Business Management 1 - Chapter 5

Question 1

PRODUCTION/OPERATIONS MANAGEMENT
INTRODUCTION
What does the production and operations management functions link together in the value chain?

Answer 1

The production and operations management functions represent the link between the inbound and outbound logistics systems in the value chain.

Question 2

PRODUCTION/OPERATIONS MANAGEMENT
INTRODUCTION
What is the production and operations department responsible for?

Answer 2

The production and operations department is responsible for the manufacturing of the finished products and services that are going to be sold.

Question 3

PRODUCTION/OPERATIONS MANAGEMENT
INTRODUCTION
What is procured by the purchasing department?

Answer 3

Raw materials, components and other semi-finished goods are procured by the purchasing department of the business enterprise .

Question 4

PRODUCTION/OPERATIONS MANAGEMENT
INTRODUCTION
What happens with the Raw materials, components and semi-finished goods that is procured by the purchasing departments?

Answer 4

These goods are then transformed into finished products that are delivered to the rest of the value chain members, namely the wholesalers and the retailers.

Question 5

PRODUCTION/OPERATIONS MANAGEMENT
TASKS OF PRODUCTION AND OPERATIONS MANAGEMENT
What tasks are included in production and operations management?

Answer 5

The tasks of production and operations management include planning, organising, leading, coordinating and controlling the production and operations activities of the business.

Question 6

PRODUCTION/OPERATIONS MANAGEMENT
TASKS OF PRODUCTION AND OPERATIONS MANAGEMENT
The tasks of production and operations management can be classified into what aspects of production and operations management?

Answer 6

The tasks of production and operations management can be classified into long, medium and short term aspects of the production and operations management.

Question 7

PRODUCTION/OPERATIONS MANAGEMENT
LONG TERM ASPECTS
What does long term aspects involve?

Answer 7

These involve planning for the future for a period longer than five years.

Question 8

PRODUCTION/OPERATIONS MANAGEMENT
LONG TERM ASPECTS
What does long term aspects include?

Answer 8

This includes fixed capacity planning such as the choice of a location, the choice of optimal quantitative ratio in the allocation of production factors, the choice of an optimal size of production unit and organisation, as well as the layout and equipping of the factory, offices and other buildings.

Question 9

PRODUCTION/OPERATIONS MANAGEMENT
MEDIUM TERM ASPECTS
What is the period being covered by medium term aspects?

Answer 9

The medium-term aspects cover a period longer than one year, but shorter than five years.

Question 10

PRODUCTION/OPERATIONS MANAGEMENT
MEDIUM TERM ASPECTS
What does medium term aspects include?

Answer 10

These aspects include variable capacity planning, sales forecasting, master scheduling, operations scheduling and inventory management.

Question 11

PRODUCTION/OPERATIONS MANAGEMENT
MEDIUM TERM ASPECTS
What is the period being covered by short term aspects?

Answer 11

Short term aspects cover a period shorter than a year.

Question 12

PRODUCTION/OPERATIONS MANAGEMENT
MEDIUM TERM ASPECTS
What does short term aspects include?

Answer 12

These include compiling and implementing the work plan, materials management, quality control, maintenance, replacement and occupational safety. They also have to do with the day to day activities in the production and operations department.

Question 13

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
What must be considered with regard to layout of the production facility to ensure efficient operations?

Answer 13

• The layout must be adapted to the production process. It must make provision for a constant flow of raw materials and goods from the point of input right through to the point of output.

Question 14

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
What must be considered with regard to the distance between the starting and finishing points of the production facility to ensure efficient operations?

Answer 14

• The distance between the starting and finishing points must be short to enable production to take place in the shortest possible time.

Question 15

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
Which factors must be considered with regard to the production facility to ensure efficient operations?

Answer 15

• Factors such as lighting, temperature, waste removal, humidity and supply of water are important for effective production.

