OPERATIONS

1. Role of operations management

1.1 Strategic role of operations management
Strategic role of the operations management involves operations managers contributing to the strategic
direction or strategic plan of the business, this is often done by minimising the cost of manufacturing.

1.1.1 cost leadership

A strategy used to attempt to have the lowest cost manufacturing in its industry. This means they can
sell their product at either cheaper prices or sold at the industry average while making higher profit.
Products made by this strategy are often of lower quality, and quite basic. Low costs can be achieved
through economies of scales, access to cheap materials, improving the operation process, producing
standardised products and eliminating wastage. It may be hard for business to maintain this strategy as
customers may refer to their products as low quality and discontinue their usage of the product.
Another negative is that other customers may being to use the same strategy which means there is
more competition in the products price range/quality. To be successful in this strategy mangers need to
be aware of this.

CS: TIGER AIRWAYS “low cost carrier”

1.1.2 good/service differentiation

The operations function within any business is shaped by the range and types of goods and services that
are produced. Businesses may use the Goods/Service Differentiation to achieve a sustainable advantage
as they have a point of interest/difference. Differentiation through the operations process can be
achieved by:
 Better quality product
 Faster delivery
 Custom designed products
 More features and applications
 Incorporation of new technology
 Clever design
Management of operations will differ for producing goods and producing services. Standardised goods
are mass produced. Customised goods are varied to the needs of the customer.

CS - Gucci

1.2 Goods and/or services in different industries

The operations function within any business is shaped by the range and types of goods and services that
are produced. Management of operations will differ for producing goods and producing services.

Operations decisions depend on whether goods are standardised or customised

 Standardised goods Customised goods
Goods that are mass produced. They are uniform Goods that are varied per the needs of
in quality and meet a predetermined level of customers. Produced with a market focus than a
quality productive focus

Goods may be classified as either perishable or non-perishable

Perishable
Operational processes will need to integrate the following factors:
 High standards of quality, safety and cleanliness in all operating processes
 Very short lead times and distribution that is as quick and effective as possible
 Appropriate and robust packaging. Cold storages processes both through production and
distribution

Non-Perishable goods
Non-perishable goods are inherently more durable and therefore the issues of quality and inventory
management arise for the operations functions. They will need to integrate:
 Manage all aspects of quality in the process, from sourcing through to production and
distribution
 Implement effective inventory management strategies be highly responsive to market demands
to not over produce

Services in different Industries

 Services can be standardised or customised
 The fast-food industry aims to standardise the service
 Industries that are characterised by professionally education and trained people (dental surgeries,
medical and legal services) are generally customised

1.3 Interdependence with other key business functions

Although a business can separate the key business functions into departments that perform their
distinct roles, the functions are interdependent — each relies on the others to perform effectively.
Another term for interdependent is cross-coordination.

2. Influences
Influences can be either internal or external factors that require the business to undergo change and
continually adjust to ensure a successful business.

I
Gold Tooth Queen Can’t Grow Little Eggs
 Globalisation, technology, quality expectations, cost-based competition, government policies,
legal regulation, environmental sustainability

2.1 Globalisation

Globalisation is when trade between countries becomes more accessible because of improvements in
technologies and communications between nations. Globalisation is often linked with an increasing
integration between national economies, high levels of transfer of capital (things such as machinery or
facilities)
Globalisation effects operations as businesses can cheaply import inputs, outsource their transformation
process to more developing countries with cheaper labour rates as well as reach a global market. This is
called the Global Web Strategy. By going global it also means that the competition expands from
nationwide to worldwide.

Supply Chain – The range of suppliers a business has and its relationship with those suppliers
Global web – 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 suppliers.

2.2 Technology

 Technology is the design, construction and/or application of innovative devices methods or

machines upon the operations process.
 Administrative technologies such as a computer or planning technologies such as Gantt Charts.
 Technologies used in the operations process include robotics (highly skilled), large machines,
Computer Aided Designs (CAD), Computer Aided Manufacturing (CAM), Rapid Manufacturing
(RM).
 Technologies used in manufacturing are used to speed up the operations process while admin
technologies are used for things such as word processing.
 If competitors are ahead in technology, it becomes a THREAT

CS – Hong Kong international airport (World’s biggest aircraft terminal)

CS – Amazon threat to West farmers

2.3 Quality expectations

Quality Expectations shapes the operations as the quality of the product that customers expect to
receive needs to be met. Operations then strive to create a product that meets their expectations while
maintaining low costs.

