What is an operating system?
Operations is an important core function within an organisation.
The operations department takes raw materials and puts them through a variety of procedures to turn them into the finished product/service. As the inputs go through the processes, this adds value, turning them into high-quality products or services that the organisation will then sell. This is known as the Operating System.
What are the roles of operating systems?
Purchasing: What stock do we need to purchase and from who and how much?
Systems: How and where should we produce the product; what staff do we need and what method of production should we use?
Stock Control: How can we ensure that adequate stock is available; how can we best store it?
Quality: How do we ensure that the quality is consistent throughout?
What is the process of operating systems?
- Input: Raw materials, Labour Research & Development
- Process: Different amounts of different resources put together ie Production Lines, Assembly Lines, Management and Skills
- Output: Goods or Services ie The End Product
What are the 3 inventory management systems?
- Raw Materials – These are purchased from suppliers and stored by the organisation to allow a flexible response to customer orders. Having a supply in stock can allow production to continue while awaiting new deliveries
- Work-in-Progress – These are partly finished goods that require longer stages between product cycles due to their nature eg whisky or cheese
- Finished Goods – This allows the organisation to meet any sudden changes in customer demand
What is inventory checking?
Organisations usually perform an annual stock take or inventory check to count stock held on shelves. This is done to record the amount of stock held physically by the organisation so it can be compared to what should be held according to stock system records. It clearly identified any inconsistencies between system stock records, system transaction records and physical stock records. Any discrepancies could indicate theft.
It also allows any outdate stock to be identified and older stock can be rotated to the front to be used first.
What is purchasing mix?
The raw materials used by an organisation must be of the optimum quality that the business can afford as this reflects on the quality of the finished product/service. When deciding upon a supplier to purchase from, there are certain factors to consider. This is known as the purchasing mix.The supplier is an important link in the production chain. If the chain breaks, it can be catastrophic in many ways!
What factors should be considered when it comes to purchase mix? (6)
- Is the supplier’s raw materials of a consistently good quality?
- Is the supplier able to deliver the correct quantities when required?
- Can the supplier deliver the raw materials by the agreed delivery date?
- Is the supplier reliable?
- Is the supplier offered quality raw materials at a fair price?
- Is the supplier located nearby?
What is stock control/inventory management?
- All organisations must have a system for controlling its stock
- If stock is not controlled this can be costly to a firm
- Enough stock means production takes place and meets customer demand
- A balance has to be struck between holding stock and cost of loss of production and sales
- Organisations must work out how much stock it needs to run smoothly but must also consider the cost of storage
- Too much stock – costly for storage, stock may deteriorate
- Too little stock – business may be unable to cope with demand, production may have to stop
What are the two ways stock can be recorded?
- Manually: Bin Notes
- Electronically: Database or spreadsheet
What is minimum stock level?
The stock level that stock must not fall below – ensures stock will always be available, allowing for ordering and delivery times (lead time
What is re-stock level?
Level at which new stock should be ordered.
Calculated by working out how much stock is used on a daily basis plus delivery time for new stocks to arrive (lead time)
What is the maximum stock level?
- The highest amount of stock that can be stored at any one time.
- At this level stock costs will be at the minimum per unit because the organisation is at full capacity
What are the problems of overstocking? (4)
- Costs related to storage and security
- Cash tied up as stock
- Stock could perish or become obsolete
- Problems with possible theft
What are the problems of under stocking?(4)
- Inability to cope with unexpected orders if stocks are low
- Production may have to be stopped
- Firms may have to place orders for stocks often - losing out on bulk buying opportunities
- Loss of customers due to being unable to cope with demand
What storage of stock? (4)
- Oldest stock usually used first
- Stock may be stored centrally or departmentally
- Stock should be stored in a dry, well ventilated, locked room
- Stock should be clearly labelled
What is just in time production? (6)
- Method of stock control which involves getting stocks to arrive just before they are needed in the production process
- Zero stock is held
- Can improve a firms cash flow – money not tied up in stock
- Reduces waste
- Reduces warehousing costs
- Requires very reliable suppliers
What is computerised stock control?
- Using this method of stock control, stock is ordered automatically when the stock level reaches the re-order level
- EPOS is a form of computerised stock control
What are the advantages of centralised stock control? (4)
- Stock is secure
- Specialist staff checking and issuing stock
- Standard organisational procedure can be developed for ordering etc
- Storage costs can be better controlled
What are the disadvantages of centralised stock control? (3)
- Time wasting to and from stores
- Cost of specialist staff
- Cost of dedicated areas
What is warehousing?
- A warehouse is the name given to the place where finished products are held until they are ready to be distributed to the customer.
- Warehouses need to be designed to ensure the most efficient movement and flow of stock.
- The exact size and layout of a warehouse depends on the size of the organisation, the product being manufactured and the organisations policy for logistics and distribution.
What is distribution and logistics?
- Distribution and logistics is concerned with getting the finished product to the right customer.
- We have covered channels of distribution and methods of physical distribution
- How the product gets to the customer depends on the distribution mix
