Strategies to Optimise Operations: Technological Development (VCE SSCE Business Management): Revision Notes
Strategies to Optimise Operations: Technological Development
Introduction to technology in operations
Technological development significantly influences how businesses operate. Technology refers to the equipment and knowledge used by a business to function and create products. When businesses adopt new technology, they may introduce fresh production methods or acquire new equipment that speeds up processes or reduces production costs.
While implementing new technology requires substantial initial investment in development and acquisition, businesses must weigh these costs against potential improvements in productivity (efficiency) and quality (effectiveness). Businesses that fail to keep pace with technological advancements quickly lose their competitive edge in the market.
The balance between initial investment costs and long-term improvements in efficiency and effectiveness is critical. Businesses must carefully evaluate whether technological adoption will deliver sufficient competitive advantage to justify the upfront expenditure and ongoing maintenance costs.
Automation
What is automation?
Automation occurs when machinery and technology take over tasks previously performed by humans. Modern automation has evolved through advances in engineering, mechanics, hydraulics, electronics, and computer science. Today's sophisticated automated systems in factories combine multiple technologies. Most contemporary manufacturing operations incorporate varying degrees of automation in their production processes.
Automated production lines
Automated production lines are widely used in manufacturing industries, particularly those involved in mass production such as automobile manufacturing. The world's most successful manufacturing economies, including Japan and Germany, invest heavily in automation technology.
An automated production line consists of a series of workstations connected by a transfer system and controlled by electrical systems. Each workstation performs a specific operation, and products move through the line step-by-step in a predetermined sequence. The transfer system moves products between stations, with each station designed to complete a particular processing operation or task.
For automated production lines to operate efficiently, all operations, transfers, and activities must be carefully sequenced and coordinated. Computers facilitate connections between equipment and control the timing and sequencing of all machinery. Without proper coordination, the entire production line can experience bottlenecks and inefficiencies.
Impact on labour: Automated production lines significantly reduce labour requirements in operations systems. However, automation has created employment opportunities in areas requiring higher-level skills, such as equipment adjustment, supervision, monitoring, and system design.
Robotics in manufacturing
Robotic automation has numerous applications in manufacturing. Robots perform tasks including handling raw materials, welding, assembly, and product packing. Production line robots are programmed and controlled by computers and can be reprogrammed to handle different products being assembled on the same line.
Robots are programmable machines capable of detecting changes in their environment. Car manufacturers were early adopters of robotic technology, using fully autonomous robots for high-volume, repetitive processes. The speed, accuracy, and durability of robots deliver significant efficiency gains, reduce waste caused by human error, and support improved, consistent quality. This benefits all stakeholders: customers experience high product satisfaction whilst manufacturers experience reduced warranty costs.
Real-World Applications of Robotics:
Mining Industry: In the mining industry, robots replace miners in high-risk areas. Autonomous mobile robots (AMRs) have onboard intelligence systems that allow them to:
- Map their surroundings
- Navigate flooded passages
- Use cameras and sensors to identify different minerals
- Provide high-resolution data
Warehouse Operations: Warehouse operations (such as Amazon's facilities) deploy automated robotic systems to load and select stock, with over 200,000 mobile robots working alongside people to maximise efficiency and throughput.
The incorporation of robotics in manufacturing maximises efficiency, increases workplace safety, and provides a competitive advantage. Increasing numbers of manufacturers are adopting robotic automation, and robots can now be installed more quickly and cost-effectively than in the past.
Advantages and disadvantages of incorporating technology
| Advantages | Disadvantages |
|---|---|
| Improved productivity through lower labour costs, reduced production times, and lower cost of production | High initial set-up costs with significant capital outlay plus additional costs such as preventative maintenance and training employees to operate machines |
| Improved safety levels with dangerous and repetitive work/tasks removed | Development costs can be high |
| Reduction in human labour costs and opportunity for staff redeployment to other business areas that may be more satisfying | Technology can be inflexible, as it is developed to perform particular tasks |
| Greater precision and accuracy of work, resulting in improved effectiveness | Corporate social responsibility issues with negative impact on local employment opportunities |
| Consistent and improved quality of final output, resulting in improved effectiveness | Ongoing maintenance of equipment may be high, requiring highly skilled maintenance workers |
| Reduction in waste material |
While automation offers numerous advantages in productivity, quality, and safety, businesses must carefully consider the substantial upfront investment, ongoing maintenance costs, and potential social impacts on employment before implementing automated systems.
