Operations Decisions

Operations Decisions Overview

  • Key to understanding operations decisions is acknowledging their critical role in determining the efficient use of resources.
  • These decisions are fundamental in achieving the business objectives including cost efficiency, quality and speed of delivery.
  • Operations decisions involve areas such as capacity planning, inventory management, quality control and supply chain management.

Capacity Planning

  • Pertains to the maximum amount, rate or extent that the organisation is capable of achieving or producing.
  • Capacity decisions are significant as they dictate the volume of output or service delivery that a firm can handle.
  • These decisions involve understanding and balancing demand forecasts with the firm’s production capabilities.
  • Over-capacity and under-capacity production can both have adverse effects, resulting in unnecessary operating costs and lost sales respectively.

Inventory Management

  • Deals with the control of raw materials, work-in-progress and finished goods in a firm.
  • The main aim is to maintain inventory at the optimal level that balances the cost of inventory holding and the risk of stockouts.
  • Inventory management decisions incorporate ordering and holding costs.

Quality Control

  • This involves maintaining the desired standard in products or services.
  • Quality control decisions revolve around setting and enforcing quality standards, continuous improvement and dealing with defective output.
  • Quality control techniques such as Total Quality Management (TQM) can be employed in a firm to improve product quality and customer satisfaction.

Supply Chain Management

  • Encompasses all the activities involved in getting a product from the supplier to the customer.
  • Supply chain decisions involve choice of suppliers, transport modes, warehousing and achieving time efficiency.
  • A well-managed supply chain is vital to ensure time and cost efficiencies and maintain quality standards.
  • The main goal is to align the supply chain with the overall business strategy.

Technological considerations

  • Technology is a significant element in operations decisions.
  • Businesses must decide on the intensity of technology they adopt in their operations for areas such as automation, mechanisation and digitalisation.
  • The level of technology used can greatly influence the efficiency, cost-effectiveness and competitive position of a business.
  • Operations decisions cannot be separated from legal and environmental responsibilities.
  • Organisations must abide by health and safety regulations, environmental laws and fair trade practices.
  • They must also make decisions that are sustainable and socially responsible.

By understanding these elements, you will be able to appreciate the complexities of operations decisions in different business scenarios. Such knowledge is vital for strategic planning and ensuring a business operates profitably and responsibly.