Management of operations

Question 1

what to think about when Choosing suppliers

Answer 1

Delivery time, price, quality, quantity, reliability

Question 2

(choosing suppliers) delivery time -

Answer 2

The time that it takes from placing an order to receiving the materials
is called the lead time, raw materials should arrive on time and not stop production.

Question 3

(choosing suppliers) Price -

Answer 3

the business must decide how much it is prepared to pay for the inputs from
the supplier, low price does not always mean that the quality is low. do they offer good quality supplies at a reasonable price.

Question 4

(Choosing suppliers) Quality -

Answer 4

whatever decision is made about a supplier, it is essential that the supplier is able to supply the organisation with a level of quality that is suitable for its needs.

Question 5

(choosing suppliers) Quantity -

Answer 5

the organisation should try to manage on as little stock as possible so that
they don’t have lots of products just lying around.

Question 6

(Choosing suppliers) Reliability -

Answer 6

the product of a suitable quality and consistency, supplier needs to deliver when required and to a consistent standard.

Question 7

Stock control - Over stocking:

Answer 7

Costs extra to buy the stock and store it, may run out of space, may
get stolen or go out of date

Question 8

Stock control - Under stocking:

Answer 8

Run out and can’t fulfil order leaving disappointed customers

Question 9

Production Methods - Job production

Answer 9

Job production means that one job at a time is done through to completion before another job is started. Product is built to a specific requirement. Each one is unique.

Question 10

Production Methods - Batch production

Answer 10

Batch production involves all stages of the production process being completed at the same time, the products that are produced may be similar but may use different ingredients. Large amount made each time

Question 11

Production methods - Flow production:

Answer 11

flow production is common in factories which have a production line, the product flows through various stages with parts being added at each stage until the end of the production line.

Question 12

Ethical and environmental - Wastage:

Answer 12

companies think carefully about dealing with waste and try to recycle as much as possible to ensure they have a good reputation. Lower wastage costs.

Question 13

Ethical and environmental - Packaging:

Answer 13

The government has issued guidelines to reduce packaging, keep the weight down, possible to be recycled.

Question 14

Quality - Quality Control

Answer 14

Checking the products are acceptable at the end of the production
process, can lead to wastage with a lot of products being thrown away. Have to ensure
it meets customer standards.

Question 15

Quality - Quality Assurance

Answer 15

The product is checked at every stage of production not just the end thus cutting wastage, to prevent errors, get it right first time.

Question 16

Quality - Quality audits

Answer 16

Checking everyone’s work to ensure the standards are met.

Question 17

Quality - Quality circles

Answer 17

groups of staff and management meet regularly to focus on ideas to improve quality and set standards.

Question 18

Quality - Benchmarking:

Answer 18

Checking the product against the best in the industry to see if it matches the standards.

Question 19

Describe the role of operations

Answer 19

The Operations department has many roles to play in the running of the business, including
Dealing with suppliers of raw materials
Inventory management
Choosing a suitable method of production
Measuring quality
Storage and distribution of the final product
Ethical and environmental operations

Question 20

Describe the operating system

Answer 20

Organisation of raw materials, labour and machines is essential to guarantee a successful product which is produced efficiently.

The method of organising the resources to achieve this is known as an operating system and has 3 stages

Question 21

What are the 3 stages of the operating system?

Answer 21

Input
Process
Output

Question 22

Describe input

Answer 22

The raw materials needed for creating a good or service are gathered and stored.

This involves choosing suitable suppliers and having an efficient system of inventory control.

Question 23

Describe process

Answer 23

During this stage, resources gathered in the input stage are used to create a new good or service.

At any point in time there will be goods partially finished (work-in-progress) and finished goods.

This involves choosing an ethical method of production and ensuring good quality products are produced.

Question 24

Describe output

Answer 24

Finished goods are stored and distributed to customers.

This involves inventory control (making sure there are enough items available to meet demand), and

Organisation of distribution (how will the finished products get to the consumer)

Question 25

What are suppliers?

Answer 25

Buying raw materials or inventory from suppliers is known as purchasing. An important part of purchasing is picking a suitable supplier to buy materials from. There are different factors that will influence which supplier is chosen, just as if you were deciding to buy something from a shop you would take different things into account. These factors are called the Purchasing Mix.

Question 26

What is the purchasing mix?

Answer 26

Price Quality Quantity Lead Time Reliability/Reputation Location Credit Terms Storage Space

Question 27

Why are the prices of raw materials important?

