Operational decisions Flashcards
What are the examples of operational objectives?
1) Quality
2) Flexibility - reacting to customers wants
3) Improving speed of response and flexibility
4) Adding value
5) Meeting environmental standards
What is added value and how do you calculate it?
Added value is increasing the difference between cost of raw materials and selling price
= Sales revenue - costs of bought goods + services
How can added value be achieved?
Increasing selling price or reducing the cost of raw materials
Internal influences on Operational objectives?
1) Nature of the product
2) Availability of resources
3) Overall objective e.g if environment based it is likely to focus on this
4) Other departments - the decisions made in finance and marketing will effect what production team can do
External influences on operational objectives?
1) Demand for product - make sure output isn’t higher than demand
2) New tech - often need to adapt to make most of new technologies
3) Competitors performance - many firms set targets in response to rivals actions
What are the 5 common methods of production?
1) Job production
2) Flow production
3) Batch production
4) Cell production
5) Lean Production
What is job production?
Production of one off items by skilled workers
What is flow production?
Mass production on a continuous production line with division of labour
What is Batch production?
Production of small bathes of identical products
What is cell production?
Production is divided into sets of tasks, each completed by a workgroup
What is lean production?
Production that aims to keep waste to a minimum
What is capacity?
The max output an organisation can produce at a given period
What is capacity utilisation?
How much capacity a business is using
How do you calculate CU?
Output ÷ Capacity x100
Why is 90% CU better than 100%?
1) May be hard to keep quality high if capacity is 100%
2) May have to turn away customers as it can’t increase output further
3) No downtime fro machines so any breakdowns will lead to delays
4) No margin for error - stress for managers
5) Cant temporarily increase demand in times of seasonal fluctuations
How can a firm increase its capacity to meet output with demand?
1) Buying more machines
2) Increase staff levels either long term or short terms through part time or temporary staff
3) Increase productivity by motivating staff
4) In times of seasonal demand they may subcontract work
What is under utilisation?
Low capacity utilisation and it is inefficeint as it means a business isn’t making use of the machines and facilities
What doe UU mean for unit costs?
Unit costs increase as fixed costs are spread over fewer units
How do you calculate unit costs?
Total costs ÷ unit output
How can a firm increase capacity?
1) Changing the marketing mix will stimulate demand
2)Fill spare capacity by subcontracting work from other firms
3)May have to down size (rationalisation)
4)
Whats the difference between Productivity and efficiency?
Productivity - Measured as the output per worker in a given period
Efficiency - Getting more output from a given number of inputs
What does labour productivity measure?
How much each employee produces, the higher it is the better the workforce is doing
How do you calculate labour productivity?
Output per period ÷ number of employees
How can a manager increase labour productivity?
Training to increase productivity,new technology to increase speed & improving motivation
Why can increasing labour productivity not always be good for a business or its workers?
1) New technology can be expensive
2) Using incentives to increase productivity may reduce quality and increase waste
3) If a business isn’t planning on increasing capacity then training them to be more productive may lead to redundancies
What are examples of lean production methods?
Just In Time Production
Time Based management
What is JIT?
A way of aiming to reduce waste and raw materials by holding as little stock as possible
- Products are made just in time for production
What is the system of repeating orders in JIT production?
Kanban
- Reduces storage costs and cash flow is improved as no stock is held up in stock
Whats a disadvantage of JIT?
-No stock means that during strikes customers can’t be supplied with goofs
What is time based management?
A way of reducing wasted time in production process as companies compete on time trying to be the quickest to get their product on the market
What is needed for time based management and what are the advantages of it?
- Effective communication, culture of trust and mulit-skilled workers are essential
- Reduces lead time which keeps customers satisfied
- However speed can be places above quality
What is quality control?
This is a method of checking goods as you make them/when they arrive to see if anythings wrong
- Done by trained inspectors and assumes errors are unavoidable
What is quality assurance?
This is introducing methods into the production process to ensure nothing goes wrong in the first place
- Errors are avoidable
- employees check own own work and they are responsible
What are the methods of improving quality?
Quality circles- Employees meet at regular intervals to discuss quality control issues.
-Use knowledge from all departments
What is Kaizen?
Lean production method where employees should be improving work all the time
-Helps workers feel involved in in quality assurance
What is total quality management?
Means the whole workforce is committed to quality improvements, every department focuses on quality in order
What are the advantages of total quality management?
- Helps bonding as everyone is involved
- Boosts company reputation for good quality products
- leads to fewer fault so less waste
What are the disadvantages of TQM?
- Takes a long time to introduce TQM
- can demotivate staff
What is the opportunity costs?
Costs of investing money into stock rather than something else
What are the ways of matching supply and demand?
1) Peripheral workers
2) Outsourcing
3) Mass customisation
4) Temporarily increase CU to 100%
What is a peripheral worker?
aren’t essential but are employed when ore staff is needed e.g on temporary or part time contacts
What is outsourcing?
When a business outsource some or all of its products to deal with increased demand
- Allows contracts to be accepted that previously wouldn’t have been allowed
- reduces costs as don’t have to pay permanent staff
What factors should be considered when choosing a supplier?
- Reliability
- Price
- Payment (how much and when)
- quality (is it consistent)
What are the several ways of building a relationship with supplier?
1) Linked networks - This is a shared IT system so both can see stock levels to know when supplies are needed
2) JIT
3) Shared costs - When similar productions can share expensive equipment and store goods in same warehouse
4) Innovation - Can share ideas and make more money by working on products together
