2.4 Flashcards
What is capacity utilisation
% of maximum output currently being used
Formula for capacity utilisation
(Current output / maximum possible output) x100
3 ways to increase capacity utilisation
- Stimulate demand (advertising)
2.reduce capacity (remain at current output) - Outsource
Causes of spare capacity
- New competitors
- Fall in demand
3.unsuccessful marketing
4.seasonal demand (low demand era)
Impacts of underutilisation
- Higher fixed costs per unit
2.lower profits - Negative image
- Employee boredom
Positive impacts- less stress for employees
Productivity =
output per worker per time period
Output / workers
what is cell production
flow production line split up into a number of self contained units
each cell is responsible for a significant part of the production line
SMCiT
how to improve productivity
- specialisation
-motivation - more capital intensive
- training
what is efficiency
Ability to minimise waste and therefore reduce the cost of production
total costs / total output
how to improve efficiency
- outsourcing
- relocate
-investing in new tech
what is buffer stock and lead time
BS- the minimum stock level that kept before stock is reordered
LT- time it takes for stock to arrive
implications of holding too much stock
- storage cost
- risk of spoilage and shrinkage
implications of holding to little stock
increases in demands cannot be met
Just in time stock
Raw materials not sold on site but ordered as required and delivered ‘just in time’
advantages and disadvantages of JIT
+ stockholding costs minimised
- cant respond to increases in demand
- unreliable suppliers
Waste Minimisation (how to reduce)
-perishable items, refrigeration
- staff training as fewer errors are likely to be made
- effective sales forecasting reduces the amount of wasted stock
What is lean production
Involves the minimisation of resources used in production
- less time
- fewer materials
- less labour
Competitive advantage from lean production
-lower unit costs achieved due to minimal wastage so prices may be lowered
- better quality of output
what is quality
the characteristics and feature of a product that satisfy the needs of customers
quality control
inspecting quality at the end of the production process
+ quality specialists employed
- cause of defects not looked into
- significant wastage of rejected goods
Quality assurance
Inspecting quality throughout production process
+ issues identified early, less waste
+ future quality issues may be prevented
_ labour costs may increase as requires a more skilled workforce
- expensive and lengthy to set up
Quality circles
Groups of workers meet regularly to solve quality problems identified in the production process
+ workers more motivated
- management has to have trust in workers
Total quality management (TQM)
Organisation of the business with quality at its core and with every worker responsible for quality
-quality in all aspects of the business
- culture of constant improvement
- all workers must be committed
continuous improvement (kaizen)
-Involves taking continuous steps to improve productivity through the elimination of all kinds of waste in the production process
Competitive advantage from quality management
- unit costs are likely to be low if a business takes a preventative approach like quality assurance or TQM
- low costs mean business may be able to reduce selling price to compete
- high quality can be used in promotional activity and provide a usp