Answer 27

Costs need to be kept as low as possible to make a profit. Low costs will improve the cash flow of a business

Question 28

Why is the quality of raw materials important?

Answer 28

Without high quality raw materials, the finished product will not be of a high quality. Low quality raw materials could result in higher wastage.

Question 29

Why is the quantity of raw materials important?

Answer 29

There needs to be enough raw materials available to allow production to continue but not too much otherwise this can be expensive for storage. Correct quantities of raw materials are required to satisfy customer demand.

Question 30

Why is the lead time of raw materials important?

Answer 30

Some raw materials need to be used quickly e.g. fresh food or they might go off. If delivery is late, production might have to stop, which is costly

Question 31

Why is the location of raw materials important?

Answer 31

The further away the supplier is, the longer the raw materials will take to be delivered. The cost of transporting products has to be considered

Question 32

What does the Reliability/Reputation of raw materials mean?

Answer 32

Reliability - will the supplier deliver when they say they will? Reputation - what do other people think of the supplier.

Question 33

Why is the Reliability/Reputation of raw materials important?

Answer 33

If the supplier does not deliver on time, this might cause production to stop and staff being paid for ‘idle time’. Late delivery can mean customers might not get their order on time and result in order cancellation. Suppliers with a good reputation are likely to get more business compared to one that has a poor reputation.

Question 34

Why is the Storage Space of raw materials important?

Answer 34

Raw materials might be wasted if they cannot be stored in the correct place Storage cost (e.g. insurance) can be expensive.

Question 35

Why is the Credit Terms of raw materials important?

Answer 35

Credit terms allow the business to sell their products before having to pay the supplier for the materials. Cash flow is improved

Question 36

Describe inventory

Answer 36

Inventory is the materials held by a business in order to produce the product being sold to the customer.

Question 37

What are the 3 categories of inventory?

Answer 37

Raw materials (input) Work in progress (process) Finished goods (output)

Question 38

Describe inventory management

Answer 38

Inventory is expensive so methods must be used to ensure that costs of holding inventory are managed while ensuring enough inventory is available for production when needed Businesses must avoid the problems of having too much inventory, called overstocking and the problems of not having sufficient inventory, called understocking.

Question 39

What are the costs of inventory?

Answer 39

Renting/paying for warehouses Electricity and lighting costs Security Insurance Staff wages

Question 40

What are the risks of inventory?

Answer 40

Theft Damaged if not stored correctly Perishable items might go off e.g. flowers, fruit and veg Fashion items might go out of fashion (SOCIAL FACTORS!) Technological items might go out of date

Question 41

What is cash flow?

Answer 41

Simply put it is the total amount of money being transferred into and out of a business.

Question 42

Describe inventory control

Answer 42

Once a business has decided how much inventory to hold (to prevent over or under stocking), then it will have to make sure that inventory is re-ordered when necessary and is looked after to prevent wastage or theft. Businesses will do this through a process known as INVENTORY CONTROL.

Question 43

Describe maximum (economic) inventory level

Answer 43

This is the highest level of stock that should be held at any time. It minimises the cost of storing extra inventory (i.e. avoids overstocking. Setting this level depends on: o Storage space available. o Type of stock – perishable or not. o Finance available – how much you can afford to buy at one time. o Security measures available.

Question 44

Describe minimum inventory level

Answer 44

This is the lowest level of inventory that a business should store It will ensure that business avoid understocking Inventory should not fall below this level because there is a risk that production might stop Also acts as buffer inventory. Buffer inventory is inventory which is held as a reserve to allow for delays in delivery or for managing unexpected demand.

Question 45

Describe re-order quantity

Answer 45

This is the quantity of inventory that has to be ordered to bring levels back to the maximum inventory level at the time the inventory arrives. The reorder quantity is automatically ordered when the reorder level is reached. Identifying the correct reorder quantity will avoid overstocking and understocking.

Question 45

Describe re-order level

Answer 45

This is set between the maximum and minimum inventory levels. This is the level at which more inventory is ordered and will return inventory to maximum level. Must take lead time into consideration. This level will ensure the business avoids running out of inventory. Some inventory systems are linked to the EPOS and automatically re-order goods.

Question 45

Describe the purpose of inventory control

Answer 45

To anticipate running out of inventory before it happens. To ensure that production is not delayed/stopped. To ensure that customers orders are not delayed through lack of inventory. To reduce costs – security, insurance and more storage. To minimise money tied up in inventory.

Question 46

Describe lead time

Answer 46

This is the time taken between an order being placed and inventory arriving at the business. As short a lead time as possible allows the business to react to rush orders.

