3.4 Decision Making To Improve Operational Performance Flashcards
What are operations management?
Operations management is the process that uses the resources of an organisation to provide the right goods or services for the customer
What are operational objectives?
Operational objectives are specific, focused targets of the operations management function within an organisation
What are the 4 ways that operational objectives are used?
– Act as a focus for decision-making
– provide a benchmark against which success or failure can be measured
– improve coordination
– improve efficiency
What are 7 types of operational objectives?
– Costs – quality – added value – speed of response – flexibility – dependability – environmental objectives
What is meant by unit costs?
Unit cost is the cost of producing one unit of output
What is the unit cost formula?
Total Costs
———————- = Unit cost
Units of output
How do you achieve lower unit costs?
– Reduce fixed costs
– reduce variable costs per unit
Give 4 internal factors that influence operational objectives
– Nature of the product
– availability of resources
– other departments
– overall objectives
Give 5 external factors that influence operational objectives
– Competitors performance – market conditions – demand for the product – changing customer needs – new technology
Job production
Production of one-off items by skilled workers
Flow production
Mass production on a continuous production line with division of labour
Batch production
Production of small batches of identical items
Cell production
Production divided into sets of tasks, each set completed by a work group
Define capacity
Capacity is maximum output with the resources currently available
What is capacity utilisation?
Capacity utilisation is how much capacity a business is using
Give the formula for capacity utilisation (%) ?
Output
————- X 100 = Capacity utilisation
Capacity
What is known as the most efficient capacity utilisation?
80%-90%
Give 5 ways of increasing capacity
– Facilitate more of the working week
– invest in more machines
– increase staff levels by employing temporary and part-time staff or get staff to work overtime
– increase productivity and employee motivation
– subcontract work
What is outsourcing or sub contracting?
Sub contracting is when a business uses of another firm to do some work on its behalf
What does under-utilisation increase?
Under-utilisation increases costs because it causes fixed costs to be spread over fewer units of output, so unit costs increase
What is the difference between productivity and efficiency?
Productivity is measured as the output per worker in a given time period.
Efficiency is all about getting more outputs from a given amount of inputs
Lean production
An approach to management that focuses on cutting out waste, whilst insuring quality. This approach can be applied to all aspects of the business - from design, through production to distribution
Give 5 types of waste
– Overproduction – waiting time – transport – stocks – defects
What is time based management?
A general approach that recognises the importance of time and seeks to reduce the level of wasted time in the production processes of a business
Give 3 benefits of effective time management
– Quicker response times to meet changing market and customer needs
– faster new product development
– reduction in waste, therefore greater efficiency
Give 2 requirements for time based management
– Flexible production methods
– trained employees
What is simultaneous engineering?
An approach to project management that helps firms develop and launch new products more quickly. All parts of the projects are planned together. Everything is considered simultaneously rather than separately
Give 3 benefits of simultaneous engineering
– New product is bought to the market much more quickly
– business may be able to charge a premium price that will give a better profit margin and help recoup research and development costs
– a greater sense of involvement across business functions improve staff commitment to the project
What is cell production?
A form of team working where production processes are split into cells. Each cell is responsible for a complete unit of work
Give 4 benefits of cell production
– Closeness of cell members should improve communication
– workers become multi skilled and more adaptable
– greater employee motivation, from variety of work, team working and responsibility
– quality improvements as each cell has ownership for quality on its area
Give 4 drawbacks of cell production
– Business may have to invest in new materials handling and ordering systems suitable for cell production
–Cell production may not allow a firm to use its machinery as intensively as in traditional flow production
– Allocation of work to sales has to be efficient so that employees have enough work but not so much that they are unable to cope
– Recruitment and training of staff must support this approach to production
What is just-in-time production?
Just-in-time aim is to ensure that inputs into the production process only arrive when they are needed
How does just-in-time work?
– Based on a pull system of production - customer orders determine what is produced
– requires complex production scheduling
– supplies delivered to production line only when needed
– requires close cooperation with high-quality suppliers
Give 3 advantages of just-in-time
– As stock is only obtained when it is needed, less working capital is tied up in stock
– lower stockholding means a reduction in storage space
– less likelihood of stock perishing, becoming obsolete or out of date
Give 3 disadvantages of just-in-time
– There is little room for mistakes as minimal stock is kept for reworking faulty product
– production is highly reliant on suppliers
– there is no spare finished product available to meet unexpected orders because all product is made to meet actual orders
What is Kaizen production?
