Decision making to improve financial performance- 4

Question 1

What are operational objectives?

Answer 1

Operational objectives are set to achieve a competitive advantage and must fit with the overall competitive strategy of the business

Question 2

Quality objectives:

Answer 2

Managers decide what they think customers want and expect and then set appropriate targets

Question 3

Speed of response objectives:

Answer 3

Providing goods and services faster than competitors

Question 4

Dependability objectives:

Answer 4

Ability of the business to deliver reliably on time

Question 5

Cost objectives:

Answer 5

Enables controlling of prices between competitors - setting lower or higher prices

Question 6

Flexibility objectives:

Answer 6

Providing customer needs more precisely

Question 7

Environmental objectives:

Answer 7

Greater awareness of environmental impact of operation decisions

Question 8

Internal influences on operational decisions:

Answer 8

• Marketing = what is produced, how and what quantities required
• Human resources = what is possible - skills of staff
• Finance = may affect what can be produced

Question 9

External influences on operational decisions:

Answer 9

• economic
• technological
• competitive
• social
• legal

Question 10

Political and legal factors:

Answer 10

Place restrictions on what can be produced, how, where and who it can be produced for

Question 11

Economic factors:

Answer 11

Allows businesses to source supplies from around the world, removal of taxes have enabled more global operations

Question 12

Social factors:

Answer 12

More availability of choices allowing customers to easily search for alternatives

Question 13

Technological factors:

Answer 13

Quickly develop, test and launch new products

Question 14

Competition factors:

Answer 14

Customers switch to competitors because they demand more

Question 15

What is labour productivity?

Answer 15

Measures output per employee and can be calculated using:
- total output / number of employees

Question 16

What is unit costs?

Answer 16

Measures cost per unit and can be calculated using:
- total costs / total output

Question 17

What is economies of scale?

Answer 17

It is a cost advantage where production becomes efficient and cost per-unit decreases as quantity produced increases

Question 18

What is diseconomies of scale?

Answer 18

Average unit costs begin to increase because of business growth

Question 19

What is capacity?

Answer 19

Capacity measures the maximum it can produce with it’s given resources. Capacity can be increased by increasing resources although this could take time

Question 20

What is capacity utilisation?

Answer 20

It measures the existing output as a percentage of the maximum possible output
- existing output / maximum possible output x100
- the higher the capacity utilisation, resources are being fulfilled

Question 21

Why is efficiency important to a business?

Answer 21

Efficiency allows the business to drive unit costs down and either bring the price down or make higher profits with the same price

Question 22

If capacity utilisation is low a manager might:

Answer 22

• improve marketing
• reduce capacity
• reduce demand

Question 23

How can we increase efficiency?

Answer 23

By increasing labour productivity (output per employee)

Question 24

How can we increase labour productivity?

Answer 24

• new ways of working
• better management
• new reward systems
• training
• new technology

Question 25

What is lean production?

Answer 25

Lean production is when managers reduce waste to improve operations efficiency

Question 26

How do managers reduce waste in lean production?

Answer 26

- Improving quality - Reducing amount of inventory held - Reducing time items are waiting for something to happen to them - Reducing the time it takes for items to move from one stage of process to another

Question 27

What is included in a quality process?

Answer 27

- Plan - Do - Check - Act

Question 28

How can managers improve quality?

Answer 28

- use market research - careful selection of suppliers - train employees - invest in technology - review the production process to see if any systems can be improved

Question 29

How to improve operational performances?

Answer 29

- speed of response - dependability - becoming more flexible

Question 30

What is mass customisation?

Answer 30

Using technology to produce items on a large scale while adapting the individual items to meet individual customer needs

Question 31

What are the costs of holding inventory?

Answer 31

- opportunity costs - cost of losing value - security costs - storage costs

Question 32

How can inventory control charts help the management of inventory?

Answer 32

- buffer inventory = minimum inventory a business wants to hold - lead time = how long it takes from a placed order to items arriving - re-order level = level at which new order must be placed for suppliers - re-order quantities = amount manager orders of a specific item

Question 33

what influences the choice of suppliers?

Answer 33

- cost of materials and quality - dependability

Question 34

what is outsourcing?

Answer 34

When a business uses another provider for some goods and services

Question 35

What are the benefits of outsourcing?

Answer 35

- use of special skills and services - increase capacity of the business

Question 36

what are the disadvantages of outsourcing?

Answer 36

- affected by other businesses cost and quality - business could be held accountable for the actions of the suppliers - pay enough for the products for the supplier to make profit

Question 37

How can you improve operational performances?

Answer 37

- speed of response - dependability (starting and finishing at stated time) - becoming more flexible (made-to-order)

Question 38

What is the cost of holding inventory?

Answer 38

- storage - security - opportunity - loosing value

Question 39

What does the inventory control chart include?

Answer 39

- buffer inventory = minimum amount held - lead time = order placed -> item arriving - re-order level = new order for supplies

Question 40

What choices affect the decision of suppliers?

Answer 40

- cost of materials - quality of materials -dependability (when supplies arrive) - ethical considerations

Question 41

What will an effective supply chain ensure?

Answer 41

- supplies arrive on time - fair price is paid - products are produced in an acceptable way

Question 42

What decisions have to be made to manage a supply chain?

Answer 42

- what to produce - supplier strategy = how many to work with - suppliers operations (employees, where they source their materials)