The level of quality the customer expects based on:

 Price
 Reputation

CS – Arnott shapes changing flavours

2.4 Cost Based Competition

A strategy used to attempt to have the lowest cost of manufacturing in its sector. This means they can
sell their product at either a competitively cheap price or sold at industry average while maintaining a
higher profit.

If the business must or wants to compete on price, it must LOWER its cost
 Find cheaper inputs
 Cut product range down – reduce costs be specialising in a smaller variety of products

CS – ALDI (Cutting down product range)

2.5 Government Policies

Government polices effect the rules, regulations and standard that must be met when producing the
final product. This therefore changes the way a business’s operations process to ensure that all
requirements are met. Government polices often change when the government changes or when social
expectations change.
 Subsides and/or tax breaks for using certain inputs – i.e. you must get a tax break for using
sustainable energy
 Restrictions and/or extra taxes e.g. extra tax placed on certain outputs – i.e. cigarettes and
alcohol
 To ensure that the business keeps its profit margins the business is likely going to have to put
prices up
 Plain packaging – or the business might lower the profit they make from each packet and try to
increase the number of packets people are going to buy to make up for the fact that less people
are going to buy them

CS - Hugo’s lounge in Sydney King Cross forced to close after revenue drop, owner blames
lockout laws

CS – Bonds recall popular Newbies overalls after Victorian mother finds needle in baby’s
onesie

CS – Sunday and public holiday penalty rates will be reduced for hospitality and retail
workers
 2.6 Legal Regulations
Legal regulations are laws and regulations which must be followed to avoid penalties. These regulations
are called compliances as the business must comply with the rules. Following these regulations often
come at a cost to the business which are called compliance costs.

Consequences for not following laws – Fines, Lawsuits, Publicity

 Some inputs are Banned whilst others are Taxed i.e. carbon tax
 WHS – appropriate safety training, supply and use of protective equipment
 Some outputs are Banned (i.e. dangerous goods or lead based point) but all outputs have Safety
Standards (child safety seats)

2.7 Environmental Sustainability

Environmental sustainability means that a business’s operations should be shaped around practices that
consume resources today without compromising access to those resources for future generations. By
implementing sustainable processes into the business, it may extend lead time and up the
transformation costs.

 Customers like “Green”

 Bad publicity can hurt sales
 Need to minimise harmful inputs, gives the marketing dept. environmental credentials to brag
about – i.e. you might see on packaging a sign saying sources from sustainable product

CS – Coca-Cola to build plastic recycling plant in effort to appear more green

2.8 Corporate social responsibility

Corporate Social Responsibility (CSR) refers to being open about the actions a business makes and taking
responsibility. This also includes going above and beyond expectations when complying with regulations.

 Customer will reward or punish businesses based on how socially responsible they are seen to
be
 Use ‘fair trade’ global inputs – i.e. fair trade coffee beans
 Avoid exploration of workers
 Avoid dangerous inputs – i.e. dangerous glue used in electronic products made in china
 Quickly recall damaged outputs – will be on the news but will be better if the problem is fixed
rather than down the track negative media
 Change inputs in response to customer concerns
 Create image of being socially responsible (Donations)

CS - Westpac Group Snapshot

2.8.1 The difference between legal compliance and ethical responsibility

Legal regulations are laws set in place for a business to meet. A business is forced to comply with these
rules but only must meet the bare requirements. Ethical responsibility is when a business goes past the
bare requirements and following the intention of the law.
 Businesses must comply with all applicable laws & regulations. Complying costs the business money
(Compliance costs) LC
 Some businesses, however go much further than simply adhering to minimum requirements set out
under the law; they demonstrate a commitment to ethical responsibility
 They are demonstrating they value more than just earning maximum profit ER

Examples of Legal compliance:

