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CHAPTER

3
Operations processes

Operations processes are the activities to wholesalers, retailers and customers, Components
involved in the transformation of inputs and provides after-sales customer Components are a part or
into outputs. This may also be referred to service. The business may take a ‘top- piece that is assembled
as the production system or operations down’ approach to operations where the with other components to
create a finished good.
system. Each activity adds value so that operations business function interprets
the output has a greater value than the the overall business strategy and aims
cost of inputs. The outputs will be sold to play its role in achieving the business
for a profit. Key questions that must be objectives. Alternatively, a systems
answered are: management approach focuses on
s What production activities are required? integrating operations with the other key
s What will be the sequence of the business functions of marketing, finance
activities? and human resources to create sustainable
s How often will the process need to be competitive advantage.
changed or adjusted?
s What technology will be used?

Passengers reach
Aircraft, pilots, flight Taking bookings and
their destination
attendants, fuel transporting passengers
safely and on time

Shaping and welding steel,
Steel, plastic, glass, Cars that perform
making parts, assembling
robotics, labour and safe to drive
components

Figure 3.1 Transforming inputs into outputs – operations for different products, an airline and
an automotive factory.

The operations manager has a role in
every part of the operations process. The
Inputs
value-added objectives are to produce The inputs into an operations system are
goods and provide services right the first more than the physical raw materials and
time, save time by eliminating delays and components used to make a good or the
improve delivery times, producing in skills, creativity or knowledge to provide
a dependable and flexible manner and services. Inputs are more complex and
control input costs. When assessing the have links with the other key business
performance of the operations functions functions: marketing, finance and human
the manager determines how effectively resources. Inputs may be classified as
the business makes and assembles materials, people or physical resources
raw materials and components into and further categorised as transformed or
finished goods and services, distributes transforming resources.

CHAPTER 3: OPERATIONS PROCESSES 37

destinations. known Transformed resources as the outputs. and the outputs are knowledgeable however. The transformations that occur service. bookings and maintenance will be used and. information will be processed to produce a ‘product’ unique to specific needs of the customer. Materials in the form of aviation fuel is a significant expense. information about flights. For example. Manufacturers will focus on materials as their most important resource. Businesses involved in transporting customers such as airlines will probably have the most equal split between these three. of time and money. customers are the most important resource. ranging from first-class seats to budget- economy seats. at school These are the inputs that are changed the inputs are the classrooms. When inputs are transformed they are converted into goods and services. For service-based businesses such as schools. 38 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . depending on the nature of the students who can learn new skills quickly industry or type of business one of these will be more important. the deadline and enough finance to purchase transforming resources change and convert inputs to pay for the operations processes. Therefore. That is. the transformed resources. doctors and financial advisers. Table 3. computers and the as a component or a finished good or teachers. textbooks. Businesses use a combination involve educating and socialising students of materials. students and converted into something else such themselves. customers determine what type of service they desire. finally. information and customers. and are transported to their new destination. A business will need Some inputs are transformed resources and enough time to finish operations before a others transforming resources.1 Types of inputs Materials People Physical Raw materials Labour (physical and mental) Factory and office building Parts and components Managers Land Power and energy Engineers Machines and tools Supplies Maintenance Office equipment Computers There are also the intangible inputs as good citizens ready for the workforce.

