4.1: The nature of operations Flashcards
What’s the aim of production?
Added value: the difference between the cost of purchasing raw materials and the price of the finished goods.
What are the operations managers concerned with? (3)
Efficiency of production - keeping the cost low
Quality - The good or service must be suitable for the purpose intended
Flexibility - the need to adapt to new processes and new products
What does the value of added value depend on? (3)
The design of the products: does the quality enable high pricing?
The efficiency with which the input resources are combined and managed.
The impact of the promotional strategy on convincing consumers to pay more for the product that the cost of the inputs.
What are the stages of operations process before the selling of good or services? (4)
Converting a consumer need into a product/service
Organising operations so that production is carried out efficiently
Deciding on suitable production methods
Setting quality standards
What are the inputs of the production process? (3)
Resources:
*Land: where the business would operate
*Labour: workers and they’re abilities
*Capital: tools, machinery, computers
Resources
What is the difference between production and productivity?
*Production is the process of converting inputs into outputs
*Productivity is the ratio of outputs to inputs during production
e.g labour productivity = total output per time / total workers
Capital productivity = total output/capital employed
How to raise productivity levels? (4)
Improve the training of staff to raise skill
Improve worker motivation
Purchase more technologically advanced equipment
More efficient management.
Drawbacks of raising productivity? (3)
Raising productivity may not guarantee business success considering if the products are not sold.
Greater effort contributions from workers may require high wages
Even though it is efficient, it may not be effective.
Difference between labour intensive and capital intensive businesses?
Labour intensive: involving high level of labour input compared with capital equipment. E.g furniture that is hand made. Tend to be applied in job production.
Capital intensive: involving high quantity of capital equipment (such as machinery) compared with labour input. E.g Making soda drinks. Tend to be applied in flow production.
Difference between efficiency and effectiveness?
Example of an efficient but ineffective business.
Efficiency: producing output at the highest ratio of output to input
Effectiveness: Meeting the objectives of the enterprise by using inputs productively to meet customers’ needs.
A business that has low unit costs and high level of outputs but low sales revenue.
Which approach, between capital/labour intensity, depends on what? (3)
The nature of the product and the product’s image
The relative prices of the two inputs- if labour costs are high, then should use more capital equipment.
The size of the firm and its ability to afford expensive capital equipment.
