4 - Operational Efficiency

Question 1

What Does Operational Efficiency Involve?

Answer 1

Maximising the level of output achieved from given inputs.

Question 2

How Can Efficiency Be Improved?
(5 Points)

Answer 2

~ Increasing capacity utilisation.

~ Increasing labour productivity.

~ Lean production techniques.

~ Choosing the optimal resource mix.

~ Using technology.

Question 3

What Does Capacity Affect?

Answer 3

Ability of a firm to match supply to demand.

Question 4

What Does Capacity Utilisation Affect?

Answer 4

Whether resources are being used efficiently or whether they are lying idle.

Question 5

What Does A Low Capacity Utilisation Mean?
(2 Points)

Answer 5

~ Means that resources are not being made to work effectively for the business.

~ Results in high unit costs.

Question 6

What Does A High Capacity Utilisation Mean?
(3 Points)

Answer 6

~ Means the firm is sweating its assets.

~ Results in lower unit costs.

~ May affect quality and cause stress to workers.

Question 7

What Is The Importance Of Capacity?
(3 Points)

Answer 7

~ Ability to match supply to demand.

~ Image / public perception.

~ Ability to achieve business objectives.

Question 8

What Steps Should A Business Take If It Is Underutilising?
(3 Points)

Answer 8

~ Increase demand.

~ Downsize.

~ Lease off spare capacity.

Question 9

What Steps Should A Business Take If It Is Overutilising?
(3 Points)

Answer 9

~ Reduce demand.

~ Outsource parts of the business operations.

~ Increase capacity by investing in more resources.

Question 10

What Happens When A Firm Increases Labour Productivity?

Answer 10

Lowers the labour cost per unit.

Question 11

How Can A Firm Increase Labour Productivity?
(5 Points)

Answer 11

~ Training.

~ Increase motivation.

~ Implement new technology.

~ Better working practices.

~ Improved recruitment and selection.

Question 12

What Are The Difficulties A Firm May Experience When Increasing Labour Productivity?
(3 Points)

Answer 12

~ Increase waste affecting unit cost.

~ Damage to long term reputation.

~ Employees may feel exploited.

Question 13

What Is Lean Production?

Answer 13

Practices that focus on cutting waste whilst maintaining quality.

Question 14

What Are The 2 Lean Production Techniques?
(2 Points)

Answer 14

~ Just-In-Time (JIT).

~ Kaizen.

Question 15

What Is JIT Operations?

Answer 15

A technique used to minimise stock holdings at each stage of the production process, helping to minimise costs.

Question 16

What Is Kaizen?

Answer 16

A technique that concentrates on small but frequent improvements in every aspect of the production process.