Management of Operations Flashcards
What is the purpose of sales budgets?
To provide targets for sales staff to aim for, used in conjunction with bonuses or commission, and motivate sales staff.
What do production budgets help to plan?
Production budgets help plan production to meet anticipated sales and manage raw material purchases.
Define capital-intensive production.
Production primarily by means of machinery and equipment, utilizing automation or mechanisation.
What is automation in production?
Production that is fully automatic, using computer-aided manufacture to control assembly lines with robotics.
List advantages of automation.
- Improved consistency
- Fewer mistakes and waste
- Can perform dangerous jobs
- Operates 24/7
- Reduces wage costs
What are the disadvantages of automation?
- Huge initial investment
- Catastrophic breakdowns can occur
- May demotivate retained employees
- Lack of creativity in products
Define mechanisation.
A method where labour and machines work together to produce products.
List advantages of mechanisation.
- Improved accuracy over handmade products
- Faster production
- Retains human creativity
What are the disadvantages of mechanisation?
- Human error can still occur
- Limited production hours due to human needs
- Repair costs can lead to idle workers
Define labour-intensive production.
Production that involves humans doing most of the work, often seen in job production.
List advantages of labour-intensive production.
- Often less expensive than capital-intensive production
- Allows for initiative and creativity
- Constant supply of skilled labour
- Higher employee motivation
What are the disadvantages of labour-intensive production?
- High risk of human error
- Limited production time due to breaks
- Overtime costs for workers
- Recruitment and training costs
What influences the choice of production methods?
- Quantity of goods required
- Skills of the workforce
- Cost of labour
- Finance available
- Technology available
Why is quality important in production?
- Poor quality can lead to returns and loss of sales
- High quality can enhance reputation and attract quality staff
- Premium prices can be charged for high quality goods
Define quality control.
A method of inspecting raw materials or finished goods to ensure they meet acceptable quality standards.
List advantages of quality control.
- Prevents faulty goods from reaching customers
- Limits potential for a bad reputation
What are the disadvantages of quality control?
- Can create waste
- Reworking costs time and money
Define quality assurance.
A method of prevention that checks products at various stages in the production process.
List advantages of quality assurance.
- Reduces wastage
- Easier identification of production faults
What are the disadvantages of quality assurance?
- Can slow down production
- May increase production costs
What is continual improvement in quality management?
An ongoing effort to improve quality even after objectives have been met.
List advantages of continual improvement.
- Keeps the business ahead of competition
- Enables quick reactions to external changes
What are the disadvantages of continual improvement?
- High staff development costs
- Employee pressure to improve continuously
Define quality circles.
A group of employees meeting with management to discuss and solve production process problems.
List advantages of quality circles.
- Motivates employees by involving them in decision-making
- Provides management with informed suggestions
What are the disadvantages of quality circles?
- Can lead to lost production time
- Training costs for participation
What do quality standards and symbols indicate?
They prove that a product has met an agreed industry standard.
List advantages of quality standards and symbols.
- Proves product quality
- Can be used as a promotional tool
- Builds customer confidence
What are the disadvantages of quality standards and symbols?
- Time-consuming to achieve
- Must be maintained to avoid losing reputation
Define quality management.
An approach to ensure quality products, incorporating various methods and ensuring commitment from all staff.
List advantages of quality management.
- Aims for zero errors
- Motivates staff through involvement
- Increases customer confidence and market share
What are the disadvantages of quality management?
- High training costs
- Requires strict staff commitment
What are mystery shoppers?
Individuals hired to evaluate customer experiences and provide feedback to the business.
List advantages of using mystery shoppers.
- Provides unbiased feedback
- Gathers valuable insights on customer experience
- Suggests improvements
What are the disadvantages of using mystery shoppers?
- Staff may resent being evaluated
- Feedback may not represent the whole business
- Costs associated with hiring mystery shoppers
Define benchmarking.
The practice of copying the quality and processes of the market leader.
