Making operational decisions Flashcards
Production
Production is the transformation of resources into finished goods or services.
Businesses can organise their production process in a variety of ways.
The method used will depend on:
The level of output required to be produced.
The nature of the product.
Whether the product is standardised or customised.
The level of automation used in production.
Job production
Manufacturers produce one product at a time as ordered by the customers.
Advantages - High quality product.
Motivated and high skilled workers.
Customised products can be produced.
Disadvantages - production is slow.
Labour costs are high.
Flow production
Continuous manufacturing of standardised products, usually on a production line.
Advantages - low unit costs due to economies of scale.
Rapid production.
Usually highly automated (capital intensive).
Disadvantages - customisation is difficult.
Capital equipment can be expensive to purchase.
Batch production
Groups of the same product are produced as a batch.
Advantages - workers can specialise.
Production can take place as the previous batch starts running out.
Disadvantages - requires careful coordination to avoid shortages.
Money is tied up in stock.
Completed products need to be stored.
Impact of technology on production
During production, businesses are always attempting to balance the cost with improvements to productivity, quality and to gain more flexibility in production.
Flexibility in production refers to how easy it is to install machinery and switch to different machinery which is required to manufacture different products known as retooling.
New technology is revolutionising flexibility in production and one example is the increased use of 3D printers.
Impact of 3D printing on production
Cost - Traditional manufacturing processes require expensive tooling and machinery, which can be a significant upfront cost for small businesses.
With 3D printing, the cost of manufacturing is reduced as there is no need for
expensive tooling.
Productivity - With traditional manufacturing, there are often long lead times for tooling and set-up, which can delay the production process.
With 3D printing, products can be produced quickly and easily, with minimal lead times.
This allows businesses to bring new products to market faster and respond more quickly to changing customer preferences.
Quality - Traditional manufacturing may find it di fficult to produce complex or intricate designs resulting in variable quality.
3D printing allows for precise and accurate production of complex shapes and
designs, resulting in higher quality products.
Flexibility - With 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 a speci fic job production.
Bar gate stock graphs
A Bar Gate Stock Control diagram illustrates the flow of stock (inventory) into and out of a business over time.
The maximum stock level is the maximum amount of stock a business is able to hold in normal circumstances.
The reorder level is the level at which a business places a new order with its supplier.
The minimum stock level is also known as the buff er stock level and is the lowest level to which a business is willing to allow stock levels to fall.
The lead time is the length of time from the point of stock being ordered from the supplier to it being delivered.
The stock level line shows how stock levels change over the given time period.
Efficient procurement of raw materials
E fficient procurement of raw materials is crucial for ensuring the success of any manufacturing process.
Businesses need to carefully consider factors when sourcing raw materials to ensure that they can effi ciently produce high-quality products at a reasonable cost.
Factors that influence the process of sourcing raw materials
Quality - If the raw materials are of poor quality, then the final product may not meet the desired standards.
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.
Availability - Companies need to ensure that the raw materials they need are readily available.
Costs - Cost is a critical factor in raw material procurement.
Companies need to ensure that they are getting the best possible price for their raw materials without sacrifi cing quality.
Trust - Companies need to ensure that they are working with reliable suppliers who can deliver quality materials on time and at a reasonable cost.
JIT stock
Just in Time (JIT) stock management is a process in which raw materials are not stored onsite but ordered as required and delivered by suppliers just in time to be used.
Careful coordination is required to ensure that raw materials and components are delivered by suppliers at the moment that they are to be used.
Advantages and disadvantages of JIT stock
Advantages - Stockholding costs are minimised.
Close working relationships are developed with a 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 - Bulk buying economies of scale are not generally possible.
The ability to respond to unexpected increases in demand is reduced.
Administrative costs related to frequent ordering are increased.
Unreliable suppliers can quickly halt production.
Signifi cant changes to organisational structure and production controls are needed.
Quality management
Quality considers the characteristics and features of a product that satisfy the needs of customers.
Businesses need to maintain a level of quality that continues to attract and retain customers.
There are a number of approaches to managing quality in the production process such as quality control and quality assurance.
Quality control
Quality control is Inspecting the quality of output at the end of the production process.
Advantages - Quality specialists are employed to check standards.
An inexpensive and simple way to check that output is fi t for purpose.
Disadvantages - The rejection of finished goods is a signifi cant waste of resources.
There is little focus on the cause of defects.
Quality assurance
Inspecting the quality of production throughout the process.
Advantages - Quality issues are identi fied early so products may be reworked rather than rejected.
The cause of defects is the focus so future quality issues may be prevented.
Controlling quality throughout the production process can be expensive, but it could ultimately reduce costs because defects do not then have to be dealt with.
Disadvantages - Sta ff training and a skilled workforce is required so labour costs may be increased.
Reworking may lengthen the production process.
Competitive advantage from quality management
The quality of a businesses products can provide a competitive advantage.
Unit costs are likely to be low if a business takes a preventative approach through the use of quality assurance.
Low costs may allow a business to reduce its selling price to better compete with or undercut its rivals.
Increased finance may be available to fund marketing activity to improve
brand recognition and attract new customers.
High levels of quality can be used in promotional activity and provide a unique selling point for businesses in competitive markets.
Successfully developing a USP for quality can ease expansion into new markets as a result of the positive reputation it creates.
