5.1 The role of operations management
Operations management and its relationship with other business functions.
Operations management: often referred to as production, is concerned with providing the right goods and
services in the right quantities and at the right quality level in a cost-effective and timely manner.
The role of management impacts all functional areas of the business. A change in production methods can
be caused by numerous reasons, including attempts to achieve greater efficiency or simply business
growth.
Market implications
- Production methods affect the quality and individuality of the product.
- Exclusive products can be marketed at high prices due to uniqueness and quality.
- Mass produced products are standardized
- Market mass produced goods, pricing, promotion and distribution must be considered.
HRM Implications
- Change in production methods can increase or decrease the size of the workforce
- Capital intensive technologies de-skill the workforce
- Different production methods have training and development needs that should be considered
- Recruitment and selection can be relatively easy for unskilled work yet attractive remuneration
packages may be needed to recruit specialist workers
- Contingency plans for crises need to be developed
Finance implications:
- Capital intensity and lean production require heavy investment in machinery and equipment
- Investment appraisal techniques are required to assess investment options as fixed investment
costs can be very high
- Contingency funds must be in place
- In labour intensive production, a greater proportion of a firm’s costs go towards remunerating
workers with financial benefits.
Operations management in organizations producing goods and/or services.
The factors of production (land, labour, capital and enterprise) are commonly known to marketing and
production managers as the Five Ms - materials, manpower, money, machines and management, i.e. the
available resources to a business. The 5 Ms can be a useful tool in devising both marketing and
production plans. They are combined in a cost-effective way to ensure that there is value-added during the
'production' stage of the transformation process, i.e. the value of the output is greater than the costs of
production, thereby earning a profit for the
Operations management strategies and practices for ecological, social (human resource) and economic
sustainability.
Sustainability: is a concept that promotes intergenerational equity. Meeting the needs of the current and
future generations.
Triple bottom line measures a firm’s performance and impact on the Economy, Society and Ecology.
, Economy: refers to the development of economic intergenerational equity. Encourages businesses to be
more responsible in their use of resources.
(selecting environmentally friendly raw materials)
Society: examines the social interactions and structures that are necessary to optimize the quality of life
for people and their descendants. {unconscious bias}
(poverty, unemployment)
Ecological sustainability: refers to the capacity of the natural environment’s intergenerational equity.
(overfishing, over-tourism)
- Requires production to consider more environmentally friendly practices ( recycling, green
technologies)
The role of operations management and the CUEGIS concepts
5.2 Production Methods
Methods of production:
Job/customized production: involves creating an individual product from start to finish, tailor made to
meet specific needs.
- buildings , wedding dresses
Advantages Disadvantages
● Quality of production. ● Labour intensive and therefore
● Highly motivated workers. expensive
● Uniqueness of the product acts as a ● Time consuming due to the varying
unique selling point (USP). and specific design requirements.
● Flexibility in the design and ● Long working capital cycle between
specifications of the products are producing and selling products.
possible. ● Few economies of scale can be
enjoyed since each product is unique
(i.e. produced on a small
● scale).
Batch production: method involves producing a limited number of identical products. (work on one batch
before starting a new one)
- Bakeries, Light bulbs
Advantages Disadvantages
❖ Economies of scale from machinery ❖ Inflexibility from difficulty in
producing larger quantities. changing one batch to another once
❖ Specialization leads to increased production has begins.
productivity ❖ Storage costs are high since there is a
❖ Higher sales from a wider product lot of work in progress.
Operations management and its relationship with other business functions.
Operations management: often referred to as production, is concerned with providing the right goods and
services in the right quantities and at the right quality level in a cost-effective and timely manner.
The role of management impacts all functional areas of the business. A change in production methods can
be caused by numerous reasons, including attempts to achieve greater efficiency or simply business
growth.
Market implications
- Production methods affect the quality and individuality of the product.
- Exclusive products can be marketed at high prices due to uniqueness and quality.
- Mass produced products are standardized
- Market mass produced goods, pricing, promotion and distribution must be considered.
HRM Implications
- Change in production methods can increase or decrease the size of the workforce
- Capital intensive technologies de-skill the workforce
- Different production methods have training and development needs that should be considered
- Recruitment and selection can be relatively easy for unskilled work yet attractive remuneration
packages may be needed to recruit specialist workers
- Contingency plans for crises need to be developed
Finance implications:
- Capital intensity and lean production require heavy investment in machinery and equipment
- Investment appraisal techniques are required to assess investment options as fixed investment
costs can be very high
- Contingency funds must be in place
- In labour intensive production, a greater proportion of a firm’s costs go towards remunerating
workers with financial benefits.
Operations management in organizations producing goods and/or services.
The factors of production (land, labour, capital and enterprise) are commonly known to marketing and
production managers as the Five Ms - materials, manpower, money, machines and management, i.e. the
available resources to a business. The 5 Ms can be a useful tool in devising both marketing and
production plans. They are combined in a cost-effective way to ensure that there is value-added during the
'production' stage of the transformation process, i.e. the value of the output is greater than the costs of
production, thereby earning a profit for the
Operations management strategies and practices for ecological, social (human resource) and economic
sustainability.
Sustainability: is a concept that promotes intergenerational equity. Meeting the needs of the current and
future generations.
Triple bottom line measures a firm’s performance and impact on the Economy, Society and Ecology.
, Economy: refers to the development of economic intergenerational equity. Encourages businesses to be
more responsible in their use of resources.
(selecting environmentally friendly raw materials)
Society: examines the social interactions and structures that are necessary to optimize the quality of life
for people and their descendants. {unconscious bias}
(poverty, unemployment)
Ecological sustainability: refers to the capacity of the natural environment’s intergenerational equity.
(overfishing, over-tourism)
- Requires production to consider more environmentally friendly practices ( recycling, green
technologies)
The role of operations management and the CUEGIS concepts
5.2 Production Methods
Methods of production:
Job/customized production: involves creating an individual product from start to finish, tailor made to
meet specific needs.
- buildings , wedding dresses
Advantages Disadvantages
● Quality of production. ● Labour intensive and therefore
● Highly motivated workers. expensive
● Uniqueness of the product acts as a ● Time consuming due to the varying
unique selling point (USP). and specific design requirements.
● Flexibility in the design and ● Long working capital cycle between
specifications of the products are producing and selling products.
possible. ● Few economies of scale can be
enjoyed since each product is unique
(i.e. produced on a small
● scale).
Batch production: method involves producing a limited number of identical products. (work on one batch
before starting a new one)
- Bakeries, Light bulbs
Advantages Disadvantages
❖ Economies of scale from machinery ❖ Inflexibility from difficulty in
producing larger quantities. changing one batch to another once
❖ Specialization leads to increased production has begins.
productivity ❖ Storage costs are high since there is a
❖ Higher sales from a wider product lot of work in progress.
