Topic 2.3 making operational decisions

Key topics:

• Business operations

• Working with suppliers

• Managing quality

• The sales process

Unit 2 Focuses on a business which has been established and is now looking to expand and grow….

Past paper questions (old spec unit 3)

2.3.1 – Business operations

Quick questions:

1) What is the purpose of business operations?

2) Name the 3 types of production process

3) Explain how each type of production works and give an example of a product made using it

4) List the pros/cons of each type of production

5) How are costs minimised?

6) How do you calculate labour productivity?

7) How can labour productivity be improved?

8) How can technology affect production?

Complete the bar gate stock questions in booklet

Purpose of business operations

“Operations” is the part of a business that provides the customer with the goods or services they have ordered.

• Every part of the product being produced & delivered is operations. It is different to marketing – that gets people to buy

• Services also have operations – it might be a website or app to process information and booking.

Business Operations ensures that the right goods or supplied to customers at the right time, with the right quality standards at the right price.

Production costs can be minimised by:

• Improved purchasing (cheaper suppliers)• Better design of products• Cheaper labour costs (better training)• Cutting overhead costs• Streamline the production process• Relocation ( cheaper premises – or closer to your

customers)

Make a note of these…

Measuring productivity Quick activity (5 mins)

1) Calculate the productivity per worker for each company. Show your workings using formula provided.

2) Give an opinion as to what the information tells you and what you might you do to improve productivity.

Feedback your ideas in 5 minutes…

Answer

What could be done to improve productivity?

• Replacement of working Patterns e.g. shifts / overtime

• New technology

• Improved management

• Improved training for staff

• Improved layout of production lines

• Reduction of workforce

Increasing competitiveness through cost efficiency

Technology in operations management

• There are a number of technological methods used in operations management:

• Robots

• Computerised stock-control programs

• Communications technology

• Design technology

Waiterless German restaurant

Impact of technology on production

• There are 4 main elements to balance:

• Production costs – dangerous tasks carried out by machines not humans.

• Productivity – mechanising or automating some processes increases productivity. Aim is to minimise cost per unit produced.

• Quality – customers getting what they want, technology matched with human flexibility tailored to their requirements.

• Flexibility – relating to quality and delivery. Ensuring technology doesn’t make customer experiences too rigid.

B for Bang! Start this as soon as you sit

down!

Match up the correct definition for the topic key terms – complete on

the sheet provided and stick in your book…

Start this as soon as you sit

down!

Key WordsBar Gate Stock graph A diagram to show changes in the level of stock over time.

Buffer Stock (Minimum Stock Levels) This is the minimum amount of stock that the business has decided to keep at any one time to avoid running out.

Just in Time (JIT) Running the business with so little stock that new supplies have to arrive Just in Time before they run out.

Stock(s) Items held by a firm for use or sale. (E.g. components used by a manufacturer to make things (raw materials), or sellable products for a retailer (boxes of cereal))

Maximum Stock levels This is the largest amount of stock that the business has decided to keep at any one time.

Reorder Level This is the level at which stock can fall and then it must be reordered to ensure the business can function effectively.

Answers

Quick task (5 minutes)• In pairs, discuss and list as many benefits of holding

stock or holding little or no stock

• Complete the table on the worksheet

• Be ready to feedback in 5 minutes…

Benefits of Holding Stock Benefits of Holding Little or No Stock

JUST IN CASE JUST IN TIME

Possible answers

Benefits of Holding Stock Benefits of Holding Little or No Stock

JUST IN CASE JUST IN TIME

Business can meet unplanned surges in demand

Cost saving in not having to store stock

Business can replace damaged goods

Less chance of damaged or stolen stock

Businesses might receive discounts for bulk buying

Employees can focus on task rather than managing stock

Limited Problems Can reduce costs of production which makes product pricing more competitive.

Bar gate stock graphs: The ‘traditional method’

• Follows the ‘just in case’ principle if stock control

• Need to get a balance between reliability and cost

• Too little stock held unhappy customers

• Too much stock held high costs impacting on prices

• This method aims to maintain sufficient stock for popular items, with regular orders for fresh supplies

• Buffer stock – minimum held in stock at all times

• Need to decide how often to reorder form supplier – bigger, less frequent orders drive down costs due to economies of scale through bulk buying

• This is automated in large stores through bar code scanning, with automatic reordering

Exam question practice

• Attempt the Q1 – discuss in pairs and feedback in 5 minutes…

Complete on the sheet & stick in your book

Question: Use the diagram to calculate how many weeks it will take for the stock to arrive after re-ordering and how many

items the company hold as buffer stock.

