Dissertation:

Business
Simulation

Lecture 3:
Operations

Dr Andrew Wilson
 Explore the operation
Session nodes

Overview Understand the

importance of operation
and supply chain
strategy in the
simulation

Explore the various

production, purchasing
and logistic strategies

Understand how quality

control can influence
customer retention and
increase sales
Operations in Focus
 “ This section of the simulation represents the
management of the day-to-day activities of the virtual
business. It oversees production, distribution, and
ensures smooth workflows. From optimizing
processes to handling inventory, Operations strives to
enhance efficiency while meeting customer demands.
It's the heartbeat of the company, ensuring everything
runs seamlessly.

What Does Operations Represent?

What Does Each Node Do?
What Does Each Node Do?
Introduction to
Resourcing
 Ensure that there are enough effective hours to
complete the required tasks for the coming
quarter.

Resourcing This essentially boils down to having enough

people in place, but you can also manage:
Advice: Keep in • The type of workers deployed.

mind the strategy • Employees’ levels of ability and morale.

that you are • The amount of overtime and how employees

will be rewarded for working beyond their
contracted hours.
pursuing
• The levels of equipment and space available
to workers.
 Key Considerations:
Resources
Do you know how much work needs to be done?

The more work you need to carry out, the more workers you need.

Is there a sustained need for workers?

If you only need resource for a short time, it may make sense to use contract workers rather than incur the
expense of recruitment and then redundancy of permanent workers.

Do you know how soon you need the resource?

If you need the resource really quickly then contractors are normally the best option, partly because the need is
often temporary. If you use permanent workers though it may be worth looking at faster recruiting methods and
also making an attractive salary offer for the quality of worker required to ensure a successful recruitment
campaign.

Can ability or morale be easily improved?

Although some aspects of efficiency are out of your hands, it may be possible to gain significant amounts of
effective resource by improving your workers' skills and / or their morale. This may work out cheaper in the long
run than simply hiring more staff.

Can you borrow workers from another department?

If other departments have spare capacity in their workforce you can borrow their employees instead of hiring
dedicated or contract workers. Borrowed workers will not have the same skill levels as dedicated workers, so
you will need more of their hours to complete a given task, but if they would otherwise be idle it makes sense to
keep them active.
Mapping Out Resource Impacts
Introduction to
Production
 Ensure that you have enough products to meet demand at
any time and keep costs low enough to allow you to make
enough profit to sustain your business.

Manage fluctuating demand

Production • Make sure there are enough products to cover the peaks in
demand that will occur through the next quarter. Making
projections will help you to approximate expected levels of

Advice: Keep in demand and keeping stock is a good way to allow for
underestimates. Large amounts of stock have to be paid
for in advance though and they will also require extra

mind the strategy space for storage, so regular monitoring is essential.

Maintain high efficiency levels

that you are • Select the highest level of Production Units you can afford.

pursuing • Contracting out allows you to more easily manage the

process but the convenience will come at a cost, reducing
the margins you can make on each sale. It may be that you
wish to change approaches as your business grows, but it
always pays to think long-term as the shift from one
approach to the other is significant.
 Key Considerations:
Productions
Is contracting out production the best option for my company?
• Contracting out may be the best option but when thinking this decision through you should have a clear understanding of all
aspects of your business.

• If you contract out production you will need to bear in mind that costs of production will almost certainly rise thus reducing profits
on each sale.

• However, if you contract work out you will have greater capacity to complete other tasks in-house.

• The decision to contract out some or all of your production work should also take account of overall business demand levels,
quality of contractor work and whether the products produced can be sold or take up costly storage space.

Do you know how many products you expect to sell in the next quarter?
• As a minimum, a business plans to build at least enough products to cover expected demand.

• But to have a good understanding of demand you should consider creating a sales forecast for the coming quarter which is
informed by past sales trends and current sales and marketing activities.

Do you have enough capacity to satisfy the expected demand?

• To assess your capacity to satisfy expected demand you need to consider your available production capability and the likely
amount of units that will be ordered in the forthcoming quarter.

• Production capability can be determined by assessing in-house as well as available contractor capacity.

• To calculate accurate levels of demand you should consider recent sales trends as well as same quarter trends in previous years.

• In addition, you should consider the amount of ongoing sales and marketing activity and the projected sales that typically results
from this level of work.

Can you manufacture in large batches?

