decision making to improve operational performance Flashcards
common operational objective
- costs
- quality
- speed/ flexibility
- dependability
- environmental
- added value
what is labour productivity
concerned with the volume of output or value produced by each employee
why is labour producivitvy important
- has an effect on efficiency and profitability of a business
- necessary to allow business to remain competitive.
factors influencing labour productivity
- access and quality of fixed assets ( equipment)
- skills, ability and motivation of the workforce e
- methods of production organisations
- training of the workforce
How is labour productivity calculated
output in period / number of employees at work
How to improve labour productivity
- measure performance, set targets
- invest in capital intensive equipment (machinery)
- invest in employee training
- improve working conditions
What is economies of scale
Arises when unit costs fall as output increases.
how to calculate unit cost
total production costs in period/ total output in period
internal economies of scale
- buying economies : buying in bulk
- technical - use of specialists equipment
- marketing: spreading a fixed marketing spend over a larger range of products
- network: adding extra customers or users to a network that is already established
- financial : larger firms benefit from access to more and cheaper finance.
what is capacity utilisation
THE CAPACITY OF A BUSINESS IS A MEASURE OF HOW MUCH OUTPUT IT CAN POTENTIALLY ACHIEVE IN A GIVEN PERIOD
how is capacity utilisation calculated
Actual level of output/ max potential output x 100
How can capacity change
- maintenance on machine work (capital intensive business)
- high absenteeism (labour intensive business)
need for capacity utilisation
- measure of productive efficiency
- higher utilisation can reduce unit costs
what is lean production
approaches to management that focus on cutting waste within a business but without cutting the quality of the products/services
what are the main methods of lean production
Time based management - reduction of wasted time- better organisation of the production methods, multi-skilled staff, trust between workers and managers.
Just in time production - where products are created to order
Kaizen- identifying small incremental changes made by employees that lead to small improvements of quality and efficiency throughout the production process
adv and disadv of JIT
\+ lower stock \+ less working capital tied up in stock \+ less likelihood of perishing stock - supplier issues can stop production all together - little room for error
Meaasurements of quality
tangible:
- reliability
- cost of ownerships
- Intangible
- brand image
- market reputation
what is quality assurance
- based on processes
- builds quality into the product
the processes that ensure production quality meets the needs of customers
what is the aim of quality assurance
organise every aspect of the production process and insure all aspects of quality are built into the process.
what is TQM
Total quality management
a management philosophy committed to focus on continuous improvements of products.
everyone I workforce is concerned with quality at every stage of production process
eliminates the need to inspect quality
Quality control
A focus on inspecting products after the production process. Taking defects out.
- requires sampling
- can be very costly
-
what are the three kinds of stock
- raw materials and components
- work in progress
- finished goods
stock control chart
the use of SCC allows assessment of the total costs of holding stock and therefore minimise them.
what is buffer stock
the minimum quantity a business would want to hold in stock.
internal influences on operational objectives
- corporate objectives - the operational objective should not conflict with a corporate objective
- finances - does the business have enough money to fund the operation
- Human Resources - targets for productivity for example will be affected by the investment in training
- marketing
internal influences on operational objectives
- corporate objectives - the operational objective should not conflict with a corporate objective
- finances - does the business have enough money to fund the operation
- Human Resources - targets for productivity for example will be affected by the investment in training
- marketing
external influences on operational objectives
- economic environment - changes in interest rates impact on the costs of financing capital investment operations
- competitor efficiency
- tech change
- legal and environmental change
