2.4

Question 1

What is capacity utilisation

Answer 1

% of maximum output currently being used

Question 2

Formula for capacity utilisation

Answer 2

(Current output / maximum possible output) x100

Question 3

3 ways to increase capacity utilisation

Answer 3

1. Stimulate demand (advertising)
   2.reduce capacity (remain at current output)
2. Outsource

Question 4

Causes of spare capacity

Answer 4

1. New competitors
2. Fall in demand
   3.unsuccessful marketing
   4.seasonal demand (low demand era)

Question 5

Impacts of underutilisation

Answer 5

1. Higher fixed costs per unit
   2.lower profits
2. Negative image
3. Employee boredom

Positive impacts- less stress for employees

Question 6

Productivity =

Answer 6

output per worker per time period
Output / workers

Question 7

what is cell production

Answer 7

flow production line split up into a number of self contained units
each cell is responsible for a significant part of the production line

Question 8

SMCiT

how to improve productivity

Answer 8

• specialisation
  -motivation
• more capital intensive
• training

Question 9

what is efficiency

Answer 9

Ability to minimise waste and therefore reduce the cost of production
total costs / total output

Question 10

how to improve efficiency

Answer 10

• outsourcing
• relocate
  -investing in new tech

Question 11

what is buffer stock and lead time

Answer 11

BS- the minimum stock level that kept before stock is reordered
LT- time it takes for stock to arrive

Question 12

implications of holding too much stock

Answer 12

• storage cost
• risk of spoilage and shrinkage

Question 13

implications of holding to little stock

Answer 13

increases in demands cannot be met

Question 14

Just in time stock

Answer 14

Raw materials not sold on site but ordered as required and delivered ‘just in time’

Question 15

advantages and disadvantages of JIT

Answer 15

+ stockholding costs minimised
- cant respond to increases in demand
- unreliable suppliers

Question 16

Waste Minimisation (how to reduce)

Answer 16

-perishable items, refrigeration
- staff training as fewer errors are likely to be made
- effective sales forecasting reduces the amount of wasted stock

Question 17

What is lean production

Answer 17

Involves the minimisation of resources used in production
- less time
- fewer materials
- less labour

Question 18

Competitive advantage from lean production

Answer 18

-lower unit costs achieved due to minimal wastage so prices may be lowered
- better quality of output

Question 19

what is quality

Answer 19

the characteristics and feature of a product that satisfy the needs of customers

Question 20

quality control

Answer 20

inspecting quality at the end of the production process
+ quality specialists employed
- cause of defects not looked into
- significant wastage of rejected goods

Question 21

Quality assurance

Answer 21

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

Question 22

Quality circles

Answer 22

Groups of workers meet regularly to solve quality problems identified in the production process
+ workers more motivated
- management has to have trust in workers

Question 23

Total quality management (TQM)

Answer 23

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

Question 24

continuous improvement (kaizen)

Answer 24

-Involves taking continuous steps to improve productivity through the elimination of all kinds of waste in the production process

Question 25

Competitive advantage from quality management

Answer 25

• 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