUSINESS MAY LOSE THE UNIQUE
SELLING POINTS IT HAS

2. LESS INVESTMENT IS REQUIRED AS 2. THE MARKET LEADER COULD BE A

THE BUSINESS CAN COPY HOW THE LARGER BUSINESS WITH BETTER
MARKET LEADER HAS HIGH QUALITY. RESOURCES AND CANNOT BE COPIED

3. SOMETIMES THE BUSINESS CAN DO 3. BY ALWAYS BENCHMARKING AND

INTERNAL BENCHMARKING BY
COMPARING THE QUALITY OF ITS
DIFFERENT BRANDS AND DIVISIONS TO
SEE WHERE IMPROVEMENT IS NEEDED.
COPYING THE MARKET LEADER THE
BUSINESS WILL LOSE ITS OWN ABILITY TO
INNOVATE IN QUALITY
4. INFORMATION ON ALL FUNCTIONS
ABOUT THE MARKET LEADER IS NOT
READILY AVAILABLE

9.3 OPERATIONS STRATEGY

OPERATIONAL DECISIONS

Strategic operations decisions are the long term decisions made by the
operations department to help achieve the business objectives.
The human resource , marketing and finance department have a great
influence on the operational decisions.
Strategic operations decisions that are influenced by HR, marketing and
finance include:
• Increasing or reducing output will be influenced by the sales forecast
given by the marketing department

• Selecting a location for the business or a decision to of relocating the

business requires a huge amount of funds and will only be taken if the
finance department can provide the capital

• offshoring or reshoring will depend a lot on the H.R. If the H.R can
recruit and train good staff in the home country then reshoring will be
done.

• outsourcing the production of certain components to a third party

again will depend on the H.R. If they can train and motivate the staff to
be productive then the operations will produce all the components and
not outsource to a third party
• changing the production methods also depends on marketing. If the
marketing want to launch into the mass market then a huge number of
units will have to be produced and operations will have to change to flow
production methods

• the introduction and application of IT and AI will depend wether H.r

can recruit I.T specialists

THE ROLE OF INFORMATION TECHNOLOGY[I.T] AND ARTIFICIAL INTELLIGENCE[A.I] IN

OPERATIONS MANAGMENT

CAD:COMPUTER AIDED DESIGN

Use of software to make 2D and 3D shapes of new products and

designs. The CAD softwares also help in performing calculations and
measurements for coming up with the best designs and shapes.

PROS
-Speeds up new product
development allowing quick
launch.
-Visualization of new designs
to help selection of designs
-Easy to change designs and
study them
-CAD has artificial intelligence
and can predict quantity of
materials to be used in the
new product
CONS
-CAD is a very costly software
and cannot be used by small
businesses
- CAD requires very high
processing computers
-Skilled labor is required which is
costly
-Technical break downs in
computers and loadshedding can
halt design process

-Helps in keeping new designs

safe and secure in secured
data
- CAD also gives design
improvement suggestions
CAM:COMPUTER AIDED MANUFACTURING

A CAM system is a machine that is controlled by computers so there is

precision and accuracy in production process.

PROS CONS

- The products that are made

have consistent high quality - Very high Investment is
and are standardised . required

-CAM can produce a large - There are no spares parts and

variety of designs and this
means greater variety of
products increasing sales
-CAM are highly accurate and
there is very little defective
production
difficult to repair a CAM in
developing countries
-High training costs of staff
-CAM may only be cost effective
for high priced products

-CAM can speed up production

which means new products
reach the market quickly

APPLICATION OF ARTIFICIAL INTELLIGENCE[AI] IN OPERATIONS

-AI banking softwares can detect fraud in online transaction by observing

abnormal activities such as large sudden withdrawals

-AI softwares in factories schedule machine maintenance and shut down

machines when maintenance is due

-AI softwares can reply to consumer calls and emails.

