3.4.1Operations management Flashcards
Capacity
The maximum total output or production that a business can produce in a given period of time
How to utilise capacity efficiently?
-Under utilisation (excess capacity)
-Capacity shortage
Capacity utilisation (equation)
(actual output per annum/maximum possible outcome per annum) x 100
Reasons for spare capacity
-New competitor or new product enter the market
-Fall in demand
-Unsuccessful marketing
-Seasonal demand
-Over investment in assets
-Merger or takeover
Advantages of spare capacity
-More time for maintenance
-Less pressure on employees
-Can cope with increased demand plan for expanding sales
Disadvantages of spare capacity
-High proportion of fixed costs (higher unit costs)
-Poor image
Operations management
Management of processes, activities and decisions relating to the way goods and services are produced and delivered
Types of operations
-Added value
-Quality
-Cost and volume
-Dependability
-Efficiency and flexibility
-Environmental
Cost and volume objectives
-Operations need to be cost-effective
-Unit cost (total costs/total units)
Quality
Only about meeting the needs and expectations of customers
Efficiency
Production is maximised based on given levels of capital, land, labour and enterprise
Flexibility
-Being able to meet demand (labour, money and enterprise)
Environmental objectives
-Strict environmental legislation
-Customers increasingly base their buying decisions on firms that take environmental responsibility seriously
Average cost per unit is calculated
total production costs in period (£)/total output in period (units)
Internal
Arise from increased output from the business