 Labour laws e.g. minimum wages, working hours, break etc.
 Environmental and public health e.g. regulations over pollution

Outsourcing
Given that the main goal of business is to generate maximum profit, it is easy to see why many
businesses opt for the lowest level of compliance permissible. Ways the business aim to reduce
compliance costs:
 Structuring operations so that aspects are conducted by outside parties (outsourcing)
 Off shore outsourcing for example can take advantage of regulating difference between nations
 Lower taxation rates, standards of leader, weaker environmental regulations
 Offshore outsourcing raises ethical issues

2.8.2 Environmental sustainability and social responsibility

Environmental sustainability refers to creating a product that doesn’t damage the environment in the
making and usage of their product. Social responsibility refers to a business acting responsibly in their
business which includes the treatment of employees, where they get their inputs from who they sell to
and their views on environmental sustainability.

Environmental Sustainability
 Economic growth must be accomplished sustainably – that is using methods of production that
ensure the Earth’s will remain for future generations
 Economic growth should not occur at the expense of polluting and degrading air, water and
forests that are essential to life
 Businesses are being ask to take increasing responsibility in protection of environment
 Consumers are gaining expectations that products sold much me ‘clean, green and safe’

Corporate Social Responsibility

A socially responsible business tries to achieve two goals simultaneously:

 Expanding the business
 Providing for greater good & society
It recognises that business activity have impacts on society and as such businesses need to consider
their action.

CS – Environmental sustainability Accor (7 pillars of planet 21 program)

 3. operations processes
3.1 Inputs

Transformed resources (materials, information, customers)

 These resources refer to resources that are changed into something else that can be
used as a part of the final product or is changed into the final product.
 Transformed resources includes materials, information and customers.

 Materials come in two forms, raw and intermediate goods. Raw materials are
unprocessed.
 Intermediate goods are processed.

 Information can be processed to create a final product. Information can also be stored
to make plans, execute operations and know levels of material inputs.

 Customers can be changed physically eg. Hairdressers change a person’s appearance,

while they can also drive what the business makes as the business is wanting to sell and
please them.

Transforming resources (human resources, facilities)

 These are the resource which are non-current assets to the business and are applied to
the “yet to be transformed” resources to transform them.
 This process adds value to the input.
 Human resources are a transforming resource as they have the skill and knowledge to
apply to the materials and transform them into goods and services. Human resources
provide the transformation process with capable employees which creates a strong
relationship.
 Facilities includes the land, building equipment and technology that the business uses to
physically change the shape and features of materials and sort information

3.2 Transformation processes

3.2.1 the influence of volume, variety, variation in demand and visibility (customer contact)

The four V’s are Volume, Variation in demand, Visibility and Variety.
- Volume refers to how much of a product is made. Volume flexibility refers to how quickly the
transformation process can increase/decrease according to demand.

- Variety refers the variation of products that a business offers. If the business has customers
with varying needs, this means the business may have to modify each product to suit them.
Businesses which produce low variation often produce their products for a low cost and in high
volumes.

- Visibility refers to the customer contact or feedback that then effects the product and how it is
made. If customers have shown they prefer businesses that are ecofriendly the business would
the implement ecofriendly transformation processes.

- Variation in demand refers to the fluctuation in demand for the product. Variation can change
bovver seasons, time of day or time of year. The operations manager needs to anticipate this
increase/decrease in demand to ensure the demand is met.

3.2.2 sequencing and scheduling – Gantt charts, critical path analysis

The Gantt chart was created by Henry Gantt in 1917. 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. Gantt charts are used for any process that has several steps and
involves a number of different activities that need to be performed.

The Critical Path Analysis (CPA) is 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.
The critical path is the shortest length of time it takes to complete all tasks necessary to
complete the process or project. You will see that some tasks can be performed simultaneously
(for example painting and testing components, or making the circuitry and assembling the
components). Because each activity on the schedule must be completed to make the nal
product, the critical path is actually the shortest path through the process (having completed all
tasks).

