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BUSINESS STUDIES > 4: OPERATIONS > Flashcards

4: OPERATIONS Flashcards

1
Q

What is operations management?

A

Operations management involves managing: processes, activities and decisions relating to the way that goods and services are produced/delivered.

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2
Q

Name 3 types of operational objectives.

A
  • quality
  • efficiency (labour)
  • environmental
  • costs
  • in/output volumes
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3
Q

What is the significance of having a low unit cost in relation to competitors?

A

Low unit cost = offer lower selling price = more competitive and a high profit margin due to more sales.

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4
Q

unit cost formula

A

Unit costs = Total costs/ Total units

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5
Q

what are some examples of cost and volume operational objectives?

A

productivity higher, capacity utilisation higher, more items produced per machine, higher contribution cost per unit.

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6
Q

Formula for contribution cost

A

Contribution = selling price - variable costs

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7
Q

what is contribution cost?

A

Costs left over to pay the fixed costs before profit is made.

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8
Q

Why is good quality important for a business?

A

Good reputation/brand image, repeated sales, loyalty.

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9
Q

How can quality be measured by a consumer?

A

The reviews given, returns, punctuality of service or delivery time.

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10
Q

Formula for punctuality (quality management)

A

deliveries on time/total deliveries X100

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11
Q

What are some examples of quality based objectives?

A

reduce defect rates, reduce returns, improve consistency of reviews, increase punctuality (delivery).

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12
Q

What does it mean for a business to be flexible and efficient in terms of processes, deliveries and decisions?

A

In operations, how responsive to short term change is it and how effectively the assets are used.

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13
Q

examples of flexibility and efficiency based objectives

A

improve labour productivity, output per time period, lead times, capacity utilisation, delivery time.

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14
Q

examples of operational environmental objectives

A

reduce energy use, more renewable, recyclable packaging, materials used more sustainable, waste disposal better, carbon footprint of product/service down

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15
Q

What is innovation?

A

Putting a new idea into action (idea -> business)

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16
Q

What are the two types of innovation within a business and what do they mean?
(2x Ps)

A

Product ( launch/improving products) Process ( more efficient producing)

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17
Q

Benefits of process innovation

A

reduce unit costs due to economies of scale, less energy used, meet demand, more flexible, reduce lead time, better customer service and higher profits.

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18
Q

Benefits of product innovation

A

first mover advantage, early loyalty, good reputation/brand image, high market share, market leader opportunity

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19
Q

Internal influences on operational objectives

A

finances (affects investments, cash flow), HR ( training, quality of workforce), corporate objectives, marketing position (prices, nature of product, life cycle)

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20
Q

Define capacity

A

capacity of a business is a measure of how much output it can achieve in a given period

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21
Q

define capacity utilisation

A

The proportion of businesses capacity that is being used over a specific period.

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22
Q

Formula for capacity utilisation

A

actual output in period/maximum possible output X100

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23
Q

Why is capacity utilisation important?

A
  • Measure production efficiency and helps set objectives
  • Determines how much benefit from economies of scale
  • alters ability to break even
  • affects ability to meet demand or target audience
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24
Q

Risks associated with low capacity utilisation

A
  • less economies of scale = high unit costs = high selling price = not competitive
  • capital tied up in assets eg. labour, equipment and recourses
  • less likely to break-even and be profitable in long term
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25
Q

Why might a business be operating at low capacity utilisation?

A

reduced market share, varying demand (expected or unexpected), bad HR department (bad training of workforce), repairing of machinery,low labour productivty

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26
Q

problems with operating at a high capacity utilisation

A

de-motivates workforce due to high stress due to higher workload
quality affected due to worsened quality control = reduce sales and negative brand image
less flexible to meet sudden demand

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27
Q

What is labour productivity?

A

The output per employee during a given time period

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28
Q

Formula for labour productivity

A

Output per period/no.employees = x units per employee

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29
Q

Influences on labour productivity

A

Skill of employees, suppliers lead time, machinery quality/quantity, recourses available, training, number of employees,motivation

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30
Q

What is a capital intensive industry?

