Management of operations (Unit 3)

Question 1

What are suppliers

Answer 1

A supplier is a company which provides the materials and resources that are needed by a business to manufacture its product.

Question 2

What is the purchasing mix

Answer 2

factors that a business should consider when deciding which suppliers to buy from.

Question 3

List the factors of the purchasing mix

Answer 3

Cost of the materials
Discounts available
Quality of the materials
Location of the supplier
Lead time
Reliability and reputation

Question 4

Describe the cost of the materials (factor of purchasing mix)

Answer 4

The more a business pays for supplies, the higher its production costs will be. Therefore, it should aim to find a cheap supplier as keeping production costs down will result in higher profits.

Question 5

Describe discounts availabe (factor of the purchasing mix)

Answer 5

A business should also consider whether a supplier offers any discounts, e.g. when bulk buying, as this would reduce costs.

Question 6

Describe quality of the materials (Factor of the purchasing mix)

Answer 6

A business will need to purchase high quality raw materials to make their product if they want the finished product to also be of a high quality. Having a high quality finished product also means that a business will be able to charge a higher price for it.

Question 7

Describe location of the supplier (factor of the purchasing mix)

Answer 7

How far away a supplier is located will be considered. The further away a supplier is from a business, the higher the costs might be for the supplier to deliver the supplies to the business. Transporting goods over a greater distance also has a higher carbon footprint, which is damaging to the environment.

Question 8

Describe lead time (factor of the purchasing mix)

Answer 8

Lead time is the time between a business placing an order and a supplier delivering the materials to them. A business will have to ensure it chooses a supplier that can deliver within a time frame which means it doesn’t run out of materials.

Question 9

Describe reliability and reputation (factor of the purchasing mix)

Answer 9

A business will also want to consider the reputation of a supplier; are they well known for being reliable and dependable for delivering on time? An unreliable supplier that does not deliver on time can result in production slowing down or stopping altogether.

Question 10

What is understocking

Answer 10

Understocking is when a business holds too little inventory to operate efficiently.

Question 11

What are the consequences of understocking

Answer 11

production slowing down or stopping altogether due to a lack of materials;

orders not being fulfilled on time, leading to dissatisfied customers;

not being able to accept unexpected orders, resulting in a loss of sales;

having to make frequent orders for small quantities of inventory, resulting in higher administration and delivery costs.

Question 12

What is overstocking

Answer 12

Overstocking occurs when a business is holding more inventory than required.

Question 13

What are the consequences of overstocking

Answer 13

money being tied up in inventory that could have been spent more effectively elsewhere in the business;

inventory deteriorating or becoming obsolete before it is used, leading to high amounts of waste;

increased storage and insurance costs, meaning a reduction in profit;

it becoming easier for staff to steal inventory undetected.

Question 14

What are inventory control systems

Answer 14

A business can use a number of systems and strategies to help manage inventory levels to help it avoid overstocking or understocking.

Question 15

In an inventory control diagram what is the maximum inventory level

Answer 15

the highest amount of inventory that a business should hold at any one time to avoid overstocking.

Question 16

In an inventory control diagram what is the minimum inventory level

Answer 16

the lowest amount of inventory that a business should hold at any one time to avoid understocking.

Question 17

In an inventory control diagram what is the re order level

Answer 17

Re-order level: when inventory levels reach this point, a business should place an order with its supplier to purchase more inventory. A business will consider the supplier’s lead time and how quickly it uses inventory when setting this level.

Question 18

In an inventory control diagram what is the re order quanity

Answer 18

the amount of inventory that a business will order to bring levels back to maximum.

Question 19

In an inventory control diagram what is lead time

Answer 19

the time between a business placing an order with a supplier and the inventory being delivered.

Question 20

Describe how supermarkets use Computerised inventory management

Answer 20

Electronic point of sale (EPOS) systems are one common example of computerised inventory management systems that are used by most large retailers. EPOS systems track inventory levels in real time; every time a barcode is scanned on one of the shop’s tills, the item is instantly deducted from the inventory level. Advanced EPOS systems can also be linked with suppliers and can automatically place orders when the inventory hits the re-order level.

Question 21

What are the benefits of computerised inventory management systems

Answer 21

providing up-to-date inventory levels instantly;

reducing the need for time-consuming stocktaking processes;

can be programmed to re-order inventory automatically, which means staff have more time to complete other tasks;

keeping a better track of inventory rotation dates.

Question 22

What are the 3 methods of production in nat 5 business

Answer 22

Job production
Batch production
Flow production

Question 23

Describe Job production

Answer 23

Job production is used to create one-off, unique products. Products can be fully customised and made entirely to each individual customer’s requirements and specifications. Using this method, one product will be completed from start to finish before production begins on the next unique product. Products made using job production are usually made by hand by highly skilled workers.