-AI softwares in pharmaceutical industry can help predict success of new

drugs
FLEXIBILITY AND INNOVATION

FLEXIBLITY IS THE ABILITY TO CHANGE THE PRODUCT SPECIFICATIONS, THE TIME OF

DELIVERY AND THE QUANTITY PRODUCED TO MEET CONSUMER DEMAND.
FLEXIBILITY IN OPERATIONS IS ACHIEVED BY THE FOLLOWING:

-MULTI TASKING AND TRAINING OF STAFF

-EFFECTIVE INVENOTRY MANGEMENT
-TECHNOLOGY AND IT SYSTEM
-OUTSOURCING PRODUCTION

The importance of operational flexibility

-adapting the volume of output to changes in market demand

-changing delivery time schedules to match the timing of customer requirements

-responding to the demand from customers for customized products.

PROCESS INNOVATION

INTRODUCING A NEW AND IMPROVED SYSTEM THAT PROVIDES THE

PRODUCT/SERVICE TO THE CONSUMER IN A QUICKER AND MORE COST EFFECTIVE
MANNER
IT INVOLVES SIGNIFICANT IMPROVEMENT AND CHANGES IN EQUIPMENT,
TECHNOLOGY AND SKILL OF WORKERS

EXAMPLE: AMAZON USING DRONES TO DELIVER PARCELS

THE BRAND ZARA HAS MADE A PRODUCTION PROCESS THAT CAN MAKE
NEW DESIGNS AND SELL THEM IN 4 WEEKS.
FOOD PANDA RIDER TRACKING SYSTEM
ADVANTAGES DISADVANTAGES
-CREATES REDUNDUNCCIES
-REDUCTION IN TOTAL AND AVERGE
COSTS -HIGH INITIAL INVESTMENT

-GREATER CUSTOMER SPECIFICATION -HIGHER MANAGERIAL COST

-MOTIVATING FOR EMPLOYEES AS IT -CHANGE IN CULTURE AS PROCESS

INVOLVES JOB ENRICHMENT INNOVATION WILL REQUIRE A NEW WAY
OF WORKING AND WORKERS MAY
-IMPROVEMENT IN CUSTOMER RESIST IT
RELATIONS

- THE BUSINESS CAN GET COPYRIGHTS

ON ITS NEW PROCESS AND CAN SELL IT
TO OTHER BUSINESSE

ERP/ enterprise resource planner

An integrated software that organises all the information from all functions of
a business in order to manage the resources of the business as a single
computer system.
Enterprise Resource Planning (ERP) software is a comprehensive business
management solution that enables companies to manage their core business
processes in one system. From accounting and financials to sales and
marketing, ERP integrates all aspects of a company’s operations into a single,
cohesive system
EXAMPLE ; THE ERP IN A LARGE SUPERMARKET WILL PERFORM A LARGE RANGE OF
TASKS:

-IT WILL RECORD THE ATTENDANCE OF THE EMPLOYEES THROUGH BIOMETRIC AND
CALCULATE THE SALARIES.

- IT IS CONNECTED TO THE CASHIER POINT OF SALE MACHINE AND RECORDING THE

SALES. IF THERE IS A LARGE SALES OF LIPTON TEA AND THE LEVEL OF INVENTORY
FALLS THEN THE ERP WILL AUTOMATICALLY SEND AN ORDER EMAIL TO UNILEVER.

- THE ERP WILL ALSO CONTROL THE CENTRAL AIR CONDITIONING IN THE STORE AND
TRIP IT IF IT IS VERY COLD.

-THE ERP WILL ALSO TRANSFER PAYMENT ONLINE TO THE SUPPLIERS ONCE THE
GOODS HAVE BEEN USED.

