4.21 Operations planning

Question 1

Operations planning

Answer 1

Preparing input resources to supply products to meet expected demand

Question 2

Operational flexibility

Answer 2

The ability of a business to vary both the level of production and the range of products following changes in customer demand

Question 3

Process innovation

Answer 3

The use of new or much improved production method or service delivery method

Question 4

Job production

Answer 4

Producing a one-off item specially designed for the customer 
.  highly skilled workforce 
\+ able to undertake specialist projects 
\+ high level of worker motivation 
- high unit production costs 
- time consuming 
- wide range of tools and equipment

Question 5

Batch production

Answer 5

producing a limited number of identical products - each item in the batch passes through one stage production before passing on to the next stage
. labour and machines must be flexible to switch to making batches of other designs
+ some econ of scales
+ faster production, lower cost than job production
+ some flexibility in design of product in each batch
- high level of stocks at each stage
- unit costs likely to be higher than with flow production

Question 6

Flow production

Answer 6

Producing items in a continually moving process
. specialised and expensive capital equipment - but efficient
. high steady demand for standardised products
+ low unit costs due to constant working of machines, high labour productivity and econ of scale
- inflexible - difficult to switch from one type to another
- expensive to set up flow line machinery

Question 7

Mass customisation

Answer 7

The use of flexible computer-aid production systems to produce items to meet individual customers’ requirements at mass-production cost levels
. many common components
. flexible and multi-skilled workers
. flexible equipment to allow variations in the product
+ combines low unit costs with flexibility to meet customers’ individual requirements
- expensive product redesign may be needed to allow key components to be switched to allow variety
- expensive flexible capital equipment needed.

Question 8

Factors determine how business chooses type of production

Answer 8

1. Size of the market
2. The amount of capital available
3. Availability of other resources
4. Market demand exists for products adapted to specific customer requirements

Question 9

Problems of changing job to batch

Answer 9

• Cost of equipment needed to handle large numbers in each batch
• Additional working capital needed to finance stocks and work in progress
• Staff demotivation - less emphasis placed on individual’s craft skills

Question 10

Problems of changing job or batch to flow

Answer 10

• Cost of capital equipment needed for flow production
• Staff training to be flexible and multi-skilled
• Accurate estimates of future demand to ensure that ouput matches demand

Question 11

Optimal location

Answer 11

A business location that gives the best combination of quantitative and qualitative factors

Question 12

Quantitative factors

Answer 12

These are measurable in financial terms and will have a direct impact on either the costs of a site or the revenue from it and its profitability

Question 13

List of quantitative factors

Answer 13

• Site and capital costs e.g: building, shop-fitting cost
• Labour costs
• Transport costs
• Sales revenue potential
• Government grants

Question 14

Other techniques to choose location

Answer 14

1. Profit estimates
   - Annual profit forecasts are of limited use –> need to be compared with the capital costs of buying and developing the site
2. Investment appraisal
   - Identify locations with the highest potential returns over a number of years
   - Estimate the location most likely to return the original investment quickest
3. Breakeven analysis

Question 15

Qualitative factors

Answer 15

Non-measurable factors that may influence business decisions

Question 16

List of qualitative factors

Answer 16

• Safety
• Room for further expansion
• Managers’ preferences
• Ethical considerations
• Environmental concerns
• Infrastructure

Question 17

Multi-site location

Answer 17

A business that operates from more than one location

Question 18

Offshoring

Answer 18

The relocation of a business process done in one country to the same or another company in another country

Question 19

Multinational

Answer 19

A business with operations or production bases in more than one country

Question 20

Ads of multi-site locations

Answer 20

+ Greater convenience for consumers
+ Lower transport costs
+ Production-based companies reduce the risk of supply disruption if there are technical or industrial-relations problems in one factory
+ Opportunities for delegation of authority to regional managers from head office -> helps to develop staff skills and improves motivation
+ Cost advantages of multi-sites in different countries

Question 21

Disads of multi-site locations

Answer 21

• Coordination problems bw the locations
• Potential lack of control and direction from senior management based at head office
• Different cultural standards and legal systems in different countries -> adaptation
• If sites are too close to each other –> danger of “cannibalism”

Question 22

Reasons for international location decisions

Answer 22

1. To reduce costs
2. To access global(world) markets
3. To avoid protectionist trade barriers

Question 23

Potential problems with international location

Answer 23

1. Language and other communication barriers
2. Cultural differences
3. Level-of-service concerns
4. Supply-chain concerns
5. Ethical considerations

Question 24

Scale of operation

Answer 24

The maximum output that can be achieved using the available inputs (resources) - this scale can only be increased in the long term by employing more of all inputs

Question 25

Factor that influence the scale of operation

Answer 25

• Owner’s’ objectives
• Capital available
• Size of the market the firm operates in
• Firm may be small if there are many rivals
• Scope for scale economies

Question 26

Economies of scale

Answer 26

Reductions in a firm’s unit (avg) costs of production that result from an increase in the scale of operations

Question 27

Type of economies of scale

Answer 27

1. Purchasing economies: Bulk-buying economies
2. Technical economies: + Large firms are more likely to justify the cost of flow production lines
   + Latest and most advanced technical equipment
3. Financial economies: + Banks often show preference for big business with a proven track record. Low interest rate.
   + Able to cover costs (advisers’ fees, prospectus publishing costs, adverts..) of going “public”
4. Marketing economies
5. Managerial economies: Afford specialist functional managers who should operate more efficiently than general managers. (fewer mistakes)

Question 28

Diseconomies of scale

Answer 28

Factors that cause average costs of production to rise when the scale of operation is increased

Question 29

Causes of diseconomies of scale

Answer 29

1. Communication problems
2. Alienation of the workforce
3. Poor coordination

Question 30

Ways to overcome diseconomies

Answer 30

1. Management by objectives
2. Decentralisation
3. Reduce diversification

Question 31

Computer-Aided Design (CAD)

Answer 31

Use of computers in designing, drafting, and/or modeling parts, products, or structures.

Question 32

Computer-Aided Manufacturing (CAM)

Answer 32

Use of computers in control and management of manufacturing processes, such as automatically coordinated operations of conveyor systems, cutting and forming machines, and riveting and welding machines.