the skill. As a form human resources function to provide the of feedback. Doctors and hairdressers transform used in the cars of sales representatives. come from analysis of the performance There is a strong relationship with the of the operations system. Information CHAPTER 3: OPERATIONS PROCESSES 39 . engineering plans and labour of people is applied to materials quality analysis reports. Some operations stay in a hotel or resort. Airlines All materials can be considered current and travel companies change the location assets that are constantly flowing in and of their customers. Businesses must know information relevant to their operations.Materials is an input for information-processing businesses such as accountants or banks. Many businesses recognise that people work schedules such as critical path are their greatest asset. input into future operations. lessons learned from business with suitably qualified. Motivated and performance objectives will also be an loyal employees are essential as well. Information Transforming resources is stored in files. materials because they help in producing the output and are not a component of the final good or service. and expect to maintain a competitive inventory kept securely for another advantage. Information will to convert them into goods and services. however. knowledge. in computer programs These are the resources that remain in the and in databases. Customers their location as in a courier business are also an input because it is their needs or transport company. Other businesses and desires that ‘drive’ the operations organise a change in the possession of the of a business. and keep controls over materials inputs. in particular market Information research. Supplies are different to raw return or investment advice. This information is business and are applied to the inputs to used to make plans. operations is closely connected to the marketing function. or longer than 12 months. Businesses can no longer materials – retailers do this. Examples of information include the Human resources know-how to operate equipment. how customers feel and look. this area of business is still a materials input. This is because analysis diagrams. Materials may produce what they think customers want merely be stored or warehoused. value has been do not use up materials but change added to their quality of life. architectural designs. Therefore. capabilities and customer orders. parts and supplies used up presented in a new form such as a tax in operations. The information is analysed and then components. Materials are the raw ingredients. in Customers a real estate office supplies would include Customers can be changed in different stationery. When customers are out of the business and not kept for entertained by theatres and movies. skilled and operational mistakes or failing to achieve experienced employees. printer cartridges and the fuel ways. For example. execute operations change them to add value.

Other facilities equipment and technology the business are concerned with storing and moving uses in operations. They are the non- materials and partly finished goods to current assets of the business because warehouses. Technology is an essential facilities are used to generate profit element as it can enable a business to through their use for a period longer use its transformed resources in a more than 12 months. Facilities remain in the efficient and effective way. 40 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . and features of materials. Machinery and equipment will be used to physically change the shape Facilities are the buildings.1 Comprehension Identify the transformed and the transforming resources used to provide a restaurant meal.2 Examples of transforming resources in different industries Transforming resources School Airline Soft drink manufacturer Human resources Teachers Pilots Machinery operators Cleaning staff Maintenance engineers Chemists and food Maintenance staff Flight attendants technology scientists Parent volunteers Cleaners Engineers Administration staff Baggage handlers IT support Aircraft refuellers Drivers Check-in staff Facilities Buildings Aircraft Mixing vats Playing ovals Hangers Warehouses Library Terminals Labelling machines IT equipment and computing lab Computerised booking system Packing machinery Classrooms Activity 3. business after materials have been used Table 3. a theatre performance and a car. Facilities up. land.

The operations Every business must consider how it will manager must select the optimal process produce goods and supply services. which was the customer’s desire. securely in a locked room until final payment referred to as the 4Vs. whether it be job. For a particular customer who wanted a racing bike the shop was able to add value in different ways. more convenient location for access by The transformation process therefore consumers needs to be designed. when the customer paid which of the 4Vs is considered the most for and picked up the new bike the owner important to the business. processes There are many different ways of producing a product. for example. This was the physical altering of the physical inputs. variety. savings secure s inspection by giving customers a better understanding of the good or service. The owner then built the bike using the different components to create a value-for-money road racer for under $2000. thereby adding further value. gears and the seat. the shop kept the bike There are four dimensions of operations. planned and s protection and safety from the controlled to make this flow as smooth and environment. the owner sourced a quality carbon fibre frame from a distributor and a range of components such as wheels. A local bike store offers bikes for sale and carries a range of brands and types. this will affect took time to carefully explain the value. a bank keeps uninterrupted as possible. Depending on was made. s physical altering of the physical inputs batch or flow production or the changes that happen to people s layout of plant and equipment when they receive a service s occupational health and safety s transportation of goods or services. Finally. First. The considering the following factors: transformation processes are those activities s available capacity of the facility that determine how value will be added. the shop was adding value from transport.Transformation used to create this unique product. By sourcing and bringing all the components together at the local bike store Influences – volume. One performance and features of each component of the most important considerations is CHAPTER 3: OPERATIONS PROCESSES 41 . variation and As the customer could not afford to purchase visibility the bike all at once. s available knowledge skills of employees These processes can add value in four ways: s type of production. the type of production method used. s production costs such as having them delivered to a s maintenance requirements.