Question 46

Describe manual inventory control

Answer 46

A manual inventory system is updated, maintained and controlled without using a technical system. This means the business updates the inventory by physically counting the inventory items on a frequent basis.

Question 47

Describe computerised inventory control

Answer 47

Many business now use a computerised system to manage inventory rather than a manual system due to the following advantages: Quick and accurate calculations. Wage savings as computers can replace staff.

Question 48

Describes barcodes and EPOS systems

Answer 48

Bar codes allows all inventory to be tracked electronically from the moment it arrives in the business until it is delivered to the customer The same EPOS equipment used at the till when a customer buys something is used in the warehouse and inventory levels are updated with each sale Can highlight changes in demand from customers

Question 48

Describe methods of production

Answer 48

All the raw materials needed for a product need to be at the right place at the right time.

Question 49

What are the advantages of job production?

Answer 49

Customers exact demands can be met – increased satisfaction High prices can be charged as products are unique and skilled labour Designs can be changed during production

Question 49

What are the methods of production?

Answer 49

Job Batch Flow

Question 50

What are the disadvantages of job production?

Answer 50

Specialist tools or equipment may be needed Higher wage costs as skilled labour Products can take a long time to make

Question 51

What are the disadvantages of flow production?

Answer 51

Products cannot be made to customers individual requirements A fault or breakdown in one part of production line could stop production process Repetitive work can be demotivating for employees

Question 51

What are the advantages of batch production?

Answer 51

Batches can be changed to suit customer requirements Cost savings can be made compared to job production as workers are lower skilled Materials bought in bulk – economies of scale/discounts

Question 52

What are the disadvantages of batch production?

Answer 52

Resources (such as equipment and employees) may have nothing to do between each batch A fault in one item can lead to the whole batch being wasted

Question 53

What are the advantages of flow production?

Answer 53

Large quantities of identical products can be made Consistency and quality Economies of scale e.g. the business can buy in bulk and obtain discounts so that cost of production per unit falls as output increases. Machinery can be used 24/7 – more efficient

Question 54

Describe product type

Answer 54

If a product is to be a “one off” (e.g. custom jewellery) then this suits Job production due to the high skill levels and flexibility of staff. On the other hand, “standardised” products (e.g. vacuum cleaners) can be made using Flow production as variety and flexibility are not needed.

Question 55

Describe labour and capital intensive

Answer 55

The amount of machinery/equipment and labour used in making a product will determine whether or not it is labour or capital intensive. o A product made mainly using human effort is labour intensive o A product made mainly using machinery/equipment is capital intensive

Question 55

What are the advantages of labour intensive?

Answer 55

No need to purchase expensive equipment One-off and unique products can be made easily Employees can be creative and use their own initiative

Question 56

What are the disadvantages of labour intensive?

Answer 56

It is expensive and takes time to recruit, select and train new employees Employees require specialist skills, which can take time to learn The quality of the work can vary, depending on who is making it

Question 57

Describe capital intensive production

Answer 57

Capital intensive is when products are mainly produced by machines and robots, meaning the initial outlay and maintenance, will be very high. Capital intensive production can be either mechanised or automated

Question 57

Describe Mechanised production

Answer 57

Mechanised production is when the production process requires both machinery and humans. Machines are required to carry out most of the work although they are operated and controlled by humans.

Question 57

Describe Automated production

Answer 57

Automated productions is when the production process is mainly carried out by machinery/robots and is mostly controlled by computers. Human input is limited in automated production.

Question 57

What are the advantages of capital intensive production?

Answer 57

Machinery can work 24/7 Quality is consistent as products are made of a standardised quality Lower wage costs as fewer employees need to be paid

Question 58

What are the disadvantages of capital intensive production?

Answer 58

Machinery and equipment is expensive to purchase and maintain Individual customer requirements cannot be met Breakdowns can cause production to stop

Question 59

What methods are used to ensure quality?

Answer 59

High Quality Inputs Materials Employees Equipment Quality Control Quality Assurance Quality Circles

Question 60

Describe quality inputs - trained staff

Answer 60

Fewer errors will be made as employees know what they are doing Less wastage Improves the image and reputation as customer is satisfied Reduces the risk of accidents happening

Question 61

Describe quality inputs - raw materials

Answer 61

Ensuring the best quality raw materials are used; o The business uses quality inputs to ensure quality outputs (products) o Quality raw materials are expensive to buy – decrease in profit and customer may be put off

Question 62

Describe mystery shopper

Answer 62

People are employed, either by the business or through an agency, to purchase products, ask questions, register complaints or behave in a certain way. They provide feedback to the business which is used to improve their operations. Used extensively in retail and catering industries. They will anonymously evaluate: o Customer experience o Operational efficiency o Employee integrity o Use of merchandising o Service/Product quality

Question 63

Why is it important to be Ethical and Environmental?