- ALL THE STORE STAFF TIMINGS AND SHIFTS ARE ALSO SCHEDULED BY THE ERP TO
MAKE SURE ALL WORKERS GET GOOD WORKLIFE BALANCE.
ADVANTAGES OF ERP DISADVANTAGES OF ERP
-Enables quick decision making eg it
can survey the rates of many -External stakeholders such as suppliers
suppliers and select the most also need to be automated otherwise
economical ERP will not work

-Reduces the cost of banking as it does -In developing countries there is

all transactions online problems with internet and load
shedding so ERP may not work.
-Inventory control becomes efficient
and also J.I.T can be done with ERP - Th initial cost is very very high

-Controls the working time of - There is less accountability on workers

machinery- and this reduce as ERP does all the work. They can blame
chances of breakdown their poor work on ERP server not
working properly.
-Consumer complaints are dealt with
quickly -Human inaccuracies still continue- as the
workers may sometimes do wrong data
-ERP can accurately analyse all types of input
data to spot trends in sales as well as
customer demand -Now all the departments have to share
information and work in a new way .
-ERP allows all the departments to Many department don’t like sharing the
communicate and share information. info.
This Horizontal communication helps
make pricing and product decisions. -Training costs are very high.

- Implementing ERP takes a lot of time

LEAN PRODUCTION

LEAN PRODUCTION REFERS TO ALL THE TECHNIQUES THAT SAVE TIME, SPACE AND
RAW MATERIAL DURING PRODUCTION.

TECHNIQUES THAT HELP CUT DOWN COSTS.

AIMS AND PURPOSES OF LEAN PRODUCTION

LEAN PRODUCTION TECHNIQUES AIMS TO CUT OUT ALL THE ACTIVITIES THAT DO
NOT ADD VALUE TO PRODUCT.
LEAN PORDUCTION TECHNIQUES REDUCE THE FOLLOWING 8 WASTES
LEAN PRODUCTION TECHNIQUES

KAIZEN [THE PHILOPSHY OF CONTINOUS IMPROVEMENT]

THE KAIZEN PHILOSPHY SAYS THAT IMPROVEMENTS IN A FACTORY COME FORM
SMALL CHANGES BEING DONE ON A FREQUENT BASIS.
SECONDLY THE KAIZEN PHILOSPHY SAYS THAT WORKERS KNOW MORE ABOUT HOW
TO MINIMIZE WASTE THAN THE MANAGERS AS IT IS THE WORKRS WHO WORK
DAILY IN THE FACTORY.
KAIZEN SUGGESTS REGULAR KAIZEN MEETINGS
WORKERS INFORM THE MANAGERS OF THE ISSUES THEY FACE IN THE FACTORY OR
WORKPLACE AND THE MANAGERS THAN MAKE THE CHANGES AND
IMPROVEMENTS.
FOR KAIZEN MEETINGS TO BE SUCCESSFUL:
-MANAGERS MUST BE WILLING TO SHARE AUTHORITY WITH WORKERS
-WORKERS MUST BE EMPOWERED
-ALL WORKERS MUST PARTICIPATE AND NOT JUST WORKERS OF OE DEPARTMENT

KAIZEN SUGGESTS MOVING THE WORKSTATIONS AND OFFICES CLOSE TOGETHER BY

RE STRUCTURING THE FACTORY FLOOR SO THAT THEREIS LESS MOVEMENT AND
WALKING OF WORKERS IN THE FACTORY SAVING TIME.

PROS CONS
-IN KAIZEN MEETINGS THE INITIAL
- WORKERS ARE MORE ALERT TO RESULTS ARE GOOD BUT IN THE LONG
WORKPLACE ISSUES AND KNOW THE RUN MEETINGS MAY BECOME WASTE OF
REAL REASONS OF THE WASTAGE SO TIME WHEN THERE ARE NO MORE ISSUES
THEY GIVE BEST SUGGESTIONS. OF WASTAGE

- KAIZEN MEETINGS PROVIDE TWO -MANAGEMENT INSECURITY BECAUSE

WAY COMMUNICATION BETWEEN NOW WORKERS HAVE THE AUTHORITY
WORKERS AND SENIOR TO SPOT ERRORS AND WASTAGES AND
MANAGEMENT SO NEW IDEAS ARE SOME MANAGERS ARE NOT WILLING TO
GIVEN SHARE AUTHORITY.