Question 24

What are common examples of job production

Answer 24

a dress maker creating a bespoke wedding dress;

a baker creating customised birthday cakes;

hairdressers cutting customers’ hair.

Question 25

What are the advantages of job production

Answer 25

products are fully bespoke to customer’s requirements, meaning very satisfied customers;

higher prices can be charged due to the unique nature of products;

workers are involved in all stages of the making of a product, which increases staff morale and motivation.

Question 26

What are the disadvantages of job production

Answer 26

highly-skilled workers will need to be paid higher wages, meaning high production costs;

lead time tends to be slow compare to other methods of production;

a business will not be able to buy raw materials in bulk, meaning it misses out on discounts.

Question 27

Describe batch production

Answer 27

Batch production involves making products in small groups known as batches. Products within each batch will be identical; however, each batch of products can be different.

Products within a batch will all go through the same stage of production together.

Question 28

What are common examples of batch production

Answer 28

a bakery making a range of cakes and breads;

food manufacturers making a variety of soup flavours

Question 29

What are the advantages of batch production

Answer 29

allows for a degree of customisation by the customer, which increases satisfaction;

large amounts can be made, which means economies of scale can be achieved;

usually requires less skilled workers than job production, which reduces wage costs.

Question 30

What are the disadvantages of batch production

Answer 30

equipment needs to be cleaned and/or changed between batches;

a mistake in a batch can mean that an entire group of products are ruined, which increases wastage;

requires careful production planning.

Question 31

Describe flow production

Answer 31

Flow production involves mass producing identical products. Products are made on an assembly line where a different component is added to the product at each stage. Workers and machinery will have one very specific task to complete at each stage. Flow production tends to be capital intensive, meaning that machinery and robots carry out most of the work in making a product.

Question 32

What are common examples of flow production

Answer 32

car and electronics manufacturing;

lightbulb and matchstick manufacturing

Question 33

What are the advantages of flow production

Answer 33

mass production of identical products allows businesses to achieve high economies of scale;

use of machinery results in higher levels of output and consistency in quality;

very large quantities of products can be made.

Question 34

What are the disadvantages of flow production

Answer 34

products cannot be tailored to customer requirements;

there is a high initial outlay in purchasing the computers and machinery needed to set up an assembly line;

when equipment breaks, the whole production line might need to stop.

Question 35

What are the factors a business must consider when choosing a method of production

Answer 35

the nature of the product - depending on what is being made, one method might be more suitable than others, e.g. if a special, bespoke product is required, job production will be used;

demand for the product - the business will have to choose a method which will allow it to make enough products to fulfil customer demand;

availability of skilled labour - the business will have to establish whether there is sufficient skilled labour available to allow it to use job production if it seems appropriate. If not, then batch or flow production will have to be considered;

availability of technology - the business will have to establish whether the machinery and technology it currently has is sufficient to allow it to set up a flow assembly line if that seems appropriate. If the business does not have a lot of machinery, then it will have to consider using job production instead;

size of the premises - how much space the business has available to make products must be considered. Production systems for batch and flow production may require a lot of space.

Question 36

What are the 3 quality inputs of a business

Answer 36

Raw materials
Employees
Technology

Question 37

Explain raw materials as a quality input

Answer 37

The raw materials used to make a product must be of a high quality. A business simply cannot make a high-quality product using poor quality materials. A business should spend time finding a supplier that can consistently provide a high quality of raw materials. However, a supplier will charger a higher price for high quality materials.

Question 38

Explain employees as a quality input

Answer 38

A company’s workers must have the correct level of skills and knowledge to make a product to a high standard. A business can ensure staff are adequately skilled by providing training to its employees. A business should also have good, rigorous recruitment and selection processes to ensure it is employing the best people to do the job. However, it can be time-consuming to train all staff, and skilled workers will often expect a higher rate of pay.

Question 39

Explain technology as a quality input

Answer 39

The machinery and technology used in the production of a company’s products should be well maintained to ensure it is functioning correctly. A business might also strive to keep machinery up-to-date by investing in the latest technology; however, purchasing new machinery and technology will be expensive.

Question 40

What are the methods of ensuring quality products

Answer 40

Quality control
Quality assurance
Quality circles
Benchmarking

Question 41

Describe quality control as a method of ensuring quality

Answer 41

Quality control involves two quality inspections. A sample of the raw materials are checked before production to ensure that they are of the required standard. The second inspection happens at the very end of production when the finished good is inspected to ensure that it meets all required quality standards.

