Chapter 21 operation planning Flashcards
What is Operations planning>
Operations planning is preparing input resources to supply products to meet expected demand
What do Operation managers need to do?
Operations managers need to coordinate and plan all production decisions with departments of the business – marketing, human resources, finance.
what is operational flexibility?
Operational flexibility means the ability of a business to vary both the level of production and the range of products following changes in customer demand
What is process innovation?
Process innovation is the use of a new or much improved production method or service delivery method
What is Job production?
producing a one-off item specially designed for the customer
What is Batch production?
producing a limited number of identical products – each item in the batch passes through one stage of production before passing on to the next stage
What is Flow production?
producing items in a continually moving process
What is Mass customization?
the use of flexible computer-aided production systems to produce items to meet individual customers’ requirements at mass-production cost levels
Main advantages of Job production
1 able to undertake specialist projects or jobs, often with high value added
2 high levels of worker motivation
Main disadvantages of Job production
1 high unit production costs
2 time consuming
3 wide range of tools and equipment needed
Main advantages of Batch production
1 some economies of scale
2 faster production with lower unit costs than job production
3 some flexibility in design of product in each batch
Main disadvantages of Batch production
1 high levels of stocks at each production stage
2 unit costs likely to be higher than flow production
Main advantages of Flow production
1 low unit costs due to constant working of machines, high productivity and economies of scale
Main disadvantages of Flow production
1 inflexible – often very difficult and time consuming to switch from one type of product to another
2 expensive to set up flow-line machinery
Main advantages of Mass customisation
1 combines low unit costs with flexibility to meet customers’ individual requirements
Main disadvantages of Mass customisation
1 expensive product redesign may be needed to allow key components to be switched to allow variety
2 expensive flexible capital equipment needed
What factors will influence the production method a business adopts?
1 Size of the market
2 The amount of capital available
3 Availability of other resources
4 The type of market demand for products
Problems of changing production methods, Job to Batch?
1 Cost of equipment needed to handle large numbers in each batch
2 Additional working capital needed to finance stocks and work in progress
3 Staff de-motivation – less emphasis placed on a individual’s craft skills
Problems of changing production methods, Job or batch to flow?
1 Cost of capital equipment needed for flow production
2 Staff training to be flexible and multi-skilled – of this approach is not adopted, then workers may end up on one boring repetitive task, which could be de-motivating
3 Accurate estimates of future demand to ensure that output matches demand
What is an Optimal Location?
An optimal location means a business location that gives the best combination of quantitative and qualitative factors
Factors influencing location decisions: Quantitative factors
1 Business costs – capital costs, labour costs, transport costs
2 Potential sale revenue
3 Government grants
Factors influencing location decisions:Qualitative factors
1 Safety 2 Room for further expansion 3 Ethical considerations 4 Environmental concerns 5 Infrastructure
What is Multi-site location?
Multi-site location means a business that operates from more than one location
Advantages of multi-site locations
1 greater convenience for customers, e.g. McDonald’s restaurants in every town
2 lower transport costs
3 opportunities for delegation of authority to regional managers from head office
4 cost advantages of multi-sites in different countries
Disadvantages of multi-site locations
1 coordination problems between the locations – excellent two-way communication systems will be essential
2 potential lack of control and direction from senior management based at head office
3 different cultural standards and legal systems in different countries
What is Offshoring?
Offshoring means the relocation of a business process done in one country to the same or another company in another country
What are the reasons for international location decisions?
1 To reduce costs e.g. labour costs
2 To access global (world) markets
3 To avoid protectionist trade barriers*
4 Other reasons e.g. foreign government support
Issues and potential problems with international location
1 Language and other communication barriers 2 Cultural differences 3 Level-of-service concerns 4 Supply-chain concerns 5 Ethical considerations
What is Scale of operation?
The scale of operation is the maximum output that can be achieved using the available inputs (resources) – this scale can only be increased in the long term by employing more of all inputs
What is Economies of scale?
Economies of scale means reductions in a firm’s unit (average) costs of production that result from an increase in the scale of operations
What are the five main reasons for economies of scale?
1 Purchasing economies 2 Technical economies 3 Financial economies 4 Marketing economies 5 Managerial economies
What is Purchasing economies of scale?
- Purchasing economies are also known as bulk-buying economies
- Cheaper deals are always offered for greater quantities offered e.g. suppliers will often offer substantial discounts for large orders
What is Technical economies of scale
Larger firms are more likely to be able to invest and install high-tech equipment that are more efficient (produce lower cost per unit) than the equipment smaller firms can afford
What is Financial economies of scale?
Larger firms often get charged lower interest rates when borrowing finance compared to smaller firms
What is Marketing economies of scale
Marketing costs (e.g. employing a sales force, employing an advertising agency) can be spread over a higher level of sales for a big firm therefore lowering the marketing cost per unit
What is Managerial economies of scale?
Larger firms should be able to afford to attract specialist functional managers who should operate more efficiently than general managers
What is Diseconomies of scale?
Diseconomies of scale means the factors that cause average costs of production to rise when the scale of operation is increased
What are the 3 main cause for Diseconomies of scale?
1 Communication problems
2 Alienation of the workforce
3 Poor coordination
Diseconomies of scale: Communication problems
Large-scale operations will often lead to poor feedback to workers, excessive use of non-personal communication media, communication overload with the sheer volume of messages being sent, and distortion of messages caused by the long chain of command
Diseconomies of scale:Alienation of the workforce
1 The bigger the organisation, the more difficult it becomes to directly involve every worker and to give them a sense of purpose and achievement in their work
2 They may feel so insignificant to the overall business plan that they become de-motivated and fail to give of their best
Diseconomies of scale: Poor coordination
1 A major problem for senior management of large-scale operations is coordination
2 Poor coordination could lead to substantially higher production costs than for a smaller business with much tighter control over operations
