2.3 | Making operational decisions

Question 1

define business operations

Answer 1

the part of the business that provides customers with the goods or services that they ordered.

Question 2

give two purposes of business operations

Answer 2

• to produce goods

- to provide services.

Question 3

define each type of production processes

Answer 3

• Job production is when individual products
  are uniquely made to meet specific customer preferences.
• Batch production involves making a set quantity ( batches )of identical products.
• Flow production involves continuously making identical products. It is heavily automated.

Question 4

give 2 advantages of job production

Answer 4

• High profit margins for bespoke products due to higher prices being charged
• Employees gain enjoyment from using their specialist skills increasing productivity

Question 5

give 2 disadvantages of job production

Answer 5

• labour intensive: Highly skilled staff are required increasing costs due to higher wages
• unable to take advantage of economies of scale - unable to buy in bulk - high unit costs

Question 6

give 2 advantages of batch production

Answer 6

• more efficient than job production thus higher productivity
• can buy in larger quantities thus able to benefit from economies of scale lowering unit costs ( so prices can be lower and thus more competitive)

Question 7

give 2 disadvantages of batch production

Answer 7

• time is taken between batches lowering productivity

- more expensive due to cost of machinery and tools which may differ for various products

Question 8

give 3 advantages of flow production

Answer 8

• makes larger quantities leading to economies of scale and lower average unit costs allowing competitive prices
• less labour intensive and higher efficiency

Question 9

give 3 disadvantages of flow production

Answer 9

• highly capital intensive due to machinery costs
• machinery requires high maintenance
• requires large warehouse spaces for product storage

Question 10

give 2 ways a business can improve productivity

Answer 10

• Investing in up-to-date machinery

- Providing training to staff to improve their skills

Question 11

give 4 impacts of technology on costs, productivity, quality, flexibility

Answer 11

costs: initial start up costs however reduces cost in the long term
productivity: machinery increases productivity and allows a business to reduce its prices to remain competitive ( EOS)
quality: automating production allows for consistency and quality control
flexibility: suited to mass production and not for tailored products

Question 12

give 3 ways ‘ stock’ can be interpreted

Answer 12

• raw materials
• work in progress
• finished stock

Question 13

what does a bar gate stock graph do?

Answer 13

• it indicates the level of stock that a business is holding at any one time
• it aids with decision making

Question 14

define maximum stock level

Answer 14

the largest amount of stock a business can store on site.

Question 15

define the minimum stock level / buffer stock

Answer 15

the lowest amount of stock a business can store on site while still being able to operate effectively
- ( think of it as a backup - if there are delays of high demand then the business can fall back on it )

Question 16

define lead time

Answer 16

how long it takes from ordering stock for it to arrive

Question 17

define the reorder level

Answer 17

the point at which a business needs to order new stock in order for it to arrive before its stock falls below the minimum level

Question 18

what is just in time stock control?

Answer 18

when the business has regular deliveries that bring only what is needed before its existing raw materials run out, so buffer stock is not needed.

Question 19

give two advantages of just in time stock control

Answer 19

• , having less stock that could go out of date will reduce waste, saving money.
• JIT reduces production costs, allowing businesses to price their products to give a more competitive advantage.

Question 20

give three disadvantages of just in time stock control

Answer 20

• unable to use bulk buy discounts losing out on economies of scale
• unable to meet unexpected orders or changes in demand
• businesses may run out of stock due to late deliveries

Question 21

Give the 5 factors that a business should consider when building a relationship with a supplier

Answer 21

• cost
• quality
• delivery
• availability
• trust

Question 22

why should a business consider cost when choosing a supplier?

Answer 22

• if supplies are cheap, variable costs are kept low, allowing it to maintain higher profit margins.

Question 23

give 2 reasons why a business should consider quality when choosing a supplier

Answer 23

• quality of supplies must be consistent as if not it may damage customer perception of the business
• good quality means fewer complaints and customer loyalty

Question 24

give 1 reason why a business should consider delivery when choosing a supplier

Answer 24

• products must arrive on time as late deliveries interrupt the manufacturing process

Question 25

give 1 reason why a business should consider availability when choosing a supplier

Answer 25

• suppliers must provide stock in sufficient quantities to meet the demand

Question 26

give 1 reason why a business should consider trust when choosing a supplier

Answer 26

• requires trust to arrange trade credit agreements

Question 27

define procurement and logistics

Answer 27

procurement: getting the right supplies from the right supplier
logistics: making sure the correct products will arrive when needed

Question 28

give an impact of logistics and supply decisions on costs, reputation and customer satisfaction

Answer 28

costs: if production is quick then costs are lower
reputation: if products are regular late then it will affect the businesses ability to deliver to its customers on time giving them a bad reputation ( vise versa)
customer satisfaction: logistics allow a business to meet customer need sin a quick and effective manner

Question 29

give the five stages of the sales process

Answer 29

• having excellent product knowledge
• good customer engagement
• quick and efficient service
• post sales service
• customer loyalty

Question 30

give 2 reasons why having excellent product knowledge is important

Answer 30

• customers feel more confident about their purchase

- staff can tailor product suggestions based on customers needs and sell additional products

Question 31

give two ways a business can ensure they have quick and efficient service

Answer 31

• retailers may reduce queue times or introduce self-service checkout
• e-tailers ensure that their website is user friendly nor too complicated nor long to disinterest customers

Question 32

give two ways a business can engage well with customers

Answer 32

• making customers feel important and valued during the sale

- build a relationship between the customer

Question 33

what is post sales service and two ways this can be done

Answer 33

• providing support for customers who have bought a product or service
• after sales helpline where customers can make inquires and discuss problems
• teach customers how to use the product

Question 34

give two ways a business can react to customer feedback

Answer 34

• adapt product based on feedback

- be polite and understanding when responding to customer’s public feedback

Question 35

give 3 impacts of good customer service

Answer 35

• satisfied customers are more likely to make repeat purchases increasing sales
• helps build a good reputation and positive brand image
• charge premium prices due to a competitive advantage as customer service can be a form of differentiation ( post sales service)

Question 36

give 3 impacts of poor customer service

Answer 36

• lower market share and sales due to dissatisfied customers
• leads to poor brand image thus less customer loyalty and may even deter to competitors