Making Operational Decisions

Question 1

What are operations?

Answer 1

The business function that organises, produces and delivers the goods and services produced or provided by a business. It is the key function that transforms resources into finished goods (a physical product) and services (a solution or utility)

Question 2

What does the production process involve?

Answer 2

Involves a business using its resources (e.g. raw materials, finance and the skills and knowledge of its workforce) to produce goods and provide services that customers can buy.

Question 3

What is the production process?

Answer 3

1) design
2) manufacture
3) assembly
4) test
5) control
6) deliver

Question 4

What is job production?

Answer 4

One-off or bespoke products
Focus on customer needs and individual service
Specialist skilled workforce increases costs
High profit margins
Longer production process
E.g. a house extension

Question 5

What is batch production?

Answer 5

Larger volumes than job production
Some flexibility (e.g. different flavours)
Semi-skilled workforce
Some levels of automation
Productivity reduced when switching between batches
E.g. a batch of cupcakes

Question 6

What is flow production?

Answer 6

High volumes and low margins (with high productivity)
Standardised production
Low skilled workforce
Highly automated process
Setting up expensive machinery increases costs
E.g. a mass-produced laptop 💻

Question 7

How can a business have a competitive advantage with production?

Answer 7

Operations is linked to productivity, flexibility, cost and quality. For example, if a business can provide custom products and services, this will make their products more desirable to customers. Similarly, controlling production costs can allow a business to lower prices or increase profit margins.

Question 8

What are some examples of technology used in businesses’ production processes?

Answer 8

Computer-aided design (CAD) 
Supply chain management (SCM)
Geographical positioning systems (GPS) 
Electronic point of sale (EPoS) 
3D printing 
E-commerce

Question 9

What are the benefits of technology on operations?

Answer 9

Speeds up the production process
Keeps businesses in touch with their customers
Lowers production costs
Ensures fewer mistakes and defects

Question 10

What are the disadvantages of technology on operations?

Answer 10

Can involve a costly initial investment
Can quickly become obsolete
Requires employees to be trained to use new technology

Question 11

What is productivity?

Answer 11

Is output per worker. It measures how much each worker produces over a period of time. Increasing productivity leads to greater competitiveness in a market. Productivity can be improved by increasing output or by lowering the costs of production (inputs) while maintaining output.

Question 12

What is economies of scale?

Answer 12

A term that describes the situation where the average costs of production fall as the volume of production increases. This is an advantage that businesses gain as they grow in size.

Question 13

What factors affect the choice of technology?

Answer 13

Productivity
Flexibility
Quality
Cost

Question 14

What is the maximum stock level?

Answer 14

The most stock that a business can hold

Question 15

What is the re-order level?

Answer 15

The level of stock at which new stock will be ordered by the business. The difference between this level and the point at which stock increases is the time it takes for the stock to arrive.

Question 16

What is the buffer stock?

Answer 16

(The minimum stock level) is the lowest amount of stock the business will hold. It is a safety net in case there is a surge in demand.

Question 17

What is Just In Time (JTI)?

Answer 17

JTI stock control is a stock management system where stock is delivered only when it is needed by the production system, and so no stock is kept by a business. For JTI to work, a business must have good relationships with suppliers, a well-organised production system, and regular demand for their products.

Question 18

What are the benefits of holding stock?

Answer 18

Any unpredicted surges in demand can be met
Damaged goods can be replaced
Businesses can receive discounts for bulk buying
Limited risk of problems supplying customer demand

Question 19

What are the benefits of holding little or no stock?

Answer 19

Cost saving in not having to store stock
Less chance of damaged or stolen goods
Employees can focus on tasks other than managing stock
Can reduce costs of production, which makes product pricing more competitive

Question 20

What makes a good supplier?

Answer 20

A good price (value for money) on products and delivery
Flexible deliveries
Reliable deliveries
Discounts for large orders
High-quality suppliers
Availability of products (short lead times)

Question 21

What are logistics?

Answer 21

The organisation and management of the transport of raw materials and goods

Question 22

What is the impact of logistics and suppliers on a business?

Answer 22

Flexible suppliers can help a business meet customer needs more easily
Late deliveries can hold up production
Poor quality can lead to dissatisfied customers and products being returned
The service provided by a supplier can directly influence the reputation of the business that uses its products
Securing good contracts and supplier agreements can help a business achieve economics of scale as it grows
Using a supplier to deliver products directly to customers can be risky if they are not reliable

Question 23

What is quality control?

Answer 23

Quality control is seen as one part of the chain of production. A quality controller will examine and/or test for quality once a product has been made or a service has been delivered

Question 24

What are the two ways of achieving good quality in business?

Answer 24

Quality control and quality assurance

Question 25

What is quality assurance?

Answer 25

Quality assurance involves focusing on quality at every stage of the production process. Everyone is involved and is responsible for contributing to the achievement of a quality standard. As a result, there should be zero defects

Question 26

What is the benefit of good quality?

Answer 26

Good quality allows for a premium price to be charged.
Good quality builds a strong brand image.
Good quality is closely linked to meeting customer needs and can help provide a competitive advantage.
Quality is a way of differentiating a product.
Quality also ensures there is less waste because there are fewer faulty products, which helps businesses to control their costs.

Question 27

What does a quality assurance system require a business to do?

Answer 27

Have quality as the focus of every process
Involve customers and suppliers at the design stage
Aim for zero defects
Have quality as the responsibility of every employee
Have managers who ensure there are systems in place to assure quality
Meet a quality standard, such as ISO 9000
Make good quality part of the business’s culture, so it is something everyone aims for and is involved in.

Question 28

What does good customer service lead to?

Answer 28

Satisfied and loyal customers
Positive brand image and reputation
Differentiated products with a competitive advantage
Increased sales and repeat purchasing

Question 29

What does poor customer service lead to?

Answer 29

Poor customer satisfaction and low customer loyalty
Poor brand image
Inability to differentiate products and to charge premium prices
Falling sales and repeat purchases

Question 30

What does the sales process identify?

Answer 30

Identifies the key stages of buying a product or service that contribute to customer satisfaction. This means that it is an important part of providing excellent customer service.

Question 31

What is the sales process?

Answer 31

1) customer interest
2) speed and efficiency of service
3) customer engagement
4) post-sales service
5) customer loyalty

Question 32

Depending on the product or service being sold, what does a business need to consider?

Answer 32

The product knowledge of its sales staff 
The speed and efficiency of its service 
Customer engagement with its products 
Its responses to customer feedback 
The post-sales service that it provides

Question 33

What five questions may a business consider about the five stages of the sales process?

Answer 33

1) how can we grab the attention and interest of potential customers? (E.g. using emotive language in advertising)
2) how can we ensure that we respond to customers’ needs promptly? (E.g. ensuring all customers receive a call back within 1 hour)
3) how can we build relationships with customers and meet their needs? (E.g. having regular communication with customers and inviting them to special events)
4) how can we ensure that customers remain happy after buying our products? (E.g. using follow-up surveys to measure satisfaction levels)
5) how can we encourage customers to continue to buy and engage with our brand? (E.g. making customers aware of new product launches)