This method reduces the chance that a faulty or substandard product reaches customers; however, it is likely to result in high amounts of waste as faults in products are not detected until the very end of production.

Question 42

Describe quality assurance as a method of ensuring quality

Answer 42

Quality assurance involves the quality of a product being inspected at every stage of production. A product will not continue along the production line unless it meets required standards at each stage.

This method results in very little wastage as faults are identified and fixed quickly; however, inspecting the product at every stage can result in production taking longer.

Question 43

Describe quality circles as a method of ensuring quality

Answer 43

A quality circle is a small group of employees from different levels across a business who meet regularly to discuss how to improve quality and methods of working.

Employees will feel empowered and more motivated as they will feel that their opinions are valued by the business; however, as meetings take place during the working day, there will be periods of reduced productivity.

Question 44

Describe benchmarking as a method of ensuring quality

Answer 44

Benchmarking involves identifying the company in the market with the highest level of quality; it will be set as the standard to try to reach. A competing business will try to find out the methods and strategies of this company, and adopt these with the aim of raising their own quality.

Benchmarking can be motivational for staff as it gives them a clear goal to work towards; however, it can be a time-consuming process gathering and studying the necessary information.

Question 45

What are the benefits of providing a high quality product

Answer 45

the company’s reputation and image will improve;

a higher price can be charged for the products, meaning increased profits;

customers will be very satisfied with the product and are likely to return and buy again;

customers are likely to recommend the company to others, which can mean an increase in new customers;

a competitive edge can be gained if the product is of a better quality than that of competitors.

Question 46

What are business ethics

Answer 46

Business ethics can be defined as the moral values that influence how an organisation behaves. As consumers, we expect businesses to do what is fair, honest and right. Therefore, it has become increasingly important for businesses to be ethical in their operations.

Question 47

What are common examples of ethical operations

Answer 47

paying employees a living wage which exceeds minimum wage rates;

not using child labour or sweatshops in the production of goods;

ensuring high farming standards;

avoiding testing products on animals;

supporting initiatives, e.g. Fairtrade, by choosing appropriate suppliers.

Question 48

What are the benefits of ethical operations

Answer 48

improved reputation and image;
higher prices can often be charged for products which are viewed as ethical;
gaining a competitive edge over rivals.

Question 49

What are the disadvantages of ethical operations

Answer 49

often more costly, meaning increased production costs;

less profits will be made due to increased production costs.

Question 50

Describe environmental operations

Answer 50

Businesses must consider the impact that their operations have on the planet and should take appropriate actions to minimise the damage they do.

Question 51

What are some common environmentally friendly practices

Answer 51

reducing the amount of packaging used for their products;

minimising the amount of waste created and disposing of it in a safe, responsible manner;

recycling as much as possible and making products and packaging recyclable where possible;

using renewable energy sources, e.g. wind and solar energy, and taking steps to reduce their energy consumption;

reducing their carbon footprint and levels of pollution.

Question 52

What are the benefits of environemntal operations

Answer 52

recycling more and cutting down on packaging can reduce production costs;

winning awards for being environmentally-friendly can be used as a marketing tool;

higher sales and profits as customers are attracted to companies that help the environment.

Question 53

What are the disadvantages of environmental operations

Answer 53

recycling of materials can be a time-consuming process;

consumers might perceive the quality of products to be inferior if recycled materials or packaging is used;

acting in an environmentally-friendly way can often be more expensive, meaning increased production costs.

Question 54

How can electtronic point of sale systems be used by the operations department

Answer 54

Electronic point of sale (EPOS) systems can be used to keep track of inventory levels. By scanning barcodes on materials and products, an EPOS system will be able to automatically keep track of inventory levels in real time as inventory is added or removed. EPOS systems can also be programmed to automatically place orders with suppliers when inventory reaches the re-order level.

Question 55

How can databases be used by the operations department

Answer 55

Databases can be used by an operations department to keep a record of all of the suppliers that a company uses.

Question 56

How can computer aided manufacture be used by the operations department

Answer 56

Computer-aided manufacturing (CAM) involves the use of computer-controlled machinery and robots in the production of goods. Once programmed, the machinery will work independently with little human input.

Question 57

How can computer aided design be used by the operations department

Answer 57

Computer-aided design (CAD) software allows an operations department to design and create digital models of a product to see how it would look and to test its functionality without having to make prototypes.

Question 58

How can the internet be used by the operations department

Answer 58

The operations department could use the internet to find and compare possible suppliers to purchase raw materials from, and to place orders using the supplier’s website.

Question 59

How can gps be used by the operations department

Answer 59

Global positioning system (GPS) tracking software can be used to track deliveries from suppliers and to track a company’s own delivery vehicles as they deliver orders to customers.