A

An industry that requires assets of machinery/tech in high volumes to meet demand eg factory

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31
Q

What is a labour intensive industry?

A

A business requiring a large workforce to meet demand eg. restaurants

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32
Q

How can a business improve labour productivity?

A

Improve training of workforce, improve layout of facilities, hire skilled workers, consistent leadership.

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33
Q

define economies of scale

A

When the unit costs fall as the output of a business increases

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34
Q

Unit cost formula

A

Total production costs (£) / Total output (units)

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35
Q

What is internal economies of scale?

A

Increasing output from within the business which lowers costs

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36
Q

What is external economies of scale?

A

Within an industry to benefit an entire industry

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37
Q

examples of external economies of scale

A

improved transportation links, uni research, governmental funding, improved infrastructure,better technology, globalisation

38
Q

What is purchasing economies of scale?

A

Bulk buying to reduce unit costs

39
Q

What is technical economies of scale?

A

Specialist equipment purchased to improve efficiency

40
Q

What is marketing economies of scale?

A

spreading the fixed marketing cost across the purchased good inflows = less per unit

41
Q

What is network economies of scale?

A

Increased number of users for the product or service reudce operating (indirect) costs

42
Q

What is financial economies of scale?

A

Access to cheaper finance as they pose less risk eg more loans and more overdrafts

43
Q

What is managerial economies of scale?

A

employing more specialised employees due to a larger firm = increase efficiency

44
Q

What is diseconomies of scale?

A

Where the average unit costs rise when a business gets too big.

45
Q

Define quality

A

Where a product or service meets the needs and expectations of a customer

46
Q

Implications of a business having high quality

A

Good reputation, loyalty, repeated sales, increased revenue, spend less on marketing ( establish brand )

47
Q

How can quality be measureds tangibly?

A

Surveys, returns, reviews, defect rates, volume of waste material.

48
Q

How can a business improve its quality?

A

Training employees, working to improve motivation, tech better, quality control, quality assurance, work closely with suppliers

49
Q

What is the difference between quality assurance and quality control?

A

Assurance = checking at every stage
Control = check at end of process

50
Q

Advantages associated with quality control

A

Be monitored well to stop faulty being received by customers, more time efficienct than assurance

51
Q

Disdvantages associated with quality control

A

Requires specialist inspector, only identified at the end so wasted material = wasted capital.

52
Q

Advantages associated with quality assurance

A

Spot faults early = less waste, provide focus of low defect rate via objectives for quality, enhance customer reputation if less faulty.

53
Q

disadvantages associated with quality assurance

A

staff training required, can reduce labour productivity, slowed production.

54
Q

Define inventory

A

The raw materials, work In progressed and finished goods that are held by a firm to enable production and meet demand.

55
Q

What are the 3 types of inventory?

A
  • Raw materials
  • Work-in-progress
  • Finished goods
56
Q

Name 3 costs of holding inventory

A
  • Storage cost
  • Employees costs
  • Obselence cost ( Can’t be sold anymore eg out of fashion or date)
  • Stock out risk (run out)
  • Interest involved in tying up capital
57
Q

What is the just-in-time production method?

A

Where inventory is required just when it’s needed no buffer stock = lower storage costs, low lead times and a reliable relationship is required with the supplier.

58
Q

Advantages of low inventory for a business

A

Less risk of obselence
Lower cost for storage
Less capital is tied up = more cash flow

59
Q

Advantages of high inventory for a business

A

less risk of delays
meet sudden demand due to unexpected circumstances
less chance of stock out
economies of scale

60
Q

What is the objective of having an inventory control chart?

A

To keep total costs of holding inventory low

61
Q

formula for calculating the re-order level of a business ( inventory control chart )

A

(lead time x average daily usage) + buffer stock = re-order level

62
Q

What is buffer stock on an inventory control chart?

A

Level below minimum stock held that is there for contingency purposes.

63
Q

define supplier

A

A supplier is a business or individual that provides good and services to another

64
Q

What is a supply chain?