- KAIZEN PROVIDES WORKERS WITH -KAIZEN MEETINGS ARE NOT SUITABLE

JOB ENRICHMENT AND THIS GIVES WITH FLEXIBLE CONTRACTS SUCH AS
MOTIVATION. PART TIME AND TEMPORARY

- KAIZEN MEETINGS ARE DONE EVERY - THE SCHEDULING OF THE MEETINGS WIL
WEEKLY SO WORKERS HIGHLIGHT MEAN LOSS OF OUTPUT DURING
ISSUES QUICKLY SAVING HUGE MEETINGS
LOSSES.
-SOME PRODUCTION PROBLEMS CANNOT
BE SOLVED BY WORKERSSUCH AS
OUTDATED TECHNOLOGY
 EVALUATION: KAIZEN REQUIRES THE INVOLVEMENT AND COPERATION OF A
MOTIVATED STAFF FOR SUCCESS

QUALITY CIRCLES

DEFINITIONS OF QUALITY CIRCLE

-A group of employees who meet regularly to consider ways of resolving problems
and improving production in their organization.
.
-A group of employees who volunteer to meet regularly to discuss and propose
solutions to problems (as of quality or productivity) in the workplace.

-A quality circle or quality control circle is a group of workers who do the same or
similar work, who meet regularly to identify, analyze and solve work-related
problems. It consists of minimum three and maximum twelve members in number.

PROS CONS

-TEAMWORKING HELPS MEET SOCIAL -PART TIME WORKERS AND WORKERS

NEEDS MOTIVATING THE EMPLOYEES ON TEMPORARY CONTRACTS WILL NOT
PARTICIPATE PROPERLY IN QUALITY
-WORKERS HAVE HANDS-ON CIRCLE AS THEY DO NOT HAVE JOB
EXPERIENCE AND GIVE GOOD SECURITY
IMPROVEMENTS
- IF THE QUALITY CIRCLE HAS
-MANAGERS CAN CONCENTRATE ON INEXPERIENCED WORKERS THEN
LONG TERM GOALS AS WORKERS ARE ERRORS WILL OCCUR.
TAKING RESPONSIBILITY OF REDUCING
WASTAGES -INITIAL TRAINING MUST BE PROVIDED
TO THE WORKERS IN THE QUALITY
CIRCLE.

- MANAGERS MUST BE WILLING TO

SHARE AUHTORITY WITH THE WORKERS.
SIMULTANEOUS ENGINEERING
Concurrent engineering, also known as simultaneous engineering, is a method
of designing and developing products, in which the different stages run
simultaneously, rather than consecutively. It decreases product development
time and also the time to market, leading to improved productivity and reduced
costs.

Simultaneous engineering is an approach in which all departments work in

parallel and simultaneously in order to launch a new product quickly.
It is a faster way than sequential engineering[ one department finishes its task
and then the other department starts]

PROS CONS
-SAVES TIME/ AND MONEY AS IT -NO TIME FOR DEPARTMENTS TO
SPEEDS UP NEW PRODUCT LAUNCH REVIEW SO THERE IS A CHANCE FOR HUGE
LOSSES
-PROVIDES QUICK SOLUTIONS TO - SOME MANAGER S MAY FEEL
BUSINESS PROBLEMS OVERBURDENED AS IT IS A HIGH
PRESSURE WORK ENVIRONMENT
-TEAMWORKING AS WORK DONE
TOGETHER

CELL PRODUCTION

Cell production is a form of team working and helps ensure worker commitment,
as each cell is responsible for a complete unit of work, which Herzberg would
view as part of job enrichment.

Cell production is a method of lean manufacturing and refers to a manufacturing

system where the workforce is divided into teams designed to complete a
particular manufacturing process or product.
PROS CONS

-SPECIALIZATIONS LEADS TO LESS -TOO MUCH DEPENDENCY ON EACH CELL

TIME TAKEN AND LESS WASTAGE
-BEING IN ONE TEAM MEANS WORKERS
-THERE IS A MOTIVATING EFFECT OF WILL ONLY LEARN SKILLS OF ONE
BEING PART OF A CELL AS THERE IS PROCESS AND THIS MEANS TUNNEL
JOB ROTATION AND TEAM WORKING VISION
IN EACH CELL
-IN THE LONG TERM WORKING IN ONE
CELL BECOMES BORING AND LEADS TO
DEMOTIVATION.

