4.3 Making operational decisions to improve performance: increasing efficiency and productivity

Question 1

Excess capacity

Answer 1

Occurs where actual production falls below maximum potential production.

Question 2

How much capacity should a business operate at?

Answer 2

Business should operate at an optimal level of capacity - close to 100% as possible whilst leaving spare capacity to cope with new orders.

Question 3

How to increase efficiency and labour productivity

Answer 3

• Investment in technology
• Improvements in training and motivation
• Job redesign
• Reduction in the labour workforce

Question 4

Lean production

Answer 4

Lean production is all about getting more from less.
- Just-in-time
- Kaizen
- Total Quality Management

Question 5

Just-in-time management

Answer 5

Inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed for production.

Question 6

Benefits of JIT

Answer 6

• Greater flexibility
• Business can respond quickly to changes in customer tastes
• Reduces amount of space needed
• Lower costs
• Improved competitiveness

Question 7

Drawbacks of JIT

Answer 7

• Running out of stock
• No opportunities for bulk purchases
• Dependent on trust with the supplier

Question 8

Difficulties of increasing efficiency and labor productivity

Answer 8

• Cost
• Quality
• Resistance of employees

Question 9

Capital intensive

Answer 9

Describes businesses requiring a large amount of capital relative to labour.

Question 10

Labour intensive

Answer 10

Describes those businesses requiring a large proportion of labor relative to capital.

Question 11

Ways in utilising capacity efficiently

Answer 11

• Increasing sales
• Reducing capacity
• Alternative uses

Question 12

What a business may consider if demand is too high and there is a lack of capacity

Answer 12

• Outsourcing
• Investment
• Reducing demand

Question 13

Types of technology used in operations

Answer 13

• Advanced computer systems
• Internet
• CAM
• CAD

Question 14

Benefits of new and updated technology

Answer 14

• Reduces unit costs
• More competitive prices
• Technologically advanced products = charging premium prices
• Consisted standard of quality
• Reduces waste

Question 15

Drawbacks of new and updated technology

Answer 15

• Expensive = drains on capital
• Requires training = increases costs
• Opposition from employees = job security = redundancy