List advantages of benchmarking.
- Potential to match the best product quality
- Saves time in developing quality approaches
What are the disadvantages of benchmarking?
- Difficulty in obtaining quality method information
- Limits the business to the current benchmark standards
What are logistic managers responsible for?
- Inventory - Liaising with suppliers that provide materials for production, partly or completely finished goods
- Storage and Warehousing - ensuring their appropriate storage of inventory including sending inventory to production departments if required
- Order processing - dealing with orders from customers to ensure they receive the correct products
- Distributions - deciding on the best method of distribution to get the product to the customer
What are the consequences of overstocking?
Supplies could go out of date if they are stored for too long
Supplies could go out of fashion before they are used
Too many supplies leaves a risk of theft by staff , customers or thieves
The business will have to pay for stockholding cost , such as insurance and security
The opportunity cost of money being tied up in inventory which could be better used elsewhere in the business
What are consequences of understocking?
The business may run out of inventory and be unable to continue production or carry on selling
The business will not benefit from bulk buying discount due to making smaller orders
There may be no goods to sell resulting in a bad reputation and customers not returning
There will be an increase in delivery cost in smaller deliveries will have to be made
There will be an increase in administration cost
Explain maximum inventory level
This is the most amount of inventory that should be held
Setting this level avoids consequences of overstocking
Explain Minimum Inventory Level
This is the least amount of inventory that should be held
Setting this level avoids consequences of understocking
Explain Re-order level
This is the level at which inventory should be reordered. Computerised inventory systems link to EPOS and automatically reorder goods
This avoids running out of inventory
Explain re-order quantity
This is the amount that is ordered
This ensures the quantity ordered is not too much or too little
Explain lead time
This is the time taken between an order being placed and inventory arriving
As short a lead time as possible allows the business to react to rush orders
Explain buffer inventory
This is the extra inventory below the agreed minimum to be used in emergencies
This ensures that production doesn’t stop and sales continue to be made
What are the factors of setting inventory levels
The maximum inventory level depends on the storage available, the cost of storing goods and the maximum amount of demand
The minimum inventory level depends on the relationship with suppliers, the skill levels of staff so materials are not wasted, the finance available, the minimum amount of demand and likelihood of drastic changes to taste and fashion
The re-order level depends on lead time, the amount of inventory already held, if bulk-buying discounts are available, and the maximum inventory levels themselves.
What is just in time
Process of ordering supplies only when they are either required for production or when an order is placed by a customer
What are advantages of just in time
Allows production to be lean, there is no wastage as all inventory is used for production
No money is tied up in inventory, improving cash flow and working capital
No warehouse is required, saving costs
The business is more responsive to external factors
What are disadvantages of just in time
If deliveries are late then the business will face the negative consequences of understocking
requires excellent relationships with suppliers to work effectively, which can take time to develop
Relies on a good infrastructure between the business and suppliers
No room for error in production
What is centralised storage
involves storing inventory in one central location in a large purpose built warehouse
What are advantages of centralised storage
Specialist staff are employed to maintain inventory which improves speed of inventory handling insecurity
Centralise warehouses can store a massive amount of inventory benefiting from economies of scale
The same procedures for issuing inventory are used across the organisation improving consistency
It may be cheaper to store inventory in one large warehouse than the total cost of many smaller on site store rooms
Easier for suppliers to deliver inventory as centralised warehouses are often located close to infrastructure
What are disadvantages of centralised storage
inventory has to be delivered to each division or department causing delays
Specialist staff need to be employed to maintain inventory, increasing wage costs
specialist equipment needs to be purchased and maintained
Inventory usage levels and needs are unclear as division need to communicate with the warehouse
The use of centralised where everything has declined due to more efficient inventory systems such as JIT, sourcing direct from the supplier
What is decentralised storage
Involves storing inventory in many locations in smaller warehouses or store rooms
What are advantages of decentralised storage
