Analysing Operational Performace

Question 1

Calculations of operations data

Answer 1

The main measures of operational performance are:
• Labour Productivity
• Unit Costs (average costs)
• Capacity
• Capacity Utilisation

Question 2

What is labour productivity?

Answer 2

‘A measure of output per worker in a given time period’

Question 3

What is labour productivity calculated by?

Answer 3

Output per period/ Number of employees per period = Labour Productivity

Question 4

What are ways of increasing labour productivity?

Answer 4

• Introducing new technology
• Modifying the production system
• Better skills and qualifications
• Motivation
• Training
• Better Management
• Flexibility
• External factors - reliability of suppliers
• New reward system - pay and incentives
• New ways of working
• Working environment

Question 5

What happens if the higher the labour productivity?

Answer 5

The higher the labour productivity, the lower the wage cost per unit (assuming each firm pays the same wage level).

Question 6

What is the emailing of ‘capacity’

Answer 6

‘The maximum total level of output or production that a business can produce in a given time period’ i.e full capacity

Question 7

Examples of capacity

Answer 7

• A fast food outlet may be able to serve 1,000 customers per hour
• A call centre may be able to handle 10,000 calls per day
• A football stadium could seat no more than 45,000 fans at each match
  A car production line may be able to complete 50,000 cars per year

Question 8

Ideal Capacity depends on a number of factors:

Answer 8

• Level of demand for the product
• Flexibility of production lines
• Seasonality of output
• Seasonality of demand
• Implications of failure to meet demand
• Opportunities for sub-contracted or outsourced production

Question 9

What is the definition of capacity utilisation?

Answer 9

‘The percentage of a firms total possible production level that is being used’

Question 10

How is capacity utilisation calculated by?

Answer 10

(Actual output per annum (or month)/ Maximum possible output per annum (or month) X 100

Question 11

Capacity Utilisation and Labour Productivity relation

Answer 11

Machinery and equipment may be idle if there is low capacity utilisation which therefore leads to lower labour productivity - may need to reduce number of workers

Question 12

Capacity Utilisation and Unit Costs relation

Answer 12

The higher the level of capacity utilization the more efficiently the firm is using its resources