Apple – Broken promises documentary

 Poor working conditions whilst over working staff and using young children
 First trillion-dollar company
 70 million products sold in the first 3 months of iPhone 6
 Indian children risking their lives to collect tin
 New products are highly advertised
 Apple promised to protect the environment and fairly treat workers
 Manufactured in China, no other country can provide labour so cheaply and quickly
 14 workers killed themselves at Applies biggest supplier in 2010
 Less hours and more pay (Apples promise to make things better)
 Improvements look better on apple

3.2.3 Technology, task design and process layout

Technology
Technology is the application of science or knowledge that enables people to do new things or
established task in better ways

 You have a choice between using existing technology or new technology

 Existing technology is tried and test, cheaper but will not give you a competitive
advantage
  New technology will be expensive and may take a long time to develop but will lead to
competitive advantage and improve business profits

 In the manufacturing sector, technology can be used to speed up the processing of raw
materials
 In the services sector, it allows business to extend services (global)
 Leasing is more common as it is cheaper and tax deductable

Task Design
Task design involves classifying job activities to make it easier for employees to know what and
how they should be completing their specific task. Task design can be analysed to see if the task
can be done for efficiently. Task design overlaps the employment relations functions of job
analysis, job description and person specification.

Skill audit is the formal process used to determine present levels of skill or any skill shortfalls

Process Layout
Process layout is the arrangement of machines, such that the machines and equipment are
grouped together by the function or process they perform.

Plant layout is the layout of the equipment, machinery and employees within the space. The
flow, location of stock, storage and compliance with regulations and WHS standards need to be
considered when designing the layout.

3.2.4 Monitoring, control and improvement

Monitoring
 Monitoring is the process of measuring planned performance against actual
performance
 Monitoring is crucial in a business to ensure that they are competitive and reaching
targeted goals
 Business monitor all the way outputs (Final product/service). It is arranged around the
need to measure KPI’s

Key Performance Indicators

 Key performance indicators are predetermined variables that are measured so that
appropriate operations processes can be made. E.g. Lead times/wait times, inventory
turnover rate, defect rates

Control
Control occurs when KPI’s are assessed against predetermined targets and corrective action is
taken if required.
 Compares what happened to what was meant to happen
  If the business has not achieved its objective changes and improvements may take place
 Managers need to organise strict control over the transformation process, this will be
clear by implementing challenging but reachable performance targets
 Performance is then closely measured through performance results, correct action can
always be taken

Improvement
Improvement refers to the systematic reduction of inefficiencies and wastage, poor work
processes and the elimination of any bottlenecks
A bottleneck is an aspect of the transformation process that slows down the overall processing
speed or creates an impediment leading to a backlog of incompletely processed products

Improvement is sought into the following areas:

 Time
 Process flows
 Quality
 Cost
 Efficiency

3.3 Outputs
The final good of service that is delivered to customer
Outputs must always, respond to consumer demands

Customer service
How well a business meets and exceeds their expectations of customers i.e. if customers are
not satisfied, something in the operations must be reviewed

Warranties
A promise to correct any defects in their product or in the services delivered

 Combined, customer services and warrants imply that the inputs and transformations
process are open to scrutiny as the outputs will be assessed by consumers

4. Operations strategies

4.1 Performance objectives – quality, speed, dependability, flexibility, customisation, cost

Performance objectives are the goals that relate to the aspects of the transformation process.
Objective are set by managers to the business becomes efficient, productive and profitable

4.1.1 Quality
Quality is often determined by the customer and their expectations

Quality of design

 Refers to how well or a product is completed

 Design is one of the first steps before creation of product
 Business needs to decide the quality of the product they will sell
 High quality product inputs attract a higher price. Businesses need to be aware that
consumers may not want to pay a high price
Quality of conformance

 Quality of conformance is the focus on how well the product meets the standard of a
prescribed design with certain specifications
 Quality of conformance is a measure of how consistently products achieve compliance
(conformance with) the desired specifications regardless of the standard of the
specifications.
 A Mercedes Benz vehicle combines very high-quality design with high standards of
conformance. A cheap plastic toy is of very low-quality design but if it meets the low-
quality design specifications, it would have a high standard of conformance, indicating a
certain quality of process.

Quality of service

 Refers to the quality of the service provided. This involves the reliability of the service, if
it meets standards and if the service is provided on time.