Question 16

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
Which factors must be considered with regard to the requirements of the employees in production facility to ensure efficient operations?

Answer 16

• The requirements of the employees are important, as they have direct influence on productivity. These factors include health, lighting, safety, noise and air conditioning. Other factors include eating areas, parking facilities, security, recreational and sports facilities.

Question 17

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
What must be considered with regard to the internal transport system of the production facility to ensure efficient operations?

Answer 17

• The internal transport system must be effective. The transport system must transport people, raw materials, machinery, equipment, half-finished products and finished products as effectively as possible.

Question 18

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
True or False - An effective external transport system is not an important requirement for the layout of the production unit.

Answer 18

False - An effective external transport system is an important requirement for the layout of the production unit.

Question 19

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
What must be considered with regard to the space of the production facility to ensure efficient operations?

Answer 19

• Space must be used effectively. Space costs money and must be occupied to its fullest capacity.

Question 20

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
What must be considered with regard to the maintenance work of the production facility to ensure efficient operations?

Answer 20

• Provision must be made for maintenance work. Workshops must be placed in places where they are near to the machinery. This should speed up the maintenance work and prevent the occurrence of production stoppages.

Question 21

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
What must be considered with regard to possible future changes in products, processes and capacity of the production facility to ensure efficient operations?

Answer 21

• Provision must be made for any possible future changes in products, processes and capacity. Modern computerized equipment changes almost daily, and the new technology must be accommodated in the layout.

Question 22

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
How many types of production layouts can be identified?

Answer 22

Four types of production layouts

Question 23

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
List the four types of production layouts

Answer 23

• Fixed product layout.
• Horizontal grouping of machinery.
• Vertical grouping of machinery.
• A combination of the above three types of layout.

Question 24

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
Briefly explain a fixed product layout

Answer 24

A fixed location is used in which a product is built from the beginning to the finished product. The product is static and all the workers, machinery, equipment, raw materials, components and other goods are brought to the product. An example of a fixed product layout is the factory in which large aircraft, such as Boeing aircraft, are built.

Question 25

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
What is the horizontal grouping of machinery layout also known as?

Answer 25

This is also known as the process layout or the functional layout.

Question 26

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
Briefly explain a horizontal grouping of machinery layout/process layout

Answer 26

According to this system, similar machines are grouped together in one department. According to this system, the production process is intermittent and the products are manufactured in a series. This means that production commences when customers place their orders, and it is interrupted once an order has been completed.

Question 27

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
What is the Vertical grouping of machinery layout also known as?

Answer 27

This is also known as the product layout/flow

Question 28

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
Briefly explain a Vertical grouping of machinery layout/product layout

Answer 28

All the machines that are used for the manufacturing of a specific product are placed in one department. They will be grouped in the sequence of the different operations in the production process. Mass production takes place here, and this layout is suitable for the manufacturing of beer, motor vehicles, television sets and other products that are manufactured in mass.

Question 29

PRODUCTION/OPERATIONS MANAGEMENT
LAYOUT OF OPERATIONS
When would a combination type layout be used?

Answer 29

In building projects.

Question 30

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY CONTROL
Briefly explain quality control.

Answer 30

Quality control is the systematic control of the variables in the manufacturing process which affect the predetermined quality standard of the finished product. The pre-determined quality standard of the finished product must be high to ensure the optimal satisfaction of the consumers‟ needs.

Question 31

PRODUCTION/OPERATIONS MANAGEMENT
INTEGRAL INSPECTION OR SELECTION
With regards to inspections, what is the responsibility of the production and operations department?

Answer 31

The production and operations department must decide where inspections will take place, what methods of inspection will be used, how many inspections must be done, and when these will be done.

Question 32

PRODUCTION/OPERATIONS MANAGEMENT
INTEGRAL INSPECTION OR SELECTION
List 6 guidelines that should aid the production and operations department in deciding on inspections?

