CH5: Production/Operations, Purchasing and Logistics Management Flashcards
What is the purchasing function in a business context?
The purchasing function involves the procurement of goods and services from external sources to ensure the business has the materials needed for operations.
Define purchasing management.
Purchasing management is the process of overseeing and managing the acquisition of goods and services necessary for the company’s operations, ensuring efficiency, cost-effectiveness, and compliance with policies.
List four key activities of the purchasing function.
- Procuring raw materials and other resources
- Achieving the best possible price
- Managing paperwork and accounting
- Ensuring compliance with business protocols
Why is purchasing important for business operations?
- It ensures timely supply of materials for production
- Cost savings in purchasing improve profitability
- It controls a significant portion of company spending
- Supports timely project execution and import substitution
Describe the first step in the purchasing process.
Needs Analysis – Identifying and documenting the need for goods or services and determining the best way to fulfill that need.
What is a purchase requisition?
A document submitted by departments to request goods/services, detailing requirements before it is converted into a purchase order.
What is three-way matching in procurement?
A process comparing the purchase order, supplier invoice, and receiving report to ensure all transaction details match before payment.
What are the final steps in the purchasing process?
- Invoice approval and payment
- Updating accounting records
What is the role of production and operations management?
It involves planning, organizing, leading, coordinating, and controlling the production activities to convert inputs into outputs efficiently.
Differentiate between long-, medium-, and short-term production planning.
- Long-term: Factory location, layout, capacity decisions (>5 years)
- Medium-term: Sales forecasts, scheduling, inventory (1-5 years)
- Short-term: Daily work plans, quality control, maintenance (<1 year)
What are key requirements for an effective production layout?
- Smooth flow from input to output
- Minimal travel distance
- Adequate lighting, temperature control, and waste removal
- Employee comfort and safety
- Efficient internal and external transport
- Space optimization and future adaptability
Why must the layout accommodate future changes?
Technology and product demands evolve, so the layout should support quick adaptation to maintain competitiveness.
What is the significance of aligning layout with employee needs?
Comfortable, safe environments enhance employee productivity and morale.
What are the strategic contributions of purchasing to a firm?
- Drives cost efficiency
- Supports production continuity
- Influences profitability directly
- Reduces dependency on imports
How does purchasing contribute to project timelines?
Ensures timely procurement of necessary materials, avoiding production delays and helping meet deadlines.
How does purchasing interact with other departments?
Collaborates with accounting, receiving, and user departments to ensure orders are within budget, accurately delivered, and meet company policies.
What factors influence vendor selection in the purchasing process?
- Performance history
- Compliance records
- Lead times
- Price and reputation
How does production management support the value chain?
It transforms procured inputs into finished goods, bridging inbound supply and outbound distribution to the market.
What is the ultimate objective of production/operations management?
To deliver finished goods efficiently, meeting quality standards, customer expectations, and business profitability goals.
What are some indirect roles of purchasing departments?
- Contributing to strategic planning
- Maintaining vendor relationships
- Monitoring market trends for cost optimization
What are the four main types of production layouts?
Fixed product layout, Horizontal grouping of machinery (process/functional layout), Vertical grouping of machinery (product/flow layout), Combination of the above three types.
What is a fixed product layout?
It’s a layout where the product remains stationary, and workers, machines, tools, and materials are brought to the product.
Why can’t the product be moved in a fixed product layout?
Due to its size, shape, or fixed location.
Give an example of a fixed product layout.
The production of large aircraft like Boeing planes.
What is horizontal grouping of machinery also known as?
Process layout or functional layout.
Describe the horizontal grouping of machinery.
Similar machines are grouped by function in departments (e.g., all sawing machines together). Production is intermittent and based on customer orders.
What are the characteristics of horizontal grouping of machinery?
Functional grouping, Intermittent production, Product manufactured in a series, Production begins on order.
What is vertical grouping of machinery also called?
Product layout or flow grouping.
Describe vertical grouping of machinery.
Machines for a specific product are placed in one department and arranged in the sequence of production operations. Used for mass production.
List examples of where vertical grouping of machinery is used.
Manufacturing of beer, motor vehicles, and television sets.
How can the three types of layouts be combined?
For example, in building flats: Fixed product layout for on-site construction, Horizontal layout for interior customization, Vertical layout for mass-producing common fittings like doors, basins, toilets.
What is quality control?
The systematic control of variables in the manufacturing process to ensure the finished product meets predetermined quality standards.
Why is a high predetermined quality standard important?
To ensure optimal satisfaction of consumer needs.
What is integral inspection or selection?
A method to monitor variables in a product through planned inspection points in the manufacturing process.
When should inspection take place?
Before manufacturing starts, Before expensive processes, At departments with known defect rates, Before defects progress too far, To prevent machine damage, Before delivery to the customer.
Why is statistical quality control used?
When production volume is too high for individual inspections (e.g., cans of beer).
What are the two types of statistical quality control?
Acceptance sampling, Process control.
What is acceptance sampling?
Inspection of a sample to decide whether a batch of products should be accepted or rejected.
What is consumer risk in acceptance sampling?
Accepting a defective batch because the sample appears fine.
What is producer risk in acceptance sampling?
Rejecting a good batch due to a bad sample.
What is process control?
Monitoring the quality of the product throughout the production process and stopping production to correct deviations.
What assumptions is process control based on?
Quality variations will occur even in well-designed processes, Manufacturing processes can’t be controlled continuously, leading to inconsistent quality.
Is price a quality characteristic in planning and control?
No.
What are the actual quality characteristics in planning and control?
Functionality (performance), Appearance (aesthetic), Durability (life expectancy), Contact (ease of interaction).
What are quality costs?
Costs incurred when products don’t meet quality standards.
What are the two types of quality costs?
Control costs, Failure costs.
What are control costs?
Costs to prevent or detect defects (e.g., inspections, quality planning, testing).
What is the difference between prevention and inspection costs?
Prevention: Before defects occur (e.g., training, quality planning), Inspection: After defects occur but before product reaches customer.
What is TQM?
A philosophy focused on continuous improvement using people and data to enhance processes, materials, and customer satisfaction.
What is logistics management?
Coordination and movement of resources (equipment, inventory, people) from origin to destination to meet customer or company requirements.
What functions are integrated in logistics?
Production, Packaging, Warehousing, Transportation, Security, Materials handling, Information flow.
How does poor logistics affect marketing?
Delays and errors in logistics can prevent timely, cost-effective product delivery, resulting in lost sales.
How can logistics enhance the marketing offering?
By reducing product cost and ensuring quality, quantity, and timely delivery.
What are distribution channels?
Paths through which goods/services flow from producer to consumer.
What’s the difference between long and short distribution channels?
Long: Used for consumer goods like cigarettes, Short: Used for machinery and equipment.
How has logistics changed since the 1960s?
Shift from military logistics to global business logistics, Emergence of 3PL providers, Digitization through IoT and software, Increased automation and real-time tracking.
What role does IoT play in logistics?
Digitally connects physical assets and enables data flow across the value chain for real-time visibility.
What are some benefits of digitised logistics systems?
Advanced analytics, Real-time tracking, Data security, Cost savings, Automation, Platform integration, Scalability.
What is the role of logistics software?
To plan, implement, and control the flow/storage of goods and information, boosting efficiency and profitability.