Computer-aided systems
Computer-aided design (CAD)
Computer-aided design is a software tool that facilitates the creation and development of the design process. CAD is standard across many industries, including building, infrastructure, manufacturing, and product design.
CAD software enables the creation of three-dimensional diagrams from given data, allowing accurate predictions of how final products will look from all angles. It also provides accurate cost analysis. Architects, engineers, and designers use CAD to draw and adjust three-dimensional designs based on client requirements.
CAD can link directly to manufacturing processes using computer-aided manufacturing (CAM) software. Product specifications can be shared through the CAM system with subcontractors and suppliers. CAD creates the technical drawings that provide clear guidelines for the CAM process.
Benefits of CAD:
- Eliminates manual, time-consuming processes
- Provides professionals with tools to create high-quality designs efficiently
- Creates accurate scale drawings with greater legibility
- Allows electronic storage of designs for easy access and repeat orders
- Enables designers to explore creativity more freely
Computer-aided manufacturing (CAM)
Computer-aided manufacturing refers to software applications that create detailed instructions to facilitate manufacturing processes. Machines receive programmed instructions from a central computer, allowing for greater precision and reduced margin for error.
CAM reduces the need for manual resetting of machinery, saving time and labour costs. Large sections of production can be controlled with greater efficiency, fewer errors, and reduced staffing requirements.
After a designer completes a design using CAD, it transfers to a CAM system that automates the production process. This can include printing designs, cutting fabric, and automated processes such as buttonholing and embroidery.
Computer-integrated manufacturing (CIM)
Computer-integrated manufacturing combines both CAD and CAM. It involves using a computer program that controls and directs production from start to finish. CIM directs planning, cost estimations, inventory planning and control, and quality control systems. The integration of computers provides more efficient and effective manufacturing.
Network RV - Australian Caravan Manufacturing:
Australian caravan manufacturer Network RV uses CAD programming in its design process, providing opportunities to customise orders according to clients' personal tastes and needs.
Key Benefits:
- The precision of CAD drawings greatly reduces errors in cutting materials and their installation during caravan construction
- Designs can be sent via email, allowing the business to negotiate with clients throughout Australia
- Enables personalisation while maintaining manufacturing efficiency
Artificial intelligence
Artificial intelligence aims to create expert systems that aid humans and enable machines to function with human-like intelligence. AI-driven machines bring machine interaction closer to human interaction, offer new opportunities, and enhance efficiency. AI helps machines collect and extract data, recognise patterns, learn, and adapt to new situations and environments through machine intelligence and speech recognition.
Applications of AI across industries
AI is used extensively across many industries:
- Banking and financial services: Quickly and accurately detect fraudulent activity, process loan applications through intelligent software robots, provide robot financial advisers that analyse multiple data sets and make recommendations, deploy AI-based chatbots to improve customer experience
- Healthcare: Various diagnostic and treatment applications
- Retail and commerce: Personalised shopping experiences and inventory management
- Manufacturing: Successfully integrated into large-scale manufacturing and increasingly accessible to smaller businesses
- Logistics and transportation: Route optimisation and tracking
- Food tech: Quality control and production optimisation
- Real estate: Property valuation and market analysis
- Entertainment: Content recommendations and personalisation
The banking and financial services industry is undergoing significant transformation due to AI applications. Banks use AI to process loan applications efficiently, whilst robot financial advisers analyse data sets in seconds to make customer recommendations. AI-based chatbots in the insurance industry improve customer experience and create insurance plans based on customer data.
Online services
An online service refers to any information or service that a business offers over the internet. Basic online services may support subscribers in gaining information through search engines. More sophisticated services process applications such as online personal loan applications from banks. Offering online services provides increased business opportunities, with many businesses using these services to be more competitive and increase market share.
Types of online services
Booking systems: Used across industries including hotels, restaurants, events, beauty, hairdressing, medical appointments, and other service providers. These systems work with online databases and diaries, potentially reducing scheduling issues. Customer details are updated, allowing businesses to promote other events.
Training courses: Universities and vocational services offer online training courses that are typically self-directed by students.
Feedback forms: Allow businesses to gather information quickly regarding customer experience.
Online shopping: Enables online selection and purchasing of essential items or luxury goods.
AgTech in Dairy Farming - Luke Wallace:
Dairy farmer Luke Wallace uses technology including the Heatime app and Allflex collars to monitor his 170 cattle. These technologies track daily movement and jaw movement, indicating when something is wrong with an animal.