the business the standard product. A business that has as its object low costs A business that must be a high volume will use a high-volume operation. Labour will be used to supervise Low volume operations will use much less equipment. Assembly lines using operations and is often associated with conveyor belts will be common and will be assembly lines. makes a number of slightly different breads. production will suit a business that must Producing a small number of the same Job production suits those products satisfy variations in demand. technology and materials used flow of inputs and outputs through the and much less labour. while a producer such as a mining company or business that chooses customisation and car assembly plant will have to use flow flexibility will use a low-volume operation. As demand for item. batch and flow. there will be a large amount of capital. designed home as a one-off job. Products tend to have little organised in a fixed sequence of activities. Outputs are made on can simply add more batches of the same Flow production demand to suit what the customer requests. 42 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . product and delete batches of products not Producing a large It is a highly flexible system but with a low in demand. produce a high volume with a high degree Batch production is similar to jobbing of process repetition. The implication for operations when using the same process and produced in volume has the strongest influence is that batches of 50–200. A low volume except products are made in groups or business will use a production process that batches. A business that must produce Producing a single used: job. Costs per unit tend to such as custom-designed car restoration. Fuel refineries use a continuous equipment with the emphasis on multiskilled flow process where it is extremely difficult labour and may be a ‘craft’-type industry to halt production. At the extreme end are projects Volume is the actual number of products such as building a unique architecturally or services produced by the operation.Job production the type of production method that will be production. be low. The type will a variety of models with different features unique item.2 Flowchart of the volume of operations comparing restaurants. variation and visibility batch production and even jobbing. variety. and services that require much more than a particular good increases. be strongly influenced by the 4Vs. Low volume High volume Example: Example: 5-star restaurants Fast-food restaurants Figure 3. output. variation. Batch to customers. known that requires considerable skill will use Batch production as volume. Flow production involves a continuous facilities. There tends to be less capital and more emphasis on high labour content Volume and skill. number of items at the same time. Costs per A business using mass production will unit are quite high. A good example is a bakery that allows lots of stoppages and adjustments.

Service-based Therefore. So short time lags be similar to those that produce low variety between customer ordering and delivery and high volume.3 Flowchart of the difference of the volume of operations. the operations in action. A business producing a high volume the operations process of a manufacturing- product with low variety will be capital. A close relationship with the human Variation can change according to time resources function will be essential. operations will need to be highly flexible. Variation Operations will need to have well- trained. season. operations will tolerance for waiting. That is. of operations will also be important as Where there is a steady. with assembly lines and a focus on The implication for operations of a producing at lowest costs per unit possible. Speed of day. customers with different needs. the influence on the operations businesses will have a high level of process will be similar to the influence of visibility. capital than labour. Variety in the pattern of demand. by the variation in demand over time. goods and services will have to be modified or a wide variety of models and options will Visibility be provided. The operations Variety refers to the number of different manager will need to anticipate and plan models and variations offered in the for changes in the demand and have a high products or services. holidays and time of year. CHAPTER 3: OPERATIONS PROCESSES 43 . with low unit costs and using more will move on to a competitor. If the business has level of contact with the market. Low variety High variety Example: Example: Car factory with small Financial advice variations of a standard model Figure 3.4 Flowchart of the difference of the volume of operations on food staples. intensive. highly visible operations process is that the quality of labour will be significant. operations are will be needed. adaptable staff to Operations will be strongly influenced handle the individual needs of customers. Low-variety operations are Operations will also be influenced by routine in producing a high-volume of the degree to which customers can see standardised product with a low cost. predictable level of customers usually have a much lower demand with little variation. highly skilled. otherwise the customer routine. while customers will rarely see volume. based business. When there is volatility Low variation High variation Example: Example: Staples such as bread and milk Ice-cream factory Figure 3.

Many businesses may have a mixture Of the 4Vs the most significant of operations with high visibility for some influences on the operations process will aspects and low visibility for others. During the example. this influenced by marketing will tend to low visibility has allowed many banks produce a higher variety of goods. the operations by bank tellers chooses to produce a high volume will be will be highly visible. A business that example.6 Influence of the 4Vs on operations. and to offshore these processes to countries unless the business has very sophisticated such as India to reduce operating costs. while back office limited in its flexibility to produce a large operations such as processing credit variety or respond quickly to a change card transactions and managing loan in demand. For be volume and variety. The changing nature of a higher level of customisation or changes the customer has meant that a high level in design. 44 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . Further. A business can change from having a The 4Vs will also be influenced high visibility operation to a low one. a retailer may decide to close the establishment phase there will be a slow physical shop and move to only selling growth in demand and volume and with products online. Low customer contact High customer contact Example: Example: Online university course Restaurant Figure 3. will produce in lower volumes. For by the product life cycle.5 Flowchart of the difference of the volume of operations on customer service. technology. A business can expect demand of personal customer contact is no longer to increase dramatically once it has necessary to make the sale. passed through the establishment phase Job Batch Flow using production production assembly lines Volume Low volume High volume Variety High variety Low variety Variation in demand High variation Low variation Visibility High visibility Low visibility (customer contact) Figure 3. A business that is strongly contracts will not be seen.