Answer 32

The following guidelines should aid the production and operations department in deciding on inspections:
• Inspect a product before the start of a manufacturing process and /or before it moves from one department to the next, where inspection will be expensive or difficult.
• Inspect before an expensive manufacturing process begins. Raw materials must be inspected before they are used in the manufacturing process to ensure that they comply with the set standards
• Inspect the products where their manufacturing processes are known to have many defects.
• Inspect the product before it progresses too far in the manufacturing process. The further it progresses without inspection, the more defects might occur, and it will be increasingly difficult and expensive to find and fix them.
• Inspect the product before the machine that is manufacturing it gets damaged because of the defects in the product. A motor vehicle component is made of a certain kind of steel. Should the steel be too hard for this specific manufacturing process, it must be replaced before the machine gets damaged.
• The final product should be inspected before delivery to a customer, especially in the case of machines or any other equipment that will be used by the customer.

Question 33

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
When can statistical sampling be used to ensure high-quality finished products?

Answer 33

When The volume of products such as cans of condensed milk or beer is too high to enable inspectors to inspect each of them individually.

Question 34

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
How many types of statistical quality control types are there?

Answer 34

There are two types of statistical quality control

Question 35

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
Name the two types of statistical quality control types

Answer 35

acceptance sampling and process control.

Question 36

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
ACCEPTANCE SAMPLING
What does acceptance sampling entail?

Answer 36

This is an inspection method whereby a population of products is accepted or rejected on the basis of the results of an inspection of a sample of a population. If more than the predetermined percentage of the items is defective, all the items in the sample will be rejected or another sample will be inspected. Should less than the predetermined percentage be defective, all the items in the sample will be approved.

Question 37

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
ACCEPTANCE SAMPLING
Who determines a fair acceptance sampling percentage?

Answer 37

A fair acceptance sampling percentage is firstly determined by the production manager.

Question 38

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
ACCEPTANCE SAMPLING
Where does the samples come from for acceptance sampling?

Answer 38

A sample of the finished products, from the warehouse or at the end of the production line.

Question 39

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
ACCEPTANCE SAMPLING
How many kinds of errors can be made with acceptance sampling?

Answer 39

Two kinds of error can be made in the case of acceptance sampling.

Question 40

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
ACCEPTANCE SAMPLING
Name the two kinds of errors that can be made with acceptance sampling?

Answer 40

• consumer risk

- producer risk

Question 41

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
ACCEPTANCE SAMPLING
Briefly explain the error “consumer risk”

Answer 41

This is where all the items in the population are approved because fewer than predetermined defects occurred in the inspection of a sample. It can happen that the rest of the sample and the population have many defects than the inspected items. This is known as consumer risk, as the consumers will bear the risk of receiving low-quality products.

Question 42

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
ACCEPTANCE SAMPLING
Briefly explain the error “producer risk”

Answer 42

This error is made where the whole population is rejected because more than the predetermined number of defects occurs in the sample. The rest of the population may have only a few defects. This error is known as producer risk.

Question 43

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
PROCESS CONTROL
What does process control entail?

Answer 43

This takes place where a product is inspected as it progresses through the manufacturing process. Samples of the output of the various manufacturing processes are periodically drawn and inspected. When deviations from the set quality standards occur, the manufacturing process is interrupted to find the cause of the deviations and to rectify it.

Question 44

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
PROCESS CONTROL
How many assumptions is process control based on?

Answer 44

Process control is based on two assumptions:

Question 45

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
PROCESS CONTROL
What does the assumption that “Differences in quality occur in the different manufacturing processes” entail?

Answer 45

This will be the case even if the process was well planned beforehand and it seems that it has been designed perfectly. A product can still be of a high quality even if some of the quality variables fall outside the set parameters. The quality of the product will only become unacceptable when too many variables of the manufacturing process fall outside the set parameters.

Question 46

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
PROCESS CONTROL
What does the assumption that “Manufacturing processes cannot be controlled on a continuous basis” entail?