JUST IN TIME-
INVENTORY CONTROL TECHNIQUE IN WHICH ORDERING OF RAW MATERIAL IS
DONE ONLY WHEN THERE IS DEMAND

- IT SAVES WAREHOUSING COST/SAVES SPACE NEEDED

- NO CHANCE OF THEFT , OBSOLETE, DAMAGE( COSTS OF RAW MATERIAL MATERIAL)

- THERE IS NO SPARE INVENTORY SO MANAGERS ARE MORE ALERT AND EFFICEINT

AND DO NOT MAKE DEFECTIVE PRODUCTS SO THERE ISLESS WASTAGE OF RAW
MATERIAL

[REST OF THE ANALYSIS COVERED IN AS NOTES]

WASTE MANAGMENT

THE WASTAGES OF PHYSICAL RESOURCES LIKE RAW MATERIALS, PETROL,

PACKAGING MATERIALS IS DONE
BY THE FOLLOWING TECHNIQUES OF LEAN PRODUCTION
-JUST IN TIME: REDUCES WASTAGE AS THERE IS NO SPARE STOCK THAT CAN BE
DAMAGED OR STOLEN
-TQM- WHICH REDUCES WASTAGE AS PRODUCT IS CHECKED AT EACH STAGE OF
PRODUCTION

SUMMARY OF LEAN PRODUCTION METHODS BENEFITS

- SAVES TIME SO THERE IS MORE OUTPUT

-REDUCES THE WASTAGE OF RAW MATERIAL
- SAVES SPACE AND RENT
- NEW PRODUCTS ARE LAUNCHED MORE QUICKLY
-INCREASE MOTIVATION OF WORKFORCE
- LESS RISK OF INVENTORY BECOMING OBSOLETE
-BETTER LABOUR MANGEMENT RELATIONS
-IMPROVES QUALITY OF THE PRODUCT

NOTE: THERE WILL ALWAYS BE ISSUES THAT WILL BE BEYOND LEAN

PRODUCTION/LEAN PRODUCTION IS NOT THE ANSWER TO ALL PROBLEMS THAT
BUSINESSES FACE

HOWEVER IF LEAN PRODUCTION IS IMPLEMENTED WITH THE RIGHT RESOURCES,

COMMITMENT OF MANAGEMENT AND THE COPERATION OF A SKILLED WORKFORCE
IT CAN TO A CERTAIN EXTENT IMPROVE EFFICIENCY IN ANY TYPE OF BUSINESS.

