Chapter 21- operations management
Introduction to operations planning:
Operations planning- preparing input resources to supply products to meet expected demand.
Operations planning- the importance of the marketing link
Perhaps the key information needed by an operations manager when planning future productions levels
is estimated or forecasts market demand. This is a crucial link-trying to match supply to potential
demand. This process is called sales and operations planning.
If the sales forecasts are reasonably accurate, then operations managers should be able to:
Match output closely to the demand levels
Keep stock levels to a minimum efficient level
Reduce wastage of production, e.g. by perishable products being rejected due to being too old.
Employ and keep busy a stable, appropriate number of staff.
The need for flexibility
If actual demand turns out to be either higher or lower than forecast, there is a great need for
Operational flexibility- the ability of a business to vary both the level of production and the range of
products following changed in customer demand.
This flexibility can be achieved in a number of ways:
A brief outline of these methods is to:
Increase capacity by extending buildings and buying more equipment- this is an expensive
Hold high stocks- but these can be damaged and there is an opportunity cost to the capital tied
Have flexible and adaptable labour force- using temporary, part-time contracts reduces fixed
salary costs but may reduce worker motivation.
Process Innovation- the use of a new or much improved production method or service delivery method. Some examples may include:
Robots in manufacturing
Faster machines to manufacture microchips for computers
Computer tracking of stock, e.g. by using bar codes and scanners.
Using the internet to track the exact location of parcels being delivered worldwide.
There are several different ways in which goods and services can be produced. They are usually
Job production- producing a one-off item specially designed for the customer.
This is normally used for the production o