Chapter 23 - Operations Planning
Learning Objective: To understand the details of each different production methods
There are many different factors that can influence operations decisions, those are:
Marketing factors;
Availability of resources;
Technology;
You should all know by know: (1) Marketing is the business department responsible for sales forecast. Why is an accurate sales forecast important for operations decisions, though?
Based on the sales forecast operations can make decisions such as:
Product mix production decisions - which products to produce more or less;
How much output to produce to match supply to demand;
How much labor and other resources are necessary for the operations.
The (2) availability of resources (or lack of) can also heavily influence operations decisions:
Location decisions are influenced by the availability of resources (relocation to resources-abundant areas);
The availability of appropriate labor impacts the selection of production method (job, batch, or flow production);
The level of automation is impacted by capital cost and labor cost (whichever is worth it).
Finally, the aid of (3) technology to design and manufacture is crucial for operations decisions:
Computer-Aided Design (CAD) - technology for creation of products and prototypes:
- Lower product development costs;
- Increases productivity;
- Improves quality;
- Reduces product time-to-market;
- Complex technology - requires training;
- Can be costly (computing power is required).
Computer-Aided Manufacturing (CAD) - automation in which technology controls production:
- Manufacturing precision (less quality issues);
- Faster and increases productivity;
- Flexible for production of multiple different outputs;
- High capital cost and training costs;
- Maintenance costs;
- Inaccessible to small businesses.
We have been repeatedly discussing methods of production - but what are they, really? There are four different methods of production:
Job Production;
Batch Production;
Flow Production
Job Production:
Characteristics:
- Unique productions;
- One-off production method;
- Each product is completed before the next one starts production;
- Complete units of work (motivating);
- Labor intensive (costly);
- Requires highly skilled workers.
Examples:
- Tailors;
- Wedding cakes;
- Flower arrangements;
- Carpenter.
Batch Production:
- Production happens in groups (batches);
- Each step of the production process is performed on each batch separately;
- Allows for division of labor;
- Good when orders are in bulks;
- Batches can be different one another;
- Not very motivating;
Bakery, school uniforms...
Flow Production:
- Individual products move through the production line continuously and independently;
- Fast production for high demand goods;
- Standardized good;
- Low labor costs;
- Demotivating - boredom (repetitive);
- Consistent quality standards;
- Allows for JIT;
- Costly implementation.
Mass Customization:
- Use of production lines to make a range of products;
- Keeps labor costs low;
- Adds value by providing customers exactly what they want
Examples:
Which production method should you choose?
The size of the market impacts on the choice;
The amount of capital available can change the decision;
The availability of other resources such as labor and land (space) influences the decision;
Whether the demand is for customized or standardized products.
Switching from a method to another after the decision has been made is extremely difficult as it involves:
Capital expenditure will most likely be required;
Employee training will be necessary to cope with the change;
Loss of motivation from staff as redundancy may happen;
Some methods require accurate demand forecasts and not every business has that figured out.
It is becoming easier for larger business to offer specialized/customized and mass produced items due to the use of technology and therefore harder for smaller business to compete. Although there may still be niche segments of the market willing to pay for non-mass produced products made by smaller businesses.
To-Do-List:
Chapter 23 - Operations Planning
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