Business Operations Flashcards
Define production (or operations) management
All the activities in managing the transformation process.
Define production
Process of changing inputs such as labour services into goods and services that can be sold
Inputs ——> Transformation ——> Outputs
Define job production
Method of production in which a product is supplied to meet the exact requirements of a customer
State four examples of job production
Garden design
Tailors
Personal trainers
Restaurants
When is Job production used?
When a customer requires individual, unique products with a unique design based on the customer’s specification
When it is not possible to use technology to produce large quantities of similar products
What are the four advantages of job production?
As workers are skilled, they are paid more than those who make products by flow production. As a result, productivity is high and staff motivation throughout the entire hierarchy is high
The business can justify higher prices because it supplies a personal service. This can help compete over larger rivals and gain greater market share, whilst maintaining profit
Products are usually very high quality, which attracts consumers and stimulates customer loyalty and attraction to the business activity
Flexible
What are the two disadvantages of job production?
Requires the recruitment and training of highly skilled labour and there is a high labour-to-capital ratio. This means that production can be very labour intensive and so business owners need to make an opportunity cost: increase employees’ wages, or risk declining motivation and productivity if investing in other areas such as expansion
Expensive and takes a longer duration of time than flow production. Unless the business is sure it can charge high prices, it may find it difficult to make a profit
Define flow (mass) production
When an item moves continuously from one stage of the process to another. All products are identical and the aim is to produce as many outputs as possible along an assembly line
When is flow production used?
As demand increases and firms need to produce on a large scale
When considering which production method is appropriate for a particular business, what should be taken into account?
- The cost
- The level of demand
- The need for flexible production
What are the advantages of flow production?
Allows firms to produce huge volumes of output and therefore sales are rapid assuming the demand is there
Allows for specialisation or division of labour. This can speed up the production process and makes staff more productive. It also makes it easier to recruit and train staff because recruits have fewer tasks to learn
It has relatively cheap average unit cost so businesses experience economies of scale and so can sell for competitive prices, whilst increasing profit. Technical economies of scale may also be observed because these businesses can afford to buy and operate more advanced machinery such as robots. The law of increased dimensions states that a factory that is 10x as big will be less than 10x expensive
What are the disadvantages of flow production?
Highly capital-intensive. A production line can cost millions of pounds
It is risky. The danger is that demand will decline and expensive equipment will not be used efficiently. If the business ends up producing only a few items, this results in increased average unit costs and so diseconomies of scale
Lacks flexibility. It is not possible to produce to the exact specification of the customer
Specialisation and division of labour can lead to dissatisfaction. Absenteeism and a high proportion of people leaving can be expensive and disruptive
Define specialisation or division of labour
When the production process is broken down into a series of stages, allowing staff to focus on a limited number of tasks and become more efficient in what they do through repetition
Define efficiency
How well a business is using its resources to produce
How can the efficiency of a business be measured?
Observing the average unit cost. If a business does not use many resources to produce, then its cost per unit should be low
What factors impact efficiency?
How well employees are managed
How good suppliers are
Investment in machinery and technology
The way in which products are produced
What are four examples of waste in a business?
Items that have to be thrown away or donated if production exceeds demand
Wasted time
Faulty products that need to be re-made
Holding stocks and buffer stock that can get damaged or stolen
Define lean production
An approach to production that aims to minimise waste and increase efficiency
What are two types of lean production techniques?
Just-in-time production (JIT)
Kaizen production
Define JIT production
Producing to order; holding as little stock as possible. Items are ordered just in time to be used
Define Kaizen production
Continuous improvement. Aims to achieve change from a series of small steps in which all employees are involved in improving how things are done
What are the advantages of JIT production?
Reduces waste caused by throwing unwanted items away
Minimal stocks are held
Useful with technology. Computer systems calculate stock levels and automatically order more when required
What are the disadvantages of JIT production?
Degree of uncertainty. Suppliers must be able to respond very quickly to orders and must deliver functional products
Businesses can’t always predict the level of demand
What is the impact of lean production on employees?
Managers need to work closely with employees to make sure that relations between them are good and there are no stoppages
Kaizen requires employees to be motivated and wanting to help in finding better ways of doing things
To avoid waste, employees need to check the quality at every stage of the process. This requires additional training and some may view it as more work and become demotivated
To be effective, lean production needs a workforce that is ___________ and wants to help. This means that the ______ style must encourage _______ and _______. The business will all also need to focus on preventing mistakes rather than _______ them and on working with ______ that can produce just in time
Co-operative
Management
Involvement
Participation
Fixing
Suppliers
What are the two types of stock control?
JIT stock control
JIC stock control
Why are stocks important for a business?
Required to operate and produce. Having stocks can also be attractive because it may mean you have a wide range of products to show customers
Why are stocks disadvantageous to a business?
All the money that is invested into stock could be in the bank earning interest; this means stock has an opportunity cost
Unsold stock has to be discounted or discarded, leading to far less profits forecasted
Why is context important when recommending how to manage stocks?
The nature and importance of stock will vary from business to business.
For example, a supermarket will hold significant amounts of stock on its shelves - this represents money tied up in stock; there are millions of pounds worth of goods on the shelves at any moment
What are the advantages of Just-In-Time stock control?
There is less money tied up in stock and a lower opportunity cost
There are fewer materials to be damaged or stolen while waiting to be used by consumers
Reduced cost as there is less space needed to warehouse stocks. This land can be therefore sold off and reinvested back into the business, or put to another use
What are the disadvantages of Just-In-Time stock control?
There are more deliveries, so this may have an environmental impact and cost more. High carbon dioxide emissions that result in global warming is poor for brand image and their attitudes to sustainable business activity and so may deter environmentally conscious customers away from the activity of the business
The business is vulnerable to any delays from suppliers as this will halt production
The business looses out on purchasing economies of scale as firms only buy small quantities of stock at a time rather than in bulk