4.1.2 Speed

 Speed refers to the time ittakes for the production and the operations process to
respond to changes in market demand.
 It requires quick changes in input levels and requires changes in processing times. This
was the business reduces wait time and lead times.
 Speed aims to satisfy those customer demands
4.1.3 Dependability

 Also, called reliability, refers to how reliable and consistent the businesses products are.
 In terms of goods, it refers to the amount of time before the good fails (Measured by
warranty claims).
 Services refers to the consistency the service is delivered to. This can be seen through
the number of complaints.

4.1.4 Flexibility

 Flexibility refers to quickly changing the operations process to adapt to changes in the
market.
 Flexibility can be best achieved by increasing the capacity of production.
 This can be done by using plant/machinery better, new technologies that increase
capacity and changing product design to meet broader range if consumers.
 Time and flexibility are related

4.1.5 Customisation
 Refers to creation of individualised products to meet the specific needs of the customer
 Variation in product features such as colour, size and functions give business the ability
to customise their products.
 Mass customisation is a process that allows a standard, mass- produced item to be
personally modified to specific customer requirements.

4.1.6 Cost

 Cost as a performance objective refers to the minimisation of expenses so that that the
operations processes are conducted as cheaply as possible
 The cost incurred often determine the price
 Technology can help a business to lower cost, use inputs better and minimise waste

4.2 New product or service design and development

The creation, or design and development of new products and services is a key strategy for any
business.

Products: Products can arise from different approaches. The first approach is to identify what
customers are looking for in products, so the business can target their preferences and desires.
The second approach is to use the advances in technology to create new products that
customers may not have thought were possible, therefore making the product appealing.
Important considerations when designing and developing a product are:

1. Quality – Customers will demand a certain quality of product, including certain

attributes and features
2. Supply Chain Management – New product will affect volume of inputs needed, number
or range of suppliers you deal with
3. Capacity Management – New product will increase the use of facilities and equipment,
may require purchasing new technology or equipment
4. Cost (Includes product utility) – the amount of inputs, time and energy used to create
the new product through the value adding process. Value is directly relating to the cost
but also includes the customers perception of the product.

4.3 Supply chain management – logistics, e-commerce, global sourcing

 Supply Chain management involves the integration and management of the flow of
supplies throughout the operations process to meet the customer’s needs.
 The managing of the flow of supplies throughout the inputs, transformation processes
and outputs to best meet the needs of customers

4.3.1 Logistics

Logistics is similar to the channel of distribution as it refers to how the product is distributed to
customers but also includes how it is transported (transportation mode), how the product is
stored, how the materials are handled (e.g. how hazardous materials are handled) and how it is
packaged.

4.3.2 E-commerce

 E-commerce involves the buying and selling of goods and services via the internet.
 The level of supplies can be managed and seen by the business and suppliers via the
internet which is called E-Procurement.
 B2B refers to direct access from one business (the supplier) to another (the buyer),
allowing the supplier to assess the needs of the buyer and meet them in a timely manner.
 B2C is the selling of goods and services to consumers over the internet, with payment
usually by credit card.

4.3.3 Global sourcing

Global sourcing is a broadterm 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.

This is when the business sources their inputs from overseas. This means buying from where
the supplies meet the businesses needs best. This allows the business to gain access to new
expertise in the industry, save money and access new technologies and resources

Supplier rationalisation - involves assessing the number of suppliers in order to reduce the
number of suppliers to the least amount.
Backwards vertical integration – if it will achieve a time or cost savings a business may look to
purchase a supplier through merger or acquisition
Cost Minimisation – Assessing low cost inputs from offshoring supplies i.e. outsourcing
Flexible or Responsive supply chain processes – Ordering stock as required to minimise waste
and continually lower costs. ‘Lean’ organisation aim to ‘make to order’ so that expenses are not
incurred on unnecessary storage.

4.4 Outsourcing – advantages and disadvantages

 Outsourcing is one of the most significant developments in current business practices. It
is a supply chain management strategy that can provide very significant value to the
business.
 Outsourcing involves the use of external providers to perform business activities
 Outsourcing is that when a service is performed by an external provider that specialises
in a particular business function, it will do so at a lower cost and with a greater
effectiveness
 Involves the use of external providers to perform business activities
 By doing this, business will save money.
 Also, called ‘Business process outsourcing’ (BPO)
Before a business decides to use outsourcing as an operations strategy, operations managers
need to assess whether the use of outsourcing is viable.

