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Business AS > 21. Operations planning > Flashcards

21. Operations planning Flashcards

1
Q

Define operations planning

A

Preparing input resources to supply products to meet expected demand

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2
Q

Aims of operations planning

A
  • Match output closely to the demand levels
  • Keep stock levels to a minimum efficient level
  • Reduce wastage of production
  • Employ and keep busy a stable, appropriate number of staff
  • Produce the right product mix. i.e. the range of products that are forecast to be demanded
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3
Q

Define CAD

A

Computer-aided design. Using computers and IT when designing products

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4
Q

Define CAM

A

Computer-aided manufacturing. The use of computers and computer-controlled machinery to speed up the production process and make it more flexible

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5
Q

Influences of CAD and CAM on operations decisions

A

Reduce unit costs (increase efficiency) and improve flexibility of operations

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6
Q

Define operational flexibility

A

The ability of a business to vary both the level of production and the range of products following changes in customer demand

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7
Q

Ways operational flexibility can be achieved

A
  • Increase capacity by extending buildings and buying more equipment - this is an expensive option
  • Hold high stocks - but these can be damaged and there is an opportunity cost to the capital tied up
  • Have a flexible and adaptable labour force - using temporary, part time contracts reduce fixed salary costs but may reduce worker motivation
  • Have a flexible flow-line production equipment
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8
Q

Define process innovation

A

The use of a new or much improved production method or service delivery method

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9
Q

Examples of process innovation

A
  • Robots in manufacturing
  • Computer tracking of stocks
  • Using internet to track the exact location of parcels being delivered worldwide
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10
Q

Define job production

A

Producing a one-off item specially designed for the customer

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11
Q

Define batch production

A

Producing a limited number of identical products - each item in the batch passes through one stage of production before passing onto the next stage

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12
Q

Define flow production

A

Producing items in a continually moving process

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13
Q

Define mass customisation

A

The use of flexible computer-aided production systems to produce items to meet individual customers’ requirements at mass production cost levels

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14
Q

Main features of job production

A
  • Single one-off items

- Highly skilled workforce

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15
Q

Main features of batch production

A
  • Group of identical products pass through each stage together
  • Labour and machines must be flexible to switch to making batches of other designs
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16
Q

Main features of flow production

A
  • Mass production of standardised products
  • Specialised, often expensive, capital equipment but very efficient
  • High steady demand for standardised products
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17
Q

Main features of mass customisation

A
  • Flow production of products with many standardised components but customised differences too
  • Flexible and multi-skilled workers
  • Flexible equipment - often computer controlled to allow for variations in the product
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18
Q

Advantages of job production

A
  • Able to undertake specialist projects or jobs often with high value added
  • High levels of worker motivation
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19
Q

Disadvantages of job production

A
  • High unit production cost
  • Time consuming
  • Wide range of tools and equipment needed
20
Q

Advantages of batch production

A
  • Some economies of scale
  • Faster production with lower unit costs than job production
  • Some flexibility in design of product in each batch
21
Q

Disadvantages of batch production

A
  • High levels of stocks at each production stage

- Unit costs likely to be higher than flow production

22
Q

Advantages of flow production

A

Low unit costs due to constant working of machines, high labour productivity and economies of scale

23
Q

Disadvantages of flow production

A
  • Inflexible - often very difficult and time consuming to switch from one type of product to another
  • Expensive to set up and maintain the machinery
24
Q

Advantages of mass customisation

A

Combines low unit costs with flexibility to meet customers’ individual requirements

25
Q

Disadvantages of mass customisation

A
  • Expensive product redesign may be needed to allow key component to be switched to allow variety
  • Expensive flexible capital equipment needed
26
Q

How to choose production methods?

A
  • Size of the market (market small => job production)
  • Amount of capital available
  • Availability of other resources (skilled workforce or large flat land area)
  • Market demand exists for products adapted to specific customer requirements - if firms wan the cost advantages of high volumes combined with the ability to make slightly different products for diff markets => mass customisation
27
Q

Problems of changing production methods

A

Job to batch
- Cost of equipment needed to handle large numbers in each batch
- Additional working capital needed to finance stocks and work in progress
- Staff demotivation - less emphasis on an individual’s craft skills
Job or batch to flow
- Cost of capital equipment
- Staff training to be flexible and multi-skilled - if not adopted => repetitive tasks => demotivating

28
Q

Factors influencing location decisions

A
  • Quantitative factors: these are measurable in financial terms and will have a direct impact on either the costs of a site or the revenues from it and its profitability
  • Qualitative factors: these are non-measurable factors that may influence business decisions
29
Q

Quantitative factors

A
  • Site and other capital costs such as building or shop-fitting costs
  • Labour costs
  • Transport costs
  • Sales revenue potential
  • Government grants
30
Q

Qualitative factors

A
  • Room for further expansion
  • Ethical considerations
  • Environmental concerns
  • Infrastructure
  • Safety
31
Q

Define offshoring

A

The relocation of a business process done in one country to the same or another company in another country

32
Q

Reasons for international location decisions

A
  • To reduce costs - labour wage rates, costs of raw materials
  • To access global markets - rapid economic growth in LEDCs
  • To avoid trade barriers - taxes or other limitations (quota) on the free international movement of goods and services
33
Q

Issues with international location

A
  • Language and communication barriers
  • Cultural differences
  • Level of service concerns
  • Supply chain concerns
  • Ethical considerations
34
Q

Define scale of operation

A

The maximum output that can be achieved using the available inputs - this scale can only be increased by employing more of all inputs

35
Q

Factors that influence scale of operation

A
  • Owner’s objectives
  • Capital available
  • Size of the market it operates in
  • Scope for scale economies
  • Number of competitors
36
Q

Define economies of scale

A

Reductions in a firm’s unit average costs of production that result from an increase in the scale of operations

37
Q

Purchasing economies of scale

A

Buying in bulk - more discount because it is cheaper for them to process and deliver one large order rather than several smaller ones

38
Q

Technical economies of scale

A
  • If machines are worked at a high capacity level, they offer low unit costs than other production methods
  • Expensive expenses on machinery can only be justified when output is high so that the fixed cost can be spread thinly
39
Q

Financial economies of sclae

A
  • Banks and other lending institutions are more likely to lend big businesses with proven track record and a diversified range of product. Interests charged are usually lower
  • Average cost of raising finance is lower than limited companies due to advisers’ fees, prospectus publishing costs and advertising
40
Q

Marketing economies of scale

A

Outsourcing - employ an advertising agency and the cost can be spread over a high level of sales for a big firm

41
Q

Managerial economies of scale

A

Can employ specialist functional mangers

42
Q

Define diseconomies of scale

A

Factors that cause average costs of production to rise when the scale of operation is increased

43
Q

Communication problems

A
  • Distortion of message caused by long chain of command
  • Overload with volumes of message being sent
    => poor decisions being made, poor feedback which reduces workers’ incentives
44
Q

Alienation of the workforce

A

Difficult to directly involve every worker and to give them a sense of purpose and achievement => demotivated

45
Q

Poor coordination

A

Growing number of departments, divisions and number of countries a firm operates in => problem to coordinate and control all of these operations
- Wasteful duplication of research into similar products by 2 branches

46
Q

Links between economies/diseconomies of scale and unit

costs

A
  • High average production costs and low scale of operation => economies of scale
  • High average production costs and high scale of operation => diseconomies of scale
    => curved graph

Business AS (22 decks)

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