Kaizen (or continuous improvement) is an approach of constantly introducing small incremental changes in the business in order to improve quality and efficiency
How kaizen works
– Leaner production is based on making many small changes
– small improvements are less likely to require major capital investment
– ideas come from the talents of the existing workforce as opposed to using R&D, consultants or equipment
– Kaizen encourages employees to take ownership for their work, can help reinforce team working and improve motivation
What are the 2 main types of technology?
- robotic engineering
- computer engineering
Give 5 advantages for a business using technology
1) increased productivity and quality
2) more effective and efficient delivery of goods and services to the customers
3) more effective marketing campaigns that target the right customers
4) reduced administrative and financial costs
5) better communication both internally and externally
Give 4 disadvantages to a business of using technology
1) initial costs may be high
2) technology requires maintenance and constant updating, which can be expensive
3) staff need to be trained to use the new systems
4) replaces some manual work so technology can lead to redundancies
What does a capital-intensive firm use?
A capital-intensive business used more machinery and relatively few workers
Are capital-intensive firms typically large or small companies?
Larger firms tend to be more capital-intensive than smaller companies. E.g Morgan motor company use lots of labour and BMW uses more robots and machinery
Give 4 advantages of capital-intensive production
- cheaper than manual labour in the long term
- more precise and gives consistent quality levels
- ability to work 24/7
- machines are easier to manage than people
Give 4 disadvantages of capital-intensive production
- high set up costs
- machines are usually only suited for one task which makes them inflexible
- machines can break down, which leads to long delays
- fears of being replaced by machines can decrease motivation of the workers
What does a labour-intensive firm use?
A labour-intensive firm uses more workers and less machinery
What public sector organisation is very labour intensive?
NHS
Give 4 advantages of labour-intensive production
- People are flexible and can be retained
- Cheaper for small-scale production
- Cheaper where low cost labour is available
- Workers can solve problems that arise during production
Give 4 disadvantages of labour-intensive production
- It is harder to manage people than machines
- People can be unreliable
- People can’t work without breaks or holidays
- Wage increases mean that the cost of labour can increase over time
What does poor quality lead to?
Poor quality leads customer dissatisfaction and a bad reputation for the business
Many customers are aware that cheaper products have lower quality compared to an expensive good, but what do customers expect for a product to be?
Fit for purpose
Define quality control and who usually carries out quality control?
Quality control means checking goods as you make them or when they arrive from suppliers to see if anything is wrong with them. It’s often done by specially trained quality inspectors
Define quality assurance
Quality assurance means introducing measures into the production process to try to ensure things don’t go wrong in the first place. This could be checking the product for quality at every stage of production
Comparing quality assurance and quality control, which is more motivating for employees?
Quality assurance because employees are empowered to self-check the quality of their work.
What does TQM stand for?
Total quality management
What is total quality management?
TQM means the whole workforce is committed to quality improvements. The idea is that every department focuses on quality in order to improve the overall quality of the products and services
Give 3 advantages of TQM
- bonds employees as a team
- boosts a company’s reputation for providing quality goods and services
- leads to fewer faulty products being produced so the business creates less waste
Give 3 disadvantages of TQM
- takes a long time to introduce TQM
- can demotivate staff as it can be a lot of effort
- usually expensive to introduce as investment is required for training of all staff
What is opportunity cost in terms of stock?
The opportunity cost is the cost of investing money in stock instead of something else
What diagram can a business use to manage their stock?
Inventory control chart
Define buffer stock
The minimum level of stock so that a business won’t run out of raw materials or finished goods
What is lead time?
The time it takes for goods to arrive after ordering them from the supplier
What is the reorder quantity?
Is the amount of stock the company orders from its supplier
What is the reorder level?
The stock level at which a reorder is placed
Formula for reorder level
(Lead time X average daily usuage) + buffer stock level
Define outsourcing
Outsourcing is when businesses contract out some activities to other businesses rather than doing them in house
Benefits of outsourcing
- The business can accept contracts which they would otherwise have turn down
- They also benefit from the specialised knowledge of the businesses they outsource to
- The business doesn’t have to pay for permanent staff when they’re only needed occasionally, so it reduces costs
What is mass customisation?
A method of producing to order (products are made after the order is placed). It combines the flexibility of a custom-made product with the low cost of mass production
What is the main benefit of mass customisation?
It allows for an increase in customer choice without a corresponding increase in costs and it can lead to a competitive advantage
What is the main disadvantage to mass customisation?
It can be very difficult for a business to make mass customisation efficient and profitable. Customise products can be expensive and it can take a long time for them to be delivered to customers – this is acceptable for luxury items but not for every day things
What are 6 factors a business needs to consider when choosing their suppliers?
Price Payment terms Quality Capacity Reliability Flexibility