it will not show when scheduling and sequencing is to which activity relies on other activities for perform a detailed task analysis to materials or machinery. the milestones process and organise them into the most would allow the firm to quote the dates efficient order to complete. A has to occur before the other Gantt chart does have limitations. business that organises production based on customer orders may use a Gantt chart for production scheduling. Task analysis is the breakdown of how the manufacture of will have low variations in demand and exactly how the manufacture of a good a good or activities to provide a service is to be may offer more variety to attract different or activities to provide a service is to be accomplished. decline phase. and have access to chart records the number of tasks for each task. tasks involved in each One of the most common scheduling particular project and the Therefore.and entered the growth stage affecting determine the separate parts of the entire Task analysis the volume the business must produce. Also. These dates are sometimes referred to Construct a business life cycle diagram as ‘milestones’. a key role of the operations of the activities. Any sort of for the completion of future orders and production scheduling and sequencing tool be the basis for rostering additional staff will need information about: and determining the schedule for future s what production activities are used business operations. As the business enters the accomplished. process of making a good or providing a The breakdown of exactly Once in the maturity phase the business service. In this case. A Gantt estimated time needed in their capacity. not show the relationship between each Therefore. CHAPTER 3: OPERATIONS PROCESSES 45 . The chart may Scheduling and sequencing show the schedule for orders on a day- by-day or week-by-week basis using bars Scheduling and sequencing tools are to show the starting and completion dates used to identify all steps in the operations for each order. tasks. Businesses that do not therefore occur at the same time keep to production targets may find their s what activities are related so that one customers moving to other suppliers. life cycle of the business. but will resources and the use of technology to not show the relationship involved in each particular project and meet these changes in the 4Vs over the between each of the the estimated time needed for each task. s when a particular activity will occur The Gantt chart allows the business to s how long an activity will take to finish compare actual progress to its originally s what activities are independent and can planned progress.2 Comprehension completion of each stage of operations. target markets. The business can set specific dates for the Activity 3. businesses need to be flexible techniques is a Gantt chart. A course of the life cycle. It will s what resources will be used. demand and volume will Gantt chart fall and some variations on the standard Gantt charts Records the number of product will be dropped from production. At each of these points indicating the changes in 4Vs over the critical decisions may need to be made.

Building a house is a project that requires careful planning otherwise expensive mistakes can be made such as having to remove a concrete floor to install plumbing.This takes a total of four weeks.The work of bricklayers. Think of the paths as It is a flow diagram that shows the being like a book.3 Construct Construct a Gantt Chart based on the following passage. Once their work has finished.Task analysis has indicated that there are many different tasks that must be performed. the could be the back cover. carpenters and electricians takes four weeks. Painting occurs before the carpets are laid so that they are not damaged. the critical path for this business would be 16 weeks. The G to H to I path may finished. especially if the exact 012 Lee time each task will take is known. the foundations can be laid. Activity 3. As all tasks need has special pictures on it and the back to be completed for the project to be cover is blank. After a final inspection the project manager may have some minor corrections or work to finish and then the house is ready. First. which only takes three days. some can occur at the same time as others. which project. which takes longer longest path taken to complete the whole than the process from G straight to I. Critical path analysis = 4 + 4 + 4 + 4 = 16.The house will then be painted and carpeted. In the CPA shown in Figure 3. some of the components appropriate scheduling tool for use in at G need to be processed through H before an operation that involves a series of they are joined together with the other repeated tasks. the plumber installs all the taps. 013 Smith 014 Grover 015 Nguyen Figure 3. the plumber will finish installing the bathroom and kitchen fittings. where the front cover interrelationship of tasks. pipes and outlets that are needed. longest path is from A to G to H to I to F 46 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . G components at I. the architect must finish the design and plans for the builder. Customer Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 A scheduling tool used in an operation 011 Hanna involving repetitive tasks. Once all the approvals have been granted (taking two weeks).8. the critical path time period is the be like the front cover.Critical path analysis (CPA) Order no. A critical path analysis (CPA) is an Note: In Figure 3.While the foundations are being finished the builder will order all the necessary materials for building the house. Therefore.8.7 A simple Gantt chart where production is based on customer orders. Before the bricklayers begin.