Investment and Returns:
- The Allflex collars were purchased for $50,000 in 2019
- The technology has enabled Luke to be more efficient, ensure herd health, and achieve better returns
This represents AgTech (agricultural technology), a collection of digital technologies providing the agricultural industry with tools and data to make informed decisions and improve productivity and sustainability.
Websites and e-commerce
Websites
A website establishes business credibility and aims to promote services and products on the internet. It also offers improved communication with customers and suppliers.
E-commerce
E-commerce takes promotion one step further, moving from marketing to providing opportunities to buy goods and products directly from the business. The convenience for shoppers and reduction in overheads for retailers are the primary drivers of Australian e-commerce growth.
E-commerce has grown exponentially. Australians spent $26.77 billion in 2013, increasing to $32.1 billion in 2019 and, due to the COVID-19 pandemic, to $54.6 billion in 2020. At least 75% of Australian businesses earn part of their revenue via e-commerce. Online purchasing accounted for 16.3% of all retail spending in 2020, creating the biggest shift in Australian spending habits.
This represents a 104% increase in e-commerce spending over just seven years, with the COVID-19 pandemic accelerating the shift to online shopping dramatically. Businesses that fail to establish an e-commerce presence risk losing significant market share.
E-commerce purchase process
- Customer attraction: Attract customers to the store via marketing and search engine optimisation
- Order placement: Customer places order using the site's shopping cart
- Payment processing: Payment gateway securely authorises payment
- Order completion: Order confirmation sent to merchant and customer
- Warehouse fulfilment: Merchant/manufacturer fills the order for shipping
- Shipment: Order shipped out to customer address
Businesses with e-commerce websites must manage their product catalogues so customers can browse inventory efficiently. E-commerce businesses need inventory management software that syncs quickly to ensure quantities are accurate and orders can be fulfilled. When customers complete adding items to their cart, they enter payment information, which is encrypted and sent to a payment gateway that handles credit card processing securely. As transactions are finalised, orders are processed by the business's systems and forwarded to the order fulfilment team. Order fulfilment can be completed in-house or by a third party.
Benefits and limitations of e-commerce
| Benefits | Limitations |
|---|---|
| For consumers: • Convenience of purchasing at any time • Less time-consuming • Quick delivery • Easy returns | For consumers: • Cannot always see and touch products before purchasing • Must be somewhat tech-savvy, potentially limiting market reach • Less 'personal' shopping experiences • Potential for fraud and data privacy issues |
| For businesses: • Lower costs and ease in implementation • More opportunities to innovate • Build strong brand loyalty • Customised and targeted marketing • Shortened distribution chain • Eliminates geographical restrictions | For businesses: • Need precise inventory systems to avoid overstocking and overselling • Potential high return rate of goods that do not meet customer expectations • Lack of in-store engagement may result in difficulty maintaining customer relations |
Blackmores E-commerce Enhancement:
Blackmores, the Australian vitamins and supplements producer, has invested in new technology to enhance customer experience across its e-commerce platform.
Technology Implementation: The inclusion of Optimizely with AI-powered personalisation allows customers to:
- Provide information about their health needs
- Receive customised suggestions and product advice
System Integration: The system integrates with the back office to:
- Support sales and manage inventory
- Gather customer insights
- Analyse checkout processes
- Offer subscription products
This demonstrates how AI and e-commerce technology can work together to create a personalised, efficient shopping experience while improving business operations.
Key Points to Remember:
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Technology significantly impacts operations through new equipment and methods that improve efficiency (productivity) and effectiveness (quality), though initial costs must be weighed against long-term benefits.
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Automation and robotics replace human labour with machinery, increasing precision, consistency, and safety whilst reducing labour costs and waste. However, they require high initial investment and ongoing maintenance.
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Computer-aided systems (CAD, CAM, CIM) streamline the design and manufacturing process, enabling accurate 3D visualisations, reducing errors, and integrating production from start to finish.
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Artificial intelligence enables machines to function with human-like intelligence, with applications across banking, healthcare, retail, manufacturing, and many other industries, improving decision-making and customer experience.
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E-commerce has transformed retail, growing from $26.77 billion in 2013 to $54.6 billion in 2020 in Australia, offering convenience for consumers and reduced overheads for businesses, though requiring precise inventory management and addressing potential customer concerns about not seeing products before purchase.
Key terms: Technology, Automation, Automated production line, Robotics, CAD (Computer-Aided Design), CAM (Computer-Aided Manufacturing), CIM (Computer-Integrated Manufacturing), Artificial Intelligence (AI), Online services, Website, E-commerce, Efficiency, Effectiveness