Advantages Disadvantages

Simplification: this arises from reducing the Payback periods and cost: this refers to how
number of activities performed within the long it takes to repay the cost of organising
business. outsourcing and make the required
organisational changes. Over time businesses
will experience cost savings.
Efficiency and cost savings: access to Communication and language: this is an issue
cheaper labour, regulatory differences and between the business and the outsourcing
skilled labour in offshore locations all lead vendor, and is a key issue in managing the
to cost savings for business. relationship. When negotiating to outsource,
the business might focus too much on the
decision to outsource rather than consider the
ongoing relationship with the vendor.
Increased process capability: this comes Loss of control of standards and information
from access to improved technologies and security: when a business opts to outsource, it
highly skilled labour. Improved process can feel a loss of control over standards and
capability means products are produced over how information is used.
and delivered to the market with improved
levels of service.

Increased accountability: through the use Hierarchies: a business using outsourcing may
of service level agreements (SLAs), which be aiming to eliminate costs associated with
contractually bind the vendor to pre- hierarchies, yet managing complex outsourcing
determined targets on KPIs agreements can create its own hierarchies
thereby maintaining business inefficiency.

Access to skills/resources lacking within Organisational change and redesign:

the business outsourcing may be accompanied by a high
level of business change and organisational
redesign. There may be downsizing, causing the
loss of domestic employment.

4.5 Technology – leading edge, established

4.5.1 Leading edge technology

  Leading edge technology is the technology that is the most advanced or innovative at
any point in time.
 Operations managers can set themselves aside from the rest by using this L.E.T.
 Helps quickly create higher quality products with less waste and helps a business
operate effectively.

CS Supermarkets and the new breed of DIY shoplifters - SWIPERS

4.5.2 Established Technology

 Established technology isthe technology that has been developed and widely used and
is simply accepted without question.
 Includes computers and software which manage the operations side of the business.
 Established technologies are functionally sound and reliable and help establish
standards for productivity and speed.
 These technologies are functional and help establish basic standards, these include:
- Barcoding
- Robotics of complex manufacturing
- CAD, CAM and computer integrated manufacturing (CIM)

4.6 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 point in time.

4.6.1 Advantages and Disadvantages of holding stock

Advantages Disadvantages

Customer demand can be met There may be large costs with holding stock

Alternative products can be offered if others Stock may need to be insured for spoilage and
run out theft
Reduce lead times between orders and delivery Stock may remain unsold

Immediate revenue Time and money spent making extra stock

could be used other places
Old stocks be sold cheaper

A store of stock allows the business to promote

use of products in non-traditional or even new
markets.
4.6.2 Valuing inventory

Stock needs to be correctly valued to calculate profit and value of unsold stock. The method of
valuation affects the calculation of the value of the goods sold, the value of the unsold stock
and the gross profit. The main inventory valuation techniques include last in first out (LIFO) and
first in first out (FIFO).

4.6.3 LIFO (Last in-First out)

The LIFO (last-in-first-out) method of pricing inventory assumes that the last goods purchased
are also the first goods sold and therefore the cost of each unit sold is the last cost recorded.

4.6.4 FIFO (First in first out)

The FIFO (first-in-first-out) method of pricing inventory assumes that the first goods purchased
are also the first goods sold and therefore the cost of each unit sold is the first cost recorded.

4.6.5 Just in time (JIT)

Just in time is not an inventory technique and more an inventory management approach which
ensures that the exact amount of material inputs will arrive only as they are needed in the
operation process. This can be used when a business is attempting to lower costs as no storage
is required.