LEAN PRODUCTION IS A LONG RUN COMMITMENT AND NOT A QUICK FIX

PROS DRAWBACKS

1. THE BUSINESS KNOWS THE THE 1. THE FORECASTED DURATIONS MAY

DURATION OF PROJECT AND IT CAN CHANGE IN A DYNAMIC ENVIRONMENT
HELP TO PLAN FURTHER STRATEGIES MAKING THE NETWROK DIAGRAM
AS WELL AS GIVE COMPLETION DATES OBSOLETE.
TO CONSUMERS.
KNOWING THE DURATION OF THE 2. TO USE THE NETWORK DIAGRAM A
PROJECT CAN ALSO HELP MAKIE LOT OF TRAINING COST AND I.T COSTS
DECISIONS ABOUT HOW LONG THE ARE NEEDED.
BANK LOAN WILL BE NEEDED
3. THE NETWORK DIAGRAM DOES NOT
2. THE NETWORK DIAGRAM PREDICTS HAVE A BACK UP PLAN IN CASE IF THE
THE EARLIEST START TIME OF EACH DURATIONS DURING THE PROJECT
TASK AND THIS CAN HELP IN CHANGE AND IF THERE IS DAMAGE TO
ORDERING THE RESOURCES JUST IN COMPLETED ACTIVITIES.
TIME. ALSO THE WORKERS CAN BE
HIRED ACCORDINGLY BY USING 4. A NETWORK DIAGRAM GIVES RIGID
ZERO HOUR CONTRACTS. PLAN AND IT DISCOURAGES MANAGERS
FROM BEING INNOVATIVE AND TRYING
3. THE NETWORK DIAGRAM ALSO TO REDUCE TIME TAKEN.
PREDICTS THE LATEST FINISH TIME
OF TASKS. THIS HELPS THE BUSINESS 5. MAKING THE NETWORK DIAGRAM
CAN MONITOR THE PROGRESS OF FOR LARGE PROJECTS IS TIME
EACH TASK. MANAGERS OF EACH CONSUMING TO MAKE.
TASK CAN BE GIVEN OBJECTIVES TO
MONITOR THEIR PERFORMANCE. 6. NETWORK DIAGRAMS ARE MUCH
MORE USEFUL FOR REPEATED PROJECTS
4. THE NETWORK DIAGRAM SHOWS RATHER THAN A FIRST TIME PROJECT.
THE CRITICIAL PATH(THE ACTIVITIES
THAT CANNOT BE DELAYED) 7 ALSO THE NETWORK DIAGRAM IS
IF THE CRITICAL ACTIVITIES ARE BEING MORE USEFUL WHEN THE EXTERNAL
DELAYED RESOURCES FROM THE NON ENVIRONMENTS ARE STABLE
CRITICAL CAN BE SHIFTED TOWARDS AND FOR INDUSTRIES THAT ARE NOT
THEM. DYNAMIC.
[HOWEVER IN MANY PROJECTS
SPECIALIST LABOUR IS WORKING ON
EACH SEPARATE WHICH CANNOT DO
MULTI- TASKING.]

5. BY IDENTIFYNG THE CRITICAL PATH

THE BEST AND MOST ADEQUATE
RESOURCES ARE CONCENTRATED ON
THE CRITICAL PATH ACTIVITIES.

6. NETWORK DIAGRAM SHOWS WHICH

ACTIVITIES CAN BE CARRIED OUT
SIMULTANEOUSLY AND IN PARALLEL
THIS HELPS SAVE TIME AND THE
BUSINESS CAN IMPLEMENT
SIMULTANEOUS ENGINEERING(LEAN
PRODUCTION)

AFTER THE NETWORK HAS BEEN MADE A GOOD WAY TO ANALYSE ITS USEFULNESS
CAN BE TO CHECK ITS CRITICAL ACTIVITIES AND MAKE A COMMENT WHETHER
CERTAIN CRITICAL ACTIVITIES SHOULD BE GIVEN MORE TIME AND CERTAIN
ACTIVITIES MAY HAVE BEEEN ALLOTTED TOO MUCH TIME.

IF THE ORGANSATION HAS AN EXCELLENT TRACK RECORD OF COMPLETING THEIR

PROJECTS ON TIME THENTHE NETWORK WILL BE BE MORE USEFUL AS IT WILL BE
MORE ACCURATE. HOWEVER IF SIMILAR PROJECTS IN THE PAST HAVE BEEN DELAYED
THEN THE NETWROK FORECASTING IS NOT VERY RELIABLE.

NETWORK DIAGRAMS CAN BE VERY USEFUL IF THEY ARE MADE BY EXPERIENCED

PERSONEL AND ESPECIALLY WHEN TIME OF COMPLETION IS OF IMPORTANCE AS
THEY HELP INFORM WHETHER A CERTAIN PROJECT CAN BE COMPLETED IN A CERTAIN
TIME FRAME. NETWROKS CAN ALSO BE STUDIED TO SEE WHICH ACTIVITY
DURATION COULD BE REDUCED TO HELP SHORTEN THE TIME TAKEN TO COMPLETE
THEPROJECT.