A

The network between company and its suppliers to produce and distribute a product

65
Q

What are some characteristics of a good supplier

A

good quality services/products
cost that suits
lead time that suits
location that suits
lead Time length ( very short if JIT model)
communicate
reliable
amount able to provide suits

66
Q

what are the two types of suppliers?

A

Strategic and commodity

67
Q

what is the difference between a commodity and strategic supplier?

A

Commodity: Can be bought elsewhere
Strategic: Can’t succeed without that specific supplier

68
Q

What is a trade credit?

A

Where a business buys goods or service from another and pays later.

69
Q

What are some factors that affect a businesses choice of suppliers?

A
  • Quality
  • Payment terms
  • Ability to meet demand (capacity)
  • Reliability
  • Price
  • Ethics of operation
70
Q

What is mass customisation?

A

Large scale production while enabling customer to make preferences

71
Q

What is CAD?

A

Computer aided design

72
Q

Why is CAD (computer aided design) useful for a firm?

A
  • CAD can help with innovation = unique models
  • ^ competitively
  • Can test before launch or mass production
  • Able to alter designs to pick which is best
73
Q

Advantages of a firm using robots

A

High speed and reliability, less workers needed, accurate processes, less risk for staff if in hazardous environment

74
Q

Disadvantages of a firm using robots

A

Maintenance costs, hard to produce, less jobs = less team working

75
Q
A
76
Q

What is CAM?

A

Computer aided manufacturing

77
Q

How can communication within a firm be improved by technology?

A

Emailing systems, zoom, quicker interdepartmental comms, able to sell on line, digital marketing, re-order systems to suppliers, tracking orders, loyalty cards.

78
Q

Benefits of having technology within a firm

A

Less stock wasted, lower costs (less warehouse storage, digital marketing), better working conditions, innovation, monitoring finances, ^ productivity.

79
Q

Drawbacks of having technology within a firm

A

Less job opportunities, loss of human touch=demotivating, cost of new technology development, if break = hard to meet demand and disrupted processes

80
Q

what is lean production?

A

Organising production and operations to minimise waste (via cutting out processes that don’t add value)

81
Q

How can a firm reduce waste via lean production?

A
  • reduce waiting time (idle equip)
  • Stock levels managed
  • Reduce defects
  • Less transport of materials
  • reduce over production
82
Q

What is just in time production?

A

Manufacturing system where materials/components are delivered immediately before required in production
- stock levels low
- inputs only when needed
- Type of lean production

83
Q

Advantages of JIT production

A

Less likelihood of stock perishing, less stockholding space, less working capital tied up

84
Q

Disadvantages of JIT production

A

less room for error, sudden rise in demand may not be accounted for (worsened customer service), reliant on suppliers, complex stock management

85
Q

What is the Kaizan process in lean production?

A

The value of continuous movement of materials so time isn’t wasted

86
Q

What is the Andon process in lean production?

A

And on chord above all processes, is pulled if something goes wrong so that production halts. Light appears so the issue can be addressed.

87
Q

How can a businesses performance be altered by suppliers?

A
  • Low quality inventory = bad reputation + lower sales
  • Able to meet demand will affect sales and turnover
  • The payment terms will affect cash flow and therefore ability to pay liabilities
  • Unreliable delivery = less competitive as less reliable lead times
88
Q

What’s a lead time?

A

How long it takes for a supplier to deliver goods.

89
Q

What is outsourcing aka. subcontracting?

A

When an organisation uses an outsider supplier

90
Q

Why outsource?

A
  • Increases capacity to meet demands
  • Employment of less specialist staff = lower labour costs
  • Accept more contracts = diversify customer base
  • reduce infrastructure costs ie. storages, office space
91
Q

Examples of when businesses may outsource

A

Law services not done in-house
Software maintenance
Financial advisors
Capital intensive jobs like factory work
cleaning

92
Q

Drawbacks of outsourcing

A

May be expensive
Less reliable quality as supplier may have worse quality than the business
Unethical supplier practices affect the ethics of company
Less control over quality

BUSINESS STUDIES (8 decks)

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