the internet school uses wireless EFTPOS machines so and wireless communication to the that customers do not have to carry large operations process. less waste and more efficient use of time. equipment and devices used to transform A 1 6 inputs into outputs. to meet a sudden increase in demand or Computer-aided design (CAD). The its standard product to satisfy individual improvements in the machines. outputs are called process technologies. The business can change volumes investing in a new technology that may fail. the businesses from process technology in local organic farmer’s market that takes place recent years is the application of computer once a weekend in the grounds of the high software modelling programs. This is in addition to the commonly and devices used to transform inputs into understood improvements to productivity. produce different variations of products aided manufacturing (CAM) and robotics are to satisfy changing consumer demands technologies used in operations processes and produce non-standardised versions of and have been described in Chapter 2. computer. Even the most labour-intensive industries Perhaps the most significant impact on use process technology.8 A critical path analysis. 1 C 4 F 4 5 G I 4 4 H Figure 3. A laptop computer is a Technology good example of product technology and – Technology is a key input into the operations when made on an assembly line using CAM process. C Process technology B 1 The improvements in the 1 2 E machines. CHAPTER 3: OPERATIONS PROCESSES 47 . task design amounts of cash. A business may wish to achieve a and robotics without the use of labour – is sustainable technological advantage over process technology. equipment clients. Note: Each number indicates how many weeks it takes to complete each stage or task. its rivals by using leading-edge technology Technology can improve the in its operations. Product technology is quite and process layout different and this is the innovation in the products themselves. tried and to respond to changes in the market more proven in operations without the risk of easily. For example. A more conservative competitiveness of operations by giving it strategy would be to use technology that more flexibility as it allows the business has already been established. Technology.

referred to as task design. technological than have a process or a product layout. programs.9 A flexible manufacturing system. the a project. and some technology and will have an impact on may require supervision and appraisal task design and the layout of the facility. Flexible manufacturing systems (FMS) employees may need training to improve are an integrated approach to using their level of efficiency. and employees with the appropriate The aim is to have as an efficient flow of skills. in order to maintain competitiveness. Figure 3. Next management decides next strategic decision is to plan the physical how the task will be completed. Task design Process layout The operations process determines Once the task has been analysed and the what tasks are to be completed to finish technology requirements determined. work areas and storage space. This is layout of the business’s factory or office. knowledge and capabilities. task design allows multiple tasks at once. Each individual This is called facilities layout planning task is analysed and broken down into and will also be influenced by the size of separate steps and allocated to machines equipment. Rather in productivity. 48 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . New ideas.Task design Deciding how a task will be completed. Even if the process of operations This type of manufacturing can perform is already established. Some resources through the business as possible. reducing the ongoing analysis and adjustments in each number of individual tasks performed activity to ensure continuous improvement by separate pieces of equipment. training and the skills of the the business may have semi-independent workforce available will necessitate automated workstations to which all the continual revision of the operations process inputs are transported. change.

together such as marketing or human that is. A process layout requires good or provide the service.11 Product layout diagram for a food manufacturer. or in volumes of goods with few variations. A process layout is where all the an office where certain roles are placed machinery is arranged by what they do. This allows for more flexibility Process layout is quite different to and customisation of the product. The product staff to be specialised and know how moves from department to department. Product layouts are used such as a bakery where some items will for assembly line manufacturing of large need decorating and others will not. CHAPTER 3: OPERATIONS PROCESSES 49 . Discharged from Reception Emergency hospital Kept as inpatient Consult by Surgery in hospital bed specialist X-ray Figure 3. the functions used to make the resources.10 Process layout diagram for a patient in a hosptial. This product layout where a product moves is also known as a functional layout and from station to station such as in a car illustrative examples include a factory assembly line. Deliveries Cooling and drying Shaping. to use the equipment and tools in their depending on what transformation is department. needed. cutting Raw material Cooking Packaging storage Mixture poured Mixing vat Storage before into moulds delivery Figure 3.