Inventory is always close at hands when needed for production or to sell to customers
Smaller, more locals warehouse are more responsive to local needs
Inventory usage reflects production as it is stored in factories or retail outlets
Smaller amounts of inventory result in no negative consequences of overstocking
What are disadvantages of decentralised storage
Can lead to wastage or theft of inventory as security isn’t as good as centralised storage
Lack of specialists can lead to inventory control being clumsy and inefficient
Each division may handle inventory differently, leading to inconsistency and problems being harder to pinpoint
Smaller amounts of inventory result in negative consequences of understocking
What are advantages of computerised inventory control
Databases keep balances of inventory which are automatically updated
Can be linked to tills through EPOS, which update inventory levels with each sale
Accurate and constant monitoring inventory levels allows for automatic reordering
Allows for decisions on slow moving inventory or best sellers to be made by managers from their computers
Can highlight regional variations in inventory for head office
Can highlight seasonal shifts in demand
Is a deterrent to theft by staff as they know inventory levels are monitored closely
What are disadvantages of computerised inventory control
Computerised systems will cost a lot of money to install and maintain
Money and time need to be invested to train staff to operate the system efficiently
Crashes and breakdowns can hold up reorders and production
What are the roles of the logistics manager
- planning inventory required using production and sales budgets
- organising for the resources needed for logistics, including warehouse equipment and staff
- commanding warehouse staff to carry out tasks
- coordinating the supply chain, channels and methods of distribution so deliveries are made on time
- controlling the quality, quantity, cost and efficiency of the movement and storage of inventory
- delegating inventory procedures to decentralised warehouses
- motivating other members of their team
What are advantages of an organisation being ethical
Awards can be granted for being ethical, which can be used for promotional purposes
Businesses with an ethical reputation can attract customers and quality staff who agree with their principles
What are disadvantages of an organisation being ethical
Audits are needed to ensure standards are met and maintained, which may be time consuming
Decision making could be more complex and time consuming as many possible solutions may not be appropriate because they are not ethical
What is animal welfare
the moral considerations of an organisation need not only to refer to how people are treated; increasingly these concerns are also around the treatments and wellbeing of animals.
This might include the conditions that animals are kept in, the way they are handled, animal testing and the use of animal derived ingredients
What is fairtrade
When suppliers of raw materials receive a guaranteed and fair price for their goods. Also ensures that employees in the supply chain are treated fairly
What are advantages of fair trade
Businesses are awarded the Fairtrade mark on their products which can appeal to customers
Stocking fair trade goods demonstrates the retailers ethical commitment to its customers
Businesses that are fair trade have a positive impact on the producers of the raw materials with which they work and have a better relationship with the supply chain
What are disadvantages of fair trade
Losing a fairtrade mark after gaining one will result in bad publicity
Fair trade products are often more expensive
The business has a more limited choice of suppliers
What are advantages of being environmentally friendly
The organisation plays a part in looking after the environment that will hopefully sustain their activities for the future
Having a positive effect on the environment will ensure the organisation gain a positive reputation
; Awards can be granted for being environmentally friendly which can be used for promotional purposes
Renewable energies save costs in the long run as fuels, oils, petrol or gas don’t need to be paid for
What are disadvantages of being environmentally friendly
investment and environmentally friendly measures will be expensive in the short term
New procedures may have to be adapted to be more environmentally friendly, which can take time
Most environmentally friendly procedures rely on the natural environment which may not be sufficient
How is technology used in operations
IT for example, laptops tablets and smart phones can be used to purchase supplies quickly
The Internet can be used to research supplier prices
EPOS can be used with computerised inventory control to automatically re-order depleted inventory
Computerised devices can be used by warehouse staff to check and find inventory
Automated systems contract deliveries for both the businesses and the customers information
Spreadsheets can be used to accurately and quickly produce production budgets
CAM such as robotics can be used an automated production
Emerging technology, such a solar energy energy and EV can be used to harness renewable energy
