Operational decisions Flashcards
Operational objectives
Quality
Costs
Flexibility
Efficiency
Innovation
Speed of response
How can a business increase added value
increasing the selling price of the product or reducing costs of raw materials
Job production
production of one off items by skilled workers
Flow production
mass production on a continuous production line with division of labour
Batch production
Production of small batches of identical items
Cell production
Production divided into sets of tasks, each set completed by a work group - improves quality
Lean production
Streamlined production with waste at a minimum
Drawbacks of 100% capacity utilisation
Quality may not be good
Turn away customers
No margin of error
Cannot temporarily change output for demand changes
How to increase capacity
using facilities more of the working week
Buy more machines
May chose to subcontract/outsource work
Cons of low capacity utilisation
increases costs because it causes fixed costs to be spread over fewer units so unit costs increase
Ways to increase labour productivity
Improving worker motivation
Training
New technology
Just-in-time production
aims to reduce waste of materials by having as little stock as possible
Pros of JIT
storage costs are reduced and cash flow is improved as money is not tied up in stock
Business is more flexible so can cope with changes in demand and adapt its products to customer needs
Cons of JIT
no stock means customers can’t be supplied during production strikes.
Furthermore, suppliers have to be reliable
Time based management
approach aims to reduce wasted time in the production process
- often used to produce technological items and high fashion clothes- can be criticised for speed over quality eg SHEIN
Pros of TBM
reduces lead time meaning that customer needs can be satisfied quicker, giving the customer a competitive advantage.
Drive innovations
Advantage of using technology
Increased productivity and quality
Reduced wastage
More effective and efficient delivery of goods and services to the customer
Cons of using technology
Initial cost may be high
Requires mantenaince and constant updating
Advantage of capital intensive production
Cheaper in the long term
Often more precise leading to improved quality
Disadvantages of capital intensive production
High set up costs
The fear of being replaced by machinery can decrease workers motivations.
Adv of labour intensive production
People are flexible and can be retraind
Cheaper when low cost labour such as in India is available
Cons of labour intensive production
Hard to manage people
Labour costs as % of turnover are high
People take breaks and can be unreliable
Quality control
Means checking goods as you make them to see if anything is wrong. Often done by specially trained quality inspectors
- detects errors
Quality assurance
means introducing measures to ensure things do not go wrong in the first place.
- employees check their own work