• Producing in batches rather than single units reduces the time needed to produce each product, thereby making a saving on
production costs per unit, and in turn Cost of Sales. Whilst benefiting from these economies of scale however, you will experience
more pressure on cash flow and require more space to store the components and finished products required. Larger batches also take
longer to complete so you may complete a quarter with units “In Progress”, in other words incomplete products which cannot be
sold in the current quarter.
Mapping Out Production Impacts
Introduction to
Quality Control
 Quality Control
Reduce the number of faulty
Advice: Keep in products produced whilst
minimising the extra cost of
mind the strategy conducting the process.
that you are
pursuing
 Key Considerations: Quality Control

Do you promote 'quality' as a Brand image or product selling

point?

• If your research has highlighted that quality is important to your

customers, then you need to consider how you build quality
procedures into the production process and how you communicate
and promote your quality ethos through your marketing channels.

Are returns a significant problem?

• If your business is experiencing higher than expected levels of

product returns, you need to consider whether the problem is big
enough to justify formal research to get to the root of the problem.
Research results should indicate clearly how the production process
can be improved to alleviate the issue. However, consider the fact
that formal research will take time and money and you may consider
this approach unnecessary.
Mapping Out Quality Control Impacts
Introduction to
Purchasing
 Ensure that enough components are ordered each
quarter to allow you to complete your production run.

Purchasing Look for a supplier that meets your company's needs in

terms of:

Advice: Keep in • The amount you can afford to pay for components
• The amount of time you are willing to contract the

mind the strategy supplier for how quickly you need components to be
delivered.

that you are As the needs and circumstances of your business

change, you will need to review your arrangements.
The ‘perfect’ solution however, is seldom available so
pursuing you will have to prioritise your requirements and select
accordingly.
 Key Considerations:
Purchasing
Does your existing supplier arrangements adequately meet your company’s needs?

• Each supplier provides a different package (price, credit terms, delivery etc.) as part of their offer. At different
times the priorities of your company will dictate that one aspect of a Supplier’s offer is particularly important. As
your company grows or circumstances change, it may be that you may need to consider reviewing whether your
existing arrangements are still the most suitable available.

Do you know how much you can afford to pay for each component?

• Your business finances together with what your customers say they can afford will dictate the amount that you will
be able to pay for components. If component costs push the overall cost of production to a point where you cannot
make any profit then you will need to consider changing suppliers, buying cheaper components and/or selling into
a different market.

• You should also consider how your gross profit margins are affected by supplier choice and understand the overall
business impact of increasing and reducing component costs.

Is your relationship with your existing supplier worth keeping?

• Changing suppliers may be the best option if better terms are being offered elsewhere. But also consider
maintaining a relationship with a supplier because it might prove more beneficial in the long run. Businesses with
longstanding relationships are more likely to be offered discounts to keep loyalty. Whilst such offers cannot be
accurately predicted, it is worth bearing in mind when considering a switch.

Do the terms offered suit your current circumstances?

• Change is the only constant in business, so it is always worth keeping an eye on what all suppliers are providing
and thus be in a position to consider and judge the best terms for your business.

• However, loyalty breeds trust and suppliers are much more likely to offer their best terms to their best
customers.
Mapping Out Purchasing Impacts
Introduction to
Logistics
 Make sure that you account for the
Logistics: Keep logistical cost when setting the
in mind the discounts you offer to sales
Channels.
strategy that you
This extra cost will reduce the profit
are pursuing margins you are able to achieve.
 Key Considerations: Logistics

How much extra cost can I afford to spend on

Logistics?

• Be aware of how much profit you can make on

each product you sell so that you can take into
account the cost of shipping your products.
Mapping Out Logistics Impacts
 The
Poster Presentation
Assessments
• You may want to consider using the key metrics included in this area to showcase the key
decisions made by the strategy and marketing director.

• Consider using the key metrics of operations and how key decisions influenced the quality of the
product and the rate it was produced at.

• The poster presentation should make use of infographics and not be littered with large amounts of
text.

Business Report
• You may want to consider making use of wider reading and theory by applying theory that
considers purchasing quantities, supply chain logistics, quality control strategy and rate of
production strategies.

• You should critically analyse and evaluate how the application of operations theory such as lean
production, total quality management, just-in-time, inventory management, and six sigma has
impacted the performance of the firm.

• This section of the business report should critically analyse the key metrics and interpret what
they mean and how they impacted the overall performance of the business.

• The section should include key recommendations for future strategy and marketing for the
business.
THANK YOU
Any Questions?