Answer 46

This often leads to differences in the quality of the finished products that may be in direct contrast with the enterprises policy on quality.

Question 47

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
PROCESS CONTROL
List the two assumptions that process control is based on?

Answer 47

• Differences in quality occur in the different manufacturing processes
• Manufacturing processes cannot be controlled on a continuous basis

Question 48

PRODUCTION/OPERATIONS MANAGEMENT
STATISTICAL QUALITY CONTROL
List the quality characteristics which relate directly to the design specifications for products or services for purposes of quality planning and control?

Answer 48

• Functionality (or performance ability).
• Appearance (or aesthetic attractiveness).
• Durability (or total life expectancy).
• Contact (or convenience of interaction).

Question 49

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
Briefly explain quality costs

Answer 49

Quality costs form an important part of quality control. They are costs incurred because certain of the products do not comply with the predetermined quality standards. Certain business enterprises experience fairly high quality costs, especially where the manufacturing processes are not up to standard.

Question 50

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
How many components are quality costs made up of?

Answer 50

Quality costs are made up of two components

Question 51

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
Name the two components that quality costs are made up of?

Answer 51

control costs and failure costs.

Question 52

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
CONTROL COSTS
What does control costs relate to?

Answer 52

Control costs are those relating to removing defective items from the manufacturing process.

Question 53

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
CONTROL COSTS
How many methods are there for removing defective items from the manufacturing process?

Answer 53

There are two methods of moving these items

Question 54

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
CONTROL COSTS
Name the two methods used to remove defective items from the manufacturing process?

Answer 54

prevention and inspection

Question 55

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
CONTROL COSTS
What does prevention costs entail?

Answer 55

Prevention costs entail the costs of preparing the production process.

Question 56

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
CONTROL COSTS
What does prevention costs include?

Answer 56

Prevention costs include the cost of activities such as quality planning, drawing up of quality specifications for new products, creating new testing programmes, developing new training programmes, and finding and evaluating suitable suppliers.

Question 57

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
CONTROL COSTS
What does inspection costs entail?

Answer 57

Inspection costs entail the costs associated with eliminating defects after they have occurred, but before the defective products reach the customer.

Question 58

PRODUCTION/OPERATIONS MANAGEMENT
QUALITY COSTS
CONTROL COSTS
What does inspection costs include?

Answer 58

These costs include the costs of inspecting raw materials received, the manufacturing process, and the finished products.

Question 59

PRODUCTION/OPERATIONS MANAGEMENT
TOTAL QUALITY MANAGEMENT
Briefly explain total quality management?

Answer 59

Total quality management is a philosophy and set of guiding principles that forms the basis of continuously improving organisation Human resources and quantitative methods are applied to improve the materials and services supplied to a business, all the processes within the business, and the degree to which customer’s needs are met.

Question 60

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9000
Who must become an ISO 9000 organisation?

Answer 60

Any business organisation in South Africa that wishes to do business with a foreign country must become an ISO 9000 organisation.

Question 61

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9000
How does organisations qualify to become an ISO 9000 organisation?

Answer 61

To qualify, the organisation must comply with five quality standards authored by the International Organisation for Standardization (ISO) situated in Geneva, Switzerland.

Question 62

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9000
What is the meaning of the abbreviation ISO?

Answer 62

International Organisation for Standardization

Question 63

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9000
Where is the International Organisation for Standardization (ISO) situated?

Answer 63

Geneva, Switzerland.

Question 64

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9000
List the 5 quality standards authored by the International Organisation for Standardization (ISO)?

Answer 64

The five standards are as follows:

• ISO 9000
• ISO 9001
• ISO 9002
• ISO 9003
• ISO 9004

Question 65

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9000
Briefly explain the ISO 9000 standards

Answer 65

ISO 9000: The ISO 9000 standards consist of standards, guidelines and technical reports. It emphasizes quality management concepts.