Past exam questions 2b(i)(ii)(c)• You have 15 minutes to complete the past exam questions

• Be ready to feedback to the class…

Complete on the sheet & stick in your book

Mark schemes

Mark schemes

Mark schemes

Further application to exam style questions

Refer to worksheet & complete in your classwork book

Further application to exam style questions

Just in time (JIT) stock control • Refer to the info sheet

• Volunteers to read

• Spend 5 minutes analysing the pros/cons of this method of stock control

• Complete the table on the info sheet

• Be ready to feedback your ideas…

Pros/cons of JIT

2.3.2 – Working with suppliers

Quick questions:

1) List the 5 main factors at the heart of the relationship between a business and its suppliers

2) What do well managed logistics and supply decisions help to achieve?

2.2.3 – Managing quality

Quick questions:

1) What is quality control?

2) What is quality assurance?

3) What impact does high quality have on a business in terms of: wages/wastage/managers?

4) What are the benefits of good quality?

Managing quality

Benefits of good quality

Benefits of Good Quality

Good quality allows for a premium price to be charged.

Good quality builds a strong brand image.

Good quality is closely linked to meeting your customers needs.

Good quality is a way of differentiating your products.

Good quality should mean less waste as there a fewer faulty products.

Good quality can reduce your costs of staffing(wages and numbers).

Good quality can give you a competitive advantage.

Benefits of greater quality

• In a nut shell…

Why quality matters

Culture and quality

2.3.4 – The sales process

Quick questions:

1) What should a business provide to succeed in selling?

2) What factors contribute to staff product knowledge?

3) What results from efficient service?

4) How can businesses engage with customers?

5) What is it important to respond to customer feedback?

Starter – 10 minutes • Consider the following sales scenarios:

• Buying:

1) A new pair of trainers

2) A new house

3) A meal in a restaurant

4) A new laptop

• Which factor would be most important in the sales process for each scenario and why?

A. Product knowledge of the sales assistant

B. Speed & efficiency of service

C. Customer engagement (Tweets/social media/updates/word of mouth)

D. Responses to customer feedback (e.g. TripAdvisor comments and responses)

• Make a note of your response for each scenario in your classwork book

• Be ready to feedback in 10 minutes…

Essential elements in the sales process

• Refer to the info sheet

• Volunteers to read

• Circle any terms your unsure of

• Highlight any key points as we go through

Effective customer service

Product knowledge

Customers have a right to expect that staff will be sufficiently well trained in the product or services

being provided.You can achieve this through:-

• Good training

• Staff engagement and loyalty

• Staff committed to providing an excellent Customer service / experience.

Customer engagement

Customers that are regularly engaged (communicated to) by businesses are more likely to use that product or service. Engaging your customers has always happened but social Media has made customer engagement easier.You can achieve customer engagement (feeling part of the product / service ideas by using:

• Promotional events / pre launch or exclusives• Electronic articles / newsletters / bulletins / emails• Use of Social Media sites such as Facebook, Twitter,

Instagram etc.• Word of Mouth

Speed & efficiency of service

Good customer service is designed for the customer not the business. If it is efficient and works well it will respond quickly and give customers a sense that they matter.

An efficient service:• Gets products to you exactly when you want them• In good condition• And if something is wrong they sort it out quickly and

without excuses.

A good service:

• Meets the needs of its customers – sometimes it may cost more but people feel its worth paying for. It isn’t about high quality / high price – sometimes such as Ryanair it is about low cost no frills services that do what people want.

Responses to customer feedback

In the past customer feedback was limited to telling the business what you thought (often not good) and telling your friends and family what you thought about a service. (generally not good) and had limited impact on many businesses.

The power of social media and review sites such as Trip advisor has meant that businesses now have to respond to feedback much more quickly and deal with issues effectively to manage customer expectations.

Failure to do this allows many people can see how your business deals with its customers and get a view as to how good your products and services are.

If a business wants to keep customers returning (repeat purchases) it needs to provide excellent customer service and keep them by managing the feedback (both good and bad) it receives so customers feel engaged and delighted by the service it receives.

After sales response

If good customer service is designed for the customer not the business. Then that service shouldn’t stop at point of sale.

Things do go wrong how a business responds to putting things right, and how quickly it does this will impact significantly on the overall customer experience and response to a business’ goods or service:-

For a business who cares about its long term reputation, good after sales service is vital.