is to ensure the operations process runs dependability. flexibility. Effective controls ensure the following areas: that the business makes and supplies s operations costs an appropriate quantity of its products. strategies to improve the process. controls No matter how well managed. control and Key performance objectives of improvement operations will not be achieved without adequate monitoring of operations. Monitoring. s volume of output. s quality in terms of the product meeting A key question that must be answered design specifications by the manager is whether the current s speed of manufacturing or response to operations are satisfactory. for example. Control is a management function that aims Monitoring.12 as they occur at as close as possible to what was planned each stage of the operations process. operations to ensure that operations are ‘on track’ and can always be improved. A business Adjustments and readjustment may need to will find it difficult to assess its performance be made to day-to-day activities in the short and make improvements without adequate term and even the entire operations process information. systems are discussed in detail in Chapter 4. monitoring. by making adjustments to the operations A business needs to accurately know process. control and improvement are to keep the business’s actual performance illustrated in Figure 3. customisation and efficiently and effectively. speed. quality control and quality improvement Inputs Transformations Outputs Figure 3. Inspecting. in order to make improvements. 50 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . and there customers will always be areas for improvement. Data will be collected about in the long term. It is coping with changes as they how well its current operations are working occur. s waste from operations such as leftover in an appropriate time frame and to the materials required level of quality according to what s defects and substandard goods it planned. control and improvement relate to The purpose of monitoring and control performance objectives of quality.12 Monitoring. producing the cost in operations. control and improvement occur at each stage of the operations process. changes in demand. Monitoring. Quality management goods and services it was designed to do.

roads Process that meet the specifications of architects. CHAPTER 3: OPERATIONS PROCESSES 51 .Improving operations is a key strategic goal of all businesses.3 Outputs from different industries products and more choice Industry Output s cost improvements – by being efficient Banking Financial services such as and productive to offer more value. adapt. improving process. a customers that is greater than the cost of business will seek a competitive advantage its inputs. s speed – by increasing speed of For example.13 Monitoring. The challenge what manufacturing-based business is to maintain continuous improvement and provides. homes. Outputs are the final products or through improvements in the following services that a business offers to customers. areas of performance: Customers may be final consumers who s quality – by getting it right the first time are members of the public or other and having defect-free products and businesses. equipment and worn-out machinery may also be and employees considered a secondary output. Businesses will compare Outputs themselves against competitors and industry The purpose of the operations function is benchmarks in order to determine areas to produce outputs that have a value to that need improvement. cotton fibre produced by a production and delivery of services cotton farm will be an input for a clothing s dependability – by being on time with manufacturer. Generally. defective products a reliable operations system. home loans and investment advice. customer service is also an In this manner. controlling and and the services provided by businesses. Goods-based businesses can a system like total quality management will achieve a competitive advantage through assist in obtaining this. Waste. s flexibility – through having processes that are able to change and offer new Table 3. security for savings Operations Education Socially responsible young Strategy adults with knowledge and skills to learn. improvements in output of all businesses and perhaps operations will be the source of competitive not considered as an essential part of advantage for the businesses. However. An output of one business error-free services can therefore be an input for another. improvements in customer service. work and related abilities Operations Improvement Construction Buildings. designers and engineers Monitoring and control Consumers understand the difference between the physical product they buy Figure 3.

