2.4 Resource Management

Question 1

What is capacity utilisation?

Answer 1

• A measure of the level to which a businesses assets are being used to produce output

Question 2

What is the formula for capacity utilisation?

Answer 2

(Current output / maximum output ) x100

Question 3

What are the implications of under-utilisation?

Answer 3

• Business wont be making the most of their resources
• increased unit costs
• workers may be under-deployed leading to fears of redundancy
• more flexible

Question 4

What are the implications of over utilisation?

Answer 4

• no flexibility
• staff will be under more pressure
• Higher levels of staff turnover
• Machinery pushed to its limits
• Minimise average total costs
• Increase businesses competitiveness

Question 5

Ways of improving capacity utilisation?

Answer 5

• Increase sales
• Increase usage
• Outsourcing
• Reduce capacity
• Redeployment

Question 6

What is buffer stock?

Answer 6

Buffer stocks are a quantity of goods/raw materials kept in case of stock shortages as to provide a competitive edge over rivals unable to meet demand

Question 7

What are the advantages of buffer stock?

Answer 7

• Stability in supply
• Price stabilisation
• Raw materials security
• Competitive advantage

Question 8

What are the disadvantages of buffer stock?

Answer 8

• Cost
• Risk of obsolescence
• Opportunity cost

Question 9

What are the implications of holding too much stock?

Answer 9

• storage costs
• Risk of spoilage
• Opportunity cost
• Unsold stock
• Price reduction

Question 10

What are the implications of holding too little stock?

Answer 10

• Risk of stock out
• Production stoppages
• Capital and Labour underutilised
• Increases in demand can’t be med
• Loss of potential sales

Question 11

What is just in time stock (JIT)?

Answer 11

Just in time stock management is a process in which raw materials are not stored onsite by ordered as required and delivered by suppliers just in time for production

Question 12

What are the advantages of JIT stock?

Answer 12

• Lower costs
• Close relationships with suppliers
• Cash flow is improved
• unused storage space
• Teamwork is encouraged

Question 13

What are the disadvantages of JIT stock ?

Answer 13

• Bulk buying EoS is not possible
• lower ability to respond to increases in demand
• Administrative costs
• Unreliable suppliers
• Changes to organisational restructure required

Question 14

What are the ways to minimise waste?

Answer 14

Storage, planning and sales tactics

Question 15

What is lean production?

Answer 15

Involves the minimisation of the resources used in production

Question 16

What is quality control?

Answer 16

Inspecting the quality of the output at the end of the production process

Question 17

What is quality assurance?

Answer 17

Inspecting the quality of production throughout the process

Question 18

What are quality circles ?

Answer 18

Groups of workers meet regularly to solve quality problems identified in the production process

Question 19

What is total quality management (TQM)?

Answer 19

Organisation of the business with quality at its core and with every worker responsible for quality