Answer 63

Consumers are well informed about the environment nowadays and will not buy products which have been made in a way that is unfair to staff or which misuses or damages the Earth’s resources. This means that more and more businesses are trying to make sure that their production process is not wasteful by reducing, reusing and recycling.

Question 63

What Does it Mean to be Ethical and Environmental?

Answer 63

Businesses have to be SOCIALLY RESPONSIBLE. This means that they will be seen in a positive way by not harming the local environment and community.

Question 64

How can you be Environmentally Responsible?

Answer 64

Minimising packaging Recycling where possible Minimising waste Preventing pollution

Question 65

Describe minimising packaging

Answer 65

Businesses use packaging to help preserve their product, transport it, protect it from damage and to attract customers. To help the environment and reduce costs most businesses aim to reduce the amount of packaging they use.

Question 66

What are the advantages of minimising packaging

Answer 66

The business will gain a positive reputation with customers, employees, pressure groups and media. Saves on costs of production – less plastic etc will be needed. Money can be used elsewhere in the business. Can gain a competitive edge

Question 67

Describe recycling

Answer 67

This is when a business is taking used materials such as glass, paper, metal and plastic and are processing them into new products. Business can also encourage employees to put rubbish in appropriately coloured bins. As consumers are becoming more aware of the environment and want to purchase from businesses who care about the environment.

Question 67

What are the disadvantages of minimising packaging

Answer 67

New procedures will have to be adapted which involved training staff and this can be very time-consuming and costly. Customers may not think the product is as good e.g. Sure compressed deodorant. Some products require a lot of packing to ensure safe transportation

Question 68

What are the advantages of recycling

Answer 68

Items can be reused to make new products – Barr glass bottles Limits the items ending up in landfills Improves the image of an organisation Can give a competitive edge

Question 69

What are the disadvantages of recycling

Answer 69

Need to be sorted into different categories which takes time e.g. glass, paper, metal etc Customers may think the product is not as good and might not be willing to buy. Can be expensive to buy recycling bins etc.

Question 69

Describe minimising waste

Answer 69

Businesses can try to minimise waste by: o Ensuring employees are properly trained, this will reduce mistakes and subsequently waste. o Keep machinery in good condition and ensure it is well maintained. o Not overstocking of products and raw materials – especially perishable items

Question 70

What are the advantages of minimising waste

Answer 70

It will reduce the production costs for the business – no waste of material or employee time Reduced costs in stockroom if business is not overstocking Business will gain a good reputation

Question 71

What are the disadvantages of minimising waste

Answer 71

Staff training will be required and this is very costly and time consuming. When staff are being trained there is no output.

Question 72

Describe preventing pollution

Answer 72

Businesses can prevent pollution by: Minimising the use of materials in production (e.g. fuel and chemicals). Disposing of any potentially harmful chemicals or products in the most environmentally friendly way.

Question 73

Describe ethical operations

Answer 73

Ethical operations is doing what is morally right and is more than is required by law. Law is about what is legal and illegal. Working ethically means doing the right thing and acting a way that is both fair and honest to all stakeholders.

Question 74

What are the advantages of ethical operations

Answer 74

Customers are more likely to return to the business - increased profit and sales Improved business image e.g. awards can be given Encourage new customers to buy their products instead of competitions - increase market share

Question 75

What are the disadvantages of ethical operations

Answer 75

Cost of sourcing materials from ethical suppliers can be higher - decrease in profit Higher prices may be charged for products and some customers might be put off by this – lower sales and profits Paying living wage is higher than minimum wage – financial impact less profit

Question 76

How can a business be ethically responsible?

Answer 76

Paying living wages Having high farm standards Not using child labour

Question 77

Describe Paying living wages

Answer 77

Ensuring staff are paid more than the national minimum wage Using suppliers who pay a living wage

Question 78

Describe Having high farm standards

Answer 78

Using suppliers which have high standards and follow legislation Ensures people and animals are treated fairly

Question 79

Describe Fairtrade

Answer 79

Fairtrade is an organised social movement and market-based approach that aims to ensure producers in developing countries receive fair payment for the goods they supply. Businesses that meet the Fairtrade Foundation standards are identified using the Fairtrade Mark e.g. Cadbury