Ch 22 The nature of operations Flashcards
What are the inputs of operations?
- Resources
- Land
- Capital
- Labour
What are the outputs of operations?
- Goods
- Services
- Components for other firms
Operations are concerned with:
- Efficiency of production - keeping costs as low as possible
- Quality
- Flexibility - the need to adapt to new processes
Factors affecting the degree of value added to inputs
- The design of the product
- The efficiency with which the input resources are combined and managed
- The impact of the promotional strategy on convincing consumers to pay more for the product than the cost of the inputs
Define capital
Wealth in the form of money or assets, taken as a sign of the financial strength of an organization, and assumed to be available for development or investment.
Define production
Converting inputs to outputs
Define level of production
The number of units produced during a time period
Define productivity
The ratio of outputs to inputs during production. Concerned with how efficiently inputs are converted into outputs
What is labour productivity?
- Number of units per worker
- Total output in a given time period/ total workers employed
What is capital productivity?
- Output/Capital employed
How to raise the productivity level?
- Improve the training of staff to increase skill levels
- Improve worker motivation
- Purchase more technologically advanced equipment
- More efficient management
Is raising productivity always the answer?
- Increasing productivity does not guarantee success - if the product is unpopular with consumers => not profitable
- Greater effort and contribution form workers to increase productivity will lead to higher wage demand => increase unit costs
- Greater productivity => does not require a lot of workers => unemployment
Define efficiency
Producing output at the highest ratio of output to input
Define effectiveness
Meeting the objectives of the enterprise by using inputs productively to meet customers’ needs
Difference between efficiency and effectiveness
- Being effective is about doing the right things, while being efficient is about doing things right
- Effectiveness focuses more on results
- Efficiency focuses on the production process
Define labour intensive
Involving a high level of labour input compared with capital equipment
Define capital intensive
Involving a high quantity of capital equipment compared with labour input
Benefits of labour intensive
- Provides jobs to the local economy
- Employees can use initiative when it is required
- Cheaper than purchasing and maintaining equipment
Limitations of labour intensive
- The accuracy and quality of work from person to person can vary => no product standardisation
- Human errors
- It costs money to recruit, select and train new employees
- Employees become tired and bored of repetitive tasks that have to be carried out
Benefits of capital intensive
- Machines can work 24/7 without the need for breaks
- Machines can produce a consistent and standardised accuracy and quality of work
Limitations of capital intensive
- Individual customer requirements can’t be met due to standardisation
- Costs of maintenance
- Breakdowns occur which can be expensive to rectify
How to increase the level of labour productivity?
- Improve worker motivation: increasing pay, involving them in decision making process, financial and non financial methods
- Improve recruitment and training
Define Operations management
Operations management is the management function that is responsible for managing resources efficiently in producing goods and services