4.7 Quality Management

Quality management refers to those processes that a business undertakes to ensure

consistency, reliability, safety and fitness of purpose of product

4.7.1 Quality Control

Quality control involves the use of inspections at various points in the production process to
check for problems and defects

 A business must have clear and defined quality standards

 Standards must be consistent over all products
 Pre-determined quality targets should be put in place
 Goods may be passed as ‘okay’ or ‘defective’

4.7.2 Assurance

Quality assurance (QA) 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. Quality assurance is a proactive approach to quality rather
than a reactive one. A series of quality assurance standards has been developed in response to
the impact of globalisation and the international emphasis on quality. ISO standards are
voluntary but many businesses comply with their requirements to enhance their domestic and
international competitiveness.

International Organization for Standardization - ISO

4.7.3 Improvement

Quality improvement focusses on two aspects: continuous improvement and total quality
management.
Continuous improvement is the ongoing commitment to improving the products and/or how
they are made.
Total quality management is the concept focuses on managing the total business to deliver
quality to customers and is a ‘holistic’ approach, however, in that quality becomes both a
commitment and the responsibility of every employee of the business Emphasis on employee
involvement in the prevention of quality problems. Build the product right in the first place and
you avoid the expense of inspection and the waste of rejected products.

4.8 Overcoming resistance to change

Legislative and regulatory changes, changes in economic conditions, social changes over time
and technological breakthroughs all impact on the business and shape its operations. Change
can also come from within the business through the initiative of staff or the application of
technology and a focus on innovation. Change can often be resisted as occasionally change
causes uncertainty and uncertainty can be stressful. Resistance to change arises from two
principal sources within a business:
- Financial
- Psychological/emotional
The most important step in overcoming resistance to change is to ensure that managers
understand the main reasons why change is resisted. Once these factors have been identified,
managers can put in place strategies to overcome the resistance.

4.8.1 Financial
The main financial costs associated with change include the:
- cost of purchasing new equipment
- cost of redundancies
- costs of retraining employees
 - costs associated with structural reorganisation of the business, including changes to
plant and equipment layouts.

4.8.2 Psychological/emotional
Another source of resistance arises from what is called inertia. Inertia is a term that describes a
psychological resistance to change.

4.8.3 Strategies to overcome resistance to change

Successful managers are the ones who anticipate and adjust to changing circumstances rather
than being passively swept along or, worse still, being caught unprepared. Such people are
proactive — they initiate change rather than simply react to events, rather than reactive —
those who wait for a change to occur and then respond to it. To be constructive, changes must:
- Occur at a pace at which they can be absorbed by, and integrated into, the business
- Be evaluated thoroughly to assess their overall impact. Poorly managed changes
normally result in employee resistance, tension and lost productivity.
- Be introduced into a workplace culture that supports employee participation.

4.8.4 Change management strategies

Identify the source of change and assess whether there is a need to accommodate change
through adjustments to business processes. Generally, the sources of change are external and
the business is responding to the threat that change can pose.
- Lower the resistance to change through communicating with employees about the need
for change and getting widespread support for the change.
- There may be a need to use change agents (internal staff or external professionals). If
staff are included in the process of creating a culture of change and setting goals, they
will generally be more supportive.
- It may be necessary to apply change models such as Kurt Lewin’s unfreeze-change-
refreeze model or the more contemporary Kotter’s eight-step change

4.9 Global Factors

Several global factors present opportunities when assessing the operations strategies available
for operations managers. These opportunities may be classified as:

4.9.1 Global Sourcing

Global sourcing is a broad term that refers to businesses purchasing supplies or services
without being constrained by location.
 Supply chain management
  Most non-core business activities can be outsourced. Decisions made to outsource will
be based on cost, efficiency, productivity, technical ability and ability to operate over
more hours of the day

4.9.2 Economies of Scales

 Refers to the cost advantages that a business may gain by producing on a large scale
 A business may be able to lover the per unite cost if they mass produce
 Globalisation plays a role to have global sourcing
 Scale of production decrease the cost per unit falls thus increasing profit margins

CS - ALDI

4.9.3 Scanning and learning

 All businesses can benefit from scanning the global environment and learning from the
best practice of businesses around the world.
 Scanning and listening can be a very valuable operations management tool as it can help
managers adapt best practice to the business operations

4.9.4 Research and Development

 Research and development (R&D). R&D can make a very big difference to the level of
innovation, quality and competitive advantage of a business.