Question 66

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9001
Briefly explain the ISO 9000 standards

Answer 66

ISO 9001: specifies a quality system model for a business enterprise that design, develop, manufacture, install and service a product

Question 67

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9002
Briefly explain the ISO 9000 standards

Answer 67

ISO 9002: specifies a quality system model for use by business enterprise that manufactures and install a product or service.

Question 68

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9003
Briefly explain the ISO 9000 standards

Answer 68

ISO 9003: specifies a quality system model for use by business enterprises that include final inspection and testing of the systems involved.

Question 69

PRODUCTION/OPERATIONS MANAGEMENT
ROLE AND IMPORTANCE OF ISO 9004
Briefly explain the ISO 9000 standards

Answer 69

ISO 9004: provides a set of guidelines for a business enterprise to develop and
implement a quality system and to interpret the standards.

Question 70

PRODUCTION/OPERATIONS MANAGEMENT
OUTBOUND LOGISTICS
THE LOGISTICS/MARKETING INTERFACE
What is the marketing department mainly responsible for in a business?

Answer 70

The marketing department of a business is mainly responsible for the contact between the business and its customers.

Question 71

PRODUCTION/OPERATIONS MANAGEMENT
OUTBOUND LOGISTICS
THE LOGISTICS/MARKETING INTERFACE
What effects does a logistics system that is not properly functioning have?

Answer 71

If the logistics system is not functioning properly, it can lead to a situation where a customer does not get his products at the right time and at the right price and this can lead to lost sales.

Question 72

PRODUCTION/OPERATIONS MANAGEMENT
OUTBOUND LOGISTICS
THE LOGISTICS/MARKETING INTERFACE
What should an efficient logistics operation do?

Answer 72

Efficient logistics operations should reduce the costs of the finished product, and should ensure that the quality and quantity of the products are as required by the customer.

Question 73

PRODUCTION/OPERATIONS MANAGEMENT
OUTBOUND LOGISTICS
DISTRIBUTION CHANNELS
What does a distribution channel consists of?

Answer 73

A distribution channel consists of the businesses and individuals who participate in the flow of goods and services from the manufacturer to the final user or consumer.

Question 74

PRODUCTION/OPERATIONS MANAGEMENT
OUTBOUND LOGISTICS
DISTRIBUTION CHANNELS
Name the ranges of distribution channels?

Answer 74

Distribution channels range from short to long channels.

Question 75

PRODUCTION/OPERATIONS MANAGEMENT
OUTBOUND LOGISTICS
DISTRIBUTION CHANNELS
What are Long channels used for?

Answer 75

Long channels are used for the marketing of consumer goods such as cigarettes.

Question 76

PRODUCTION/OPERATIONS MANAGEMENT
OUTBOUND LOGISTICS
DISTRIBUTION CHANNELS
What are Short channels used for?

Answer 76

Short channels are used for such goods as machinery and equipment.

Question 77

PRODUCTION/OPERATIONS MANAGEMENT
RESEARCH AND DEVELOPMENT
What is the role of research and development in South African organisations?

Answer 77

The Role of research and development in South African organisations must endeavour to stimulate the development of new products.

Question 78

PRODUCTION/OPERATIONS MANAGEMENT
RESEARCH AND DEVELOPMENT
How can new product ideas be stimulated?

Answer 78

New products ideas can be stimulated as follows:
• New ideas can originate from within the business organisation.
• The designers in the research and development department usually come to light with new product ideas as this is their line of work.
• The marketing department often supplies new ideas to the organisation as this department has the most contact with customers and potential customers.
• The marketing department has to keep up with queries regarding quality or other features of products that customers are not satisfied with.
• Sometimes customers make special requests regarding the upgrading of old products or the development of completely new ones.
• Competitors are generally in competition with other businesses as far as the creation and development of new products are concerned.
• Top management can be quite useful in generating new product ideas, particularly since their main task is planning.