Making operational decisions Flashcards
production
transformation of resources into finished goods or services
goods
physical products
services
non-physical items
methods of production
job production
batch production
flow production
what factors do the method of production used by a business depend on?
level of output
nature of product
wether product is standardised or customised
level of automations used in production
job production
manufacturers produce one product at a time as ordered by the customer
job production advantages
high quality product
motivated and highly skilled workers
customised products can be produced
job production disadvantages
production is slow
labour costs are high
flow production
continuous manufacturing of standardised products, usually on a production line
flow production advantages
low unit cost due to economies of scale
rapid production usually highly automated
flow production disadvantages
customisation is difficult
capital equipment can be expensive to purchase
batch production
groups of the same product are produced as a batch
batch production advantages
workers can specialise
production can take place as the previous batch starts running out
batch production disadvantages
requires careful coordination to avoid shortages
money is tied up in stock
completed products need to be stored
flexibility in production
how easy it is to install machinery and switch to different machinery which is required to manufacture different products
3D printers
digital design is uploaded and the printer produces the product with minimal labour costs
impact of new technology on cost
with 3D printing, cost of manufacturing is reduced as there is no need for expensive tooling
impact of new technology on productivity
with 3D printing, products can be produced quickly and easily, with minimal lead times
allows business to bring new products to market faster and respond more quickly to changing customer preferences
impact of new technology on quality
3D printer allows for precise and accurate production of complex shapes and designs, resulting in higher quality products
impact of new technology on flexibility
3D printing products can easily be customised to meet the specific needs of customers
3D printing allows for small production runs which reduces the costs of specific job production
maximum stock level
maximum amount of stock a business is able to hold in normal circumstances
reorder level
level at which a business places a new order with its suppliers
minimum stock level/buffer stock
lowest level at which a business is willing to allow stock levels to fall
lead time
length of time from the point of stock being ordered from the supplier to it being delivered
factors that can influence the efficiency of raw material procurement
quality of raw materials
cost of raw materials
delivery ( costs, speed, reliability )
relationship with suppliers
availability of raw materials
factors that influence the process of sourcing raw materials - quality
if raw materials are of poor quality, then final product may not meet the desired standards
factors that influence the process of sourcing raw materials - delivery
companies need to ensure that their raw materials are delivered on time, at a reasonable cost, and in a reliable manner
many companies are now using an order and delivery process called just in time
factors that influence the process of sourcing raw materials - availability
companies need to ensure that raw materials they need are readily available
factors that influence the process of sourcing raw materials - costs
companies need to ensure that they are getting the best possible price for their raw materials without sacrificing quality
factors that influence the process of sourcing raw materials - trust
companies need to ensure that they are working with reliable suppliers who can deliver quality materials on time and at a reasonable cost
Just in Time (JIT) stock management
process in which raw materials are not stored onsite but ordered as required and delivered by suppliers
‘just in time’ to be used
advantages of JIT stock management
stockholding costs are minimised
working relationships developed w small number of trusted suppliers
cash flow is improved as money is not tied up in stocks
unused storage space is available for productive use
teamwork is encouraged so employee motivation is likely to be improved
disadvantages of JIT stock management
ability to respond to unexpected increases in demand is reduced
administrative costs related to frequent ordering are increased
unreliable suppliers can quickly halt production
quality control
inspecting the quality of output at the end of the production process
quality control benefits
quality specialists are employed to check standards
inexpensive, simple way to check output is fit for purpose
quality control drawbacks
rejection of finished good is significant waste of resources
little focus on cause of defects
quality assurance benefits
issues are identified early so products can be reworked
cause of defects is focus so future quality issues may be prevented
controlling quality throughout the production process can be expensive but reduces costs ultimately because defects don’t have to be dealt with
quality assurance
inspecting quality throughout the process
quality assurance drawbacks
staff training and a skilled workforce required so labour costs may be increased
reworking may lengthen the production process
competitive advantage from quality management
unit costs are likely to be low if business takes a preventative approach - low costs may allow a business to reduce its selling price to better compete w or undercut its rivals
increased finance may be available to fund marketing activity to improve brand recognition and attract new customers
high level of quality can be used in promotional activity and provide a USP - ease expansion into new. markets asa result of the positive reputation it creates
steps in sales process
gain customer interest
provide speedy and efficient service
engage the customer
provide post-sales service
achieve customer loyalty
Gain customer interest - explanation
must make customer aware of product through marketing activities
may also be gained through product knowledge
provide speedy and efficient service - explanation
must be flexible to take orders, produce and deliver to customers promptly
product knowledge
salesperson needs to be able to talk confidently about product features and be capable of answering questions and making recommendations.
how can speed and efficiency be improved ?
delivering & installing products for customers
allowing customers to choose a convenient delivery method
making online platforms easy to use
reducing queues at checkouts
providing a range of way for customers to contact the business
engage the customer - explanation
regular communication with customer
customised items may also need customer approval before they are manufactured
provide post-sales service - explanation
support given to customers after the purchase of a product
can include - support in using product
- dealing w complaints
- providing servicing or repairs
some elements can be included within the product package
achieve customer loyalty - explanation
important as it leads to repeat sales and valuable word-of-mouth reviews
importance of customer service
generates customer loyalty —-> drives repeat purchases —> helps firm reduce marketing costs when launching new products
How businesses develop customer loyalty - customer service
when they have a positive experience, more likely to return and recommend business to others
How businesses develop customer loyalty - loyalty cards
popular way for businesses to encourage repeat customers
offer rewards or discounts for frequent purchases
How businesses develop customer loyalty - savers schemes
offer discounts or special pricing for customers who save money with them
helps customers gradually save up money that can be used at periods when food bills are usually higher e.g. Christmas
