2.3 Making operational decisions Flashcards
Job production
Manufacturers produce one product at a time as ordered by the customer
+High quality product
+Motivated and highly skilled workers
+Customised products can be produced
-Production is slow
-Labour costs are high
Flow Production
Continuous manufacturing of standardised products, usually on a production line
+Low unit costs due to economies of scale
+Rapid production
+Usually highly automated (capital intensive)
-Customisation is difficult
-Capital equipment can be expensive to purchase
Batch Production
Groups of the same product are produced as a batch e.g. 1000 Blueberry muffins
+Workers can specialise
+Production can take place as the previous ‘batch’ starts running out
-requires careful coordination to avoid shortages
-Money is tied up in stock
-Completed products need to be stored
The Impact of Technology on Production
- cost
- productivity
- quality
- flexibility
COST:
* Traditional manufacturing processes require expensive tooling and machinery leading to large upfront cost.
* With 3D printing, the cost of manufacturing is reduced as there is no need for expensive tooling
PRODUCTIVITY
* products can be produced quickly and easily, with minimal lead times
* bring new products to market faster and respond more quickly to changing customer preferences
QUALITY
* 3D printing allows for precise and accurate production of complex shapes and designs, resulting in higher quality products which older machines find harder to do
FLEXIBILITY
* products can easily be customised to meet the specific needs of customers
* allows for small production runs which reduces the costs of a specific job production
Bar Gate Stock Graph
The maximum stock level is the maximum amount of stock a business is able to hold in normal circumstances (1600)
The reorder level is the level at which a business places a new order with its supplier (800)
The minimum stock level is also known as the buffer stock level and is the lowest level to which a business is willing to allow stock levels to fall (400)
The lead time is the length of time from the point of stock being ordered from the supplier to it being delivered (1 week)
Factors That Influence the Process of Sourcing Raw Materials
Quality
If the raw materials are of poor quality, then the final product may not meet the desired standards
Delivery
Companies need to ensure that their raw materials are delivered on time, at a reasonable cost, and in a reliable manner
Availability
Companies need to ensure that the raw materials they need are readily available (this is different to delivery on time)
Costs
Cost is a critical factor in raw material procurement
Companies need to ensure that they are getting the best possible price for their raw materials without sacrificing quality
Trust
Companies need to ensure that they are working with reliable suppliers who can deliver quality materials on time and at a reasonable cost
Just in Time Stock Management
- advantages
- disadvantages
ADVANTAGES:
* Stockholding costs are minimised
* Close working relationships are developed with a small number of trusted suppliers
* Cash flow is improved as money is not tied up in stocks
* Unused storage space is available for productive use
DISADVANTAGES:
* Bulk buying economies of scale are not generally possible
* The ability to respond to unexpected increases in demand is reduced
* Administrative costs related to frequent ordering are increased
* Unreliable suppliers (late or poor quality deliveries) can quickly halt production
The Importance of Quality Management
- Quality considers the characteristics and features of a product that satisfy the needs of customers
- Businesses need to maintain a level of quality that continues to attract and retain customers
Approaches to Managing Quality
QUALITY CONTROL:
Inspecting the quality of output at the end of the production process
+Quality specialists are employed to check standards
+An inexpensive and simple way to check that output is fit for purpose
-The rejection of finished goods is a significant waste of resources **
-There is little focus on the cause of defects
QUALITY ASSURANCE:
Inspecting the quality of production throughout the process
+Quality issues are identified early** so products may be reworked rather than rejected
+The cause of defects is the focus so future quality issues may be prevented
-Controlling quality throughout the production process can be expensive,but it could ultimately reduce costs because defects do not then have to be dealt with
-Staff training and a skilled workforce is required so labour costs may be increased
-Reworking may lengthen the production process
Competitive Advantage from Quality Management
- Unit costs are likely to be low if a business takes a preventative approach through the use of quality assurance so Low costs may allow a business to reduce its selling price to better compete with or undercut its rivals
- Increased finance may be available to fund marketing activity to improve brand recognition and attract new customers
- High levels of quality can be used in promotional activity and provide a unique selling point for businesses in competitive markets
- Successfully developing a USP for quality can ease expansion into new markets as a result of the positive reputation it creates
Steps in the Sales Process
1. Gain Customer Interest
A business must make a customer aware of its product through marketing activities e.g. sponsorship, advertising
2. Provide a Speedy and Efficient Service
A business needs to be flexible enough to be able to take orders, produce and deliver to customers promptly
this can be improved be:
* allowing customers to choose a convenient delivery method
* making online platforms easy to use
* reducing queues at checkouts
3. Engage the Customer
In some cases it is important to engage with the customer during the sales transaction and ensure regular communication to answer questions and provide updates
4. Provide Post-sales Service
Post-sales service is support given to customers after the purchase of a product and can include
* dealing with complaints and faults
* managing items that need to be returned
* providing servicing or repairs
* offering warranties or guarantees
* collecting customer feedback on the transaction
5. Achieve Customer Loyalty
Achieving customer loyalty is important to businesses as it leads to repeat sales and valuable word-of-mouth reviews
* Providing extended product support
* Maintaining a positive reputation
* Continuing to offer what the customer wants
* Using promotional tactics to encourage repeat purchases
The Importance of Customer Service
Developing customer loyalty helps businesses to grow and be successful in the long term
Good customer service generates customer loyalty which drives repeat purchases and helps the firm to reduce marketing costs when launching new products
Examples of How Businesses Develop Customer Loyalty
CUSTOMER SERVICE:
When customers have a positive customer service experience, they are more likely to return and recommend the business to others
LOYALTY CARDS:
These cards typically offer rewards or discounts for frequent purchases encouraging repeat customers
SAVER SCHEMES:
These schemes typically offer discounts or special pricing for customers who save money with them like beggars.
