4 Operations Management Flashcards
What is productivity?
the output measured against the inputs used to create it.
How do you calculate labour productivity?
Labour Productivity = Output over a given period of time/ Number of Employees
How can you increase productivity and efficiency?
- improve product quality and inventory
- automation
- improve employee training
- motivate employees
- introduce new technology
How do you calculate productivity?
Productivity = Output / Quantity of Input
What is buffer inventory?
the inventory held to deal with uncertainty in customer demand and deliveries of supplies.
What are the benefits to increasing productivity?
- reduced input needed for same output
- lower cost per unit
- fewer workers needed
- higher motivation
What is lean production?
techniques used by a business to cut down on waste and increase efficiency.
What are the types of wastes that can occur in production?
- Overproduction
- Waiting
- Transportation
- Unnecessary Inventory
- Motion
- Over-processing
- Defects
How can lean production be achieved?
- Kaizen
- JIT Inventory Control
- Cell production
What is kaizen?
a Japanese term meaning ‘continuous improvement’ through the elimination of waste.
What is Just-in-time (JIT)?
involves reducing the need to hold inventories of raw materials/ unsold inventories of the finished product.
What is cell production?
where the production line is divided into separate, self contained units making an identifiable part of the finished product.
What is batch production?
where a quantity of one product is made, then a quantity of another item will be produced.
What factors affect which method of production to use?
- product nature
- size of market
- nature of demand
- size of business
What is job production?
where a single product is made at a time.
What is flow production?
where large quantities of a product are produced in a continuous process.
What’re the advantages of new technology?
- increased productivity and efficiency
- increased job satisfaction
- need for more skilled workers
- better quality products
- quicker communication
- quicker decision making
What are the disadvantages of technology?
- unemployment increase
- expensive
- unhappy employees
- needs updating to remain competitive
What are fixed costs?
costs that do not fluctuate even if the output increases.
What are variable costs?
costs that vary directly with the number of output.
What is total cost?
fixed and variable costs combined.
What is the average cost per unit?
total cost of production / total output
What are economies of scale?
factors that lead to a reduction in average cost as the business grows in size.
What are diseconomies of scale?
factors that lead to an increase of average cost as a business grows beyond a certain size.
What are the five of economies of scale?
- Purchasing
- Marketing
- Financial
- Managerial
- Technical
What are the causes of diseconomies of scale?
- Poor communication
- Lack of employee commitment
- Poor coordination
What is break-even level of output?
the quantity that must be produced/ sold for total revenue to equal total costs (break-even point)
What is a break-even chart?
graphs which show how costs and revenues of a business change with sales.
What is revenue?
the income during a period of time from the sale of goods/ services.
Quantity Sold x Price = Total Revenue
What is the break even point?
the levels of sales at which total cost = total revenue.
How do you plot a break even chart?
- y axis: money (cost and revenue)
- x axis: number of units produced and sold
- fixed cost do not change
- total cost line = variable + fixed costs
What’re the advantages of break-even charts?
- managers can see expected profit/ loss
- graph is able to be redrawn
- margin of safety
What is a margin of safety?
the amount by which sales exceed the break even point.
What are the limitations of a break -even chart?
- assumes all goods are sold
- scale of production does not change
- does not consider other aspects of the business’s operations
- assumed cost and revenue can be drawn with straight lines
What is contribution?
a product’s selling price being less than its variable cost.
What is quality?
to produce a good/ service which meets customer expectations.
How does quality help a business?
- establish brand image
- brand loyalty
- good reputation
- increase sales
- attract new customers
What is quality control?
the checking for quality at the end of the production process using quality inspectors.
What happens if quality is not maintained?
- lose customers to other brands
- replace faulty products/ offer refunds
- bad reputation
What is quality assurance?
the checking for quality standards throughout the production process by employees.
What is Total Quality Management (TQM)?
the continuous improvement of products and processes by focusing on quality at every stage of production.
What are factors affecting the location of a manufacturing business?
- production methods
- market
- raw materials
- external economies of scale
- availability of labour
- government influence
- transport and communications
- power and water supply
What are factors affecting the location of a service sector business?
- customers
- owner preference
- technology
- availability of labour
- climate
- proximity to other businesses
- rent/ taxes
What’re factors affecting the location of a retail business?
- shoppers
- nearby shops
- customer parking
- rent/ taxes
- security
- legislation
What’re factors affecting the location of a multinational company?
- new overseas market
- cheaper/ new materials
- labour force and wage costs
- rent/ taxes
- government grants/ incentives
- trade/ tariff barriers