It may be Good customer service is an aspect of as simple as a sales assistant in a clothing relationship marketing and can enable a store following the owner’s ‘7 steps to business to charge higher prices and lessen a successful sale’ guideline to more the need to reduce costs elsewhere in the Taking an Purchasing a overseas holiday modular kitchen with hotels and Purchase of iron or furniture tour guides ore by Chinese steel manufacturer Figure 3. relationships with customers. Twitter. comprehensive service system. Internet sites and automatic Customer service is a particular output telephone-answering computers with of service-based businesses.7 steps to a Customer service complex and strict rules that cover every successful sale situation on how to treat customers. All businesses provide some degree Technology has changed the way of services because services are benefits customer service is delivered in many that accompany physical goods. show the business cannot achieve a competitive information customer why you can advantage with a better product. Although some businesses are they also provide services. industries.14 Increasing degree of service provided in different industries. As an output s handling customer returns promptly 3 Get confirmation and explain the details it is very difficult to measure. service: email. Customer service is provided 6 Schedule next steps s using technology to offer a 24-hour 7 Ask for the sale to customers before. however all voice recognition software reduce sales manufacturing businesses must realise that staff needs. Facebook. during and after a purchase. alienated customers may leave the policies and procedures on how to manage business. When a s answering questions and providing 4 Credibility. That is. is labour-intensive and immediately consumed. 52 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . as service is Many businesses aim to have a an emotional experience and frustrated. Customer service is an advantage. Good Within the vision and mission statements 1 Introduce yourself and customer service will increase consumer of most businesses is a promise of good listen to the customer satisfaction and contribute a competitive 2 Explain why the offer customer service. restoring the human touch. it s frequent and meaningful communication be trusted s anticipating customer needs can differentiate itself as better than its 5 Describe what to do s following up customer enquiries and competitors because it has better customer and what it will cost complaints service. Customer service includes the is important to the intangible output that requires extensive following features: individual customer contact with customers.

Customers can even hire an IKEA designer to help them select furniture and accessories. That is. IKEA’s customer service philosophy is not to ‘hassle’ the customer but to provide them with as much clear information as possible to help them make their decision. while other displays have all the same types of furniture together for easy comparison. market share.business. The IKEA showroom has two types of displays: ‘room settings’ show how the furniture and accessories would look set up in a room. 80% of revenue comes although the quality of delivery may vary from 20% of the customer base who return from teacher to teacher. It assists in maintaining the 80/20 a measure of the quality of customer service. service is that customers buy and keep In a school the ratio of teachers to students is returning. Customer service extends beyond the store with staff that can assist in loading customers’ cars in a large loading area and even a home delivery and installation service (they will even bring their own Allen key). CHAPTER 3: OPERATIONS PROCESSES 53 . There will be challenges in the market and still achieve a significant from differences in language and culture. BUSINESS to the business. relationship. Customer service can be Training in customer relations and the BUSINESS measured by using the number of customer customer service policies of the business complaints or even the average response will be very important to achieving consistency in service delivery. If a business can combine In a global business the challenge BITE excellent customer service with a high-quality is to replicate its service system in its good then it can command a premium price other locations. Staff are positioned at specific points in the store to provide assistance if approached by a customer. The outcome of good customer time of a business to a customer enquiry.

2 Describe the benefits of faster response times to customer enquiries to a business. 3 Explain why it can be difficult to achieve an increase in productivity in the delivery of service. if a consumer is not satisfied. c A business that supplies indoor plants for decoration to office buildings. Asics Gel Key-Kayano it is the responsibility of the seller to organise this and take the issue up with the manufacturer. ensure that the goods they sell: These responsibilities make up the s have a level of quality that is statutory (or implied) warranty that give comparable to the price and product consumers legal protection under the description Fair Trading Act 1987 (NSW) and the s are suitable for the purpose or job they Competition and Consumer Act 2010 (Cth) will be used for in Australia. 54 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . a manufacturer may repair faulty goods with skill and care. Activity 3. such as a three-year replacement warranty. This is on top of the statutory warranty and may cover the product from manufacturer’s defects or faults for an additional time. This comes at an extra cost as it represents an additional service and more peace of mind for the consumer.4 Analysis 1 Outline the services that accompany the following products a A DVD rental. 4 Assess the importance of customer service to a business that supplies components to other businesses. what the advertising they make and provide to the market. Consumers can expect A warranty is an assurance that a business several months of comfortable running for stands by the quality claims of the products what they are paying. A business may offer an extended warranty above the legal minimum. Alternatively. b A new car. using spare parts of a suitable quality and then return it to the customer. Warranties shoes are a performance running shoe that retails for over $200. For example. promises and based on the design of the Under Australian law all businesses must product. Retailers and manufacturers s match the product description in any must comply with the warranty and may advertising or promotion need to provide a replacement product s are free from defects or faults. Generally.

Also included as inputs are time and finance. control and improvement to operations are essential if the business is to achieve its performance objectives and sustain a competitive advantage. operations will produce a lower volume. Chapter revision task 1 Match the following outputs with the appropriate business. s Process technology is the improvements in the machines. the more customer-focused the business is. Product technology is the innovations in the goods and services. technology. s Scheduling and sequencing tools are used to identify all steps in the operations process and organise them into the most efficient order to complete. s Outputs are the goods and services provided to customers. information or customer inputs: (a) transport delivery (e) telecommunications (b) market research (f) retailer (c) mining company (g) warehousing (d) dentist (h) hotel CHAPTER 3: OPERATIONS PROCESSES 55 . producing a wide variety of goods and are subject to a volatile level of demand will need to have a highly flexible operations process using more skilled labour. s Transformed resources or inputs are the materials. s Visibility of operations refers to how ‘open’ the operations process is to customers. The more visible the operations. s Businesses that produce in high volumes. s The transformation processes are those activities that add value to the inputs. Gantt charts and critical path analysis are the most common. equipment and devices used to transform inputs into outputs. materials and facilities. Transforming resources act on the inputs to change them and are not used up in operations. Low-volume operations. s Inputs into an operations system are the materials. Cinema Kitchen cabinets Printing company Mineral ore Carpenter Printed signs to order Accounting firm Entertained customers Mining company Financial reports and statements 2 Categorise each of the following businesses as either a transformer of materials. Customer service and warranties are an intangible output. people and facilities used to make goods or provide services. higher variety of made-to-order products unique to the customer’s wants. information and customers that are changed by the operations process. s Monitoring.Chapter summary s Operations processes or the production process are the activities involved in the transformation of inputs into outputs. These are human resources and facilities. low variety and experience little variation in demand will use a high level of capital equipment.

low variation. although it can occur with the introduction of technology? (A) Reductions in waste and improvements in efficiency (B) Introduction of new and better products (C) Industrial relations issues (D) Improved communication 5 Which influences will cause operations to be more labour-intensive? (A) Low volume. high variation and high visibility (C) Low volume. low visibility (B) High volume. Book Bridge Hospital School Soft drink publisher construction emergency canteen bottler Volume Medium Variety High Variation Medium Visibility Low Multiple-choice questions 1 Why are human resources classified as a transforming resource? (A) Because employees will improve their skills with training (B) Because employees will use their skills to add value to resources (C) Because employees are multiskilled (D) Because employees’ productivity and motivation will vary 2 Gantt charts and critical path analysis are both tools that can be used for which activity? (A) Rostering (B) Scheduling (C) Highlighting relationships between task (D) Task design 3 When is a business considered capital-intensive? (A) When it has borrowed a lot of capital from the bank (B) When it is based in a capital city (C) When is has a very high proportion of fixed costs (D) When it has a very high proportion of variable costs 4 Which of the following are thought NOT to be a benefit. 3 Complete the following table indicating the impact of the 4Vs on the operations process. The first has been completed as a guide. high variety. low variety. high variety. high visibility (D) The actual production process used in the business 56 CAMBRIDGE HSC BUSINESS STUDIES SECOND EDITION TOPIC 1: OPERATIONS . high variation.

4 Explain how task design can give a business a competitive advantage. Extended-response question Outline the strategic goals of the operations process and explain the influence of volume. 5 Explain the difference between Gantt charts and critical path analysis. robotics and CAM (B) Activities are organised according to function (C) Equipment is set out in the same sequence as the operations process (D) Where all the machinery is arranged by its function 10 When do improvements in process technology occur? (A) When a business seeks a competitive advantage through lower costs (B) When a new invention leads to a new product (C) When a business learns from its mistakes (D) When a business applies technological innovation to the operations process Short-answer questions 1 Identify the difference between a transforming resource and a transformed resource? 2 Explain the difference between monitoring and control strategies. CHAPTER 3: OPERATIONS PROCESSES 57 . 3 Assess why all businesses must consider improvements in customer service.6 Why are scheduling tools used in operations? (A) To work out rosters for employees (B) To work out when products are sold (C) To create the most efficient production process (D) To plan production and control operations 7 What are outputs? (A) Final goods and services (B) What is produced by the operations process (C) What is produced from the raw materials (D) Components used in operations 8 Which of the following business’s operations process will be most influenced by high visibility? (A) Restaurant (B) Building a house (C) Creating the next generation of smart phones (D) Producing paper 9 What are the characteristics of a process layout? (A) Assembly lines. variation and visibility on operations. variety.