Operational decisions

Question 1

What are the examples of operational objectives?

Answer 1

1) Quality
2) Flexibility - reacting to customers wants
3) Improving speed of response and flexibility
4) Adding value
5) Meeting environmental standards

Question 2

What is added value and how do you calculate it?

Answer 2

Added value is increasing the difference between cost of raw materials and selling price

= Sales revenue - costs of bought goods + services

Question 3

How can added value be achieved?

Answer 3

Increasing selling price or reducing the cost of raw materials

Question 4

Internal influences on Operational objectives?

Answer 4

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

Question 5

External influences on operational objectives?

Answer 5

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

Question 6

What are the 5 common methods of production?

Answer 6

1) Job production
2) Flow production
3) Batch production
4) Cell production
5) Lean Production

Question 7

What is job production?

Answer 7

Production of one off items by skilled workers

Question 8

What is flow production?

Answer 8

Mass production on a continuous production line with division of labour

Question 9

What is Batch production?

Answer 9

Production of small bathes of identical products

Question 10

What is cell production?

Answer 10

Production is divided into sets of tasks, each completed by a workgroup

Question 11

What is lean production?

Answer 11

Production that aims to keep waste to a minimum

Question 12

What is capacity?

Answer 12

The max output an organisation can produce at a given period

Question 13

What is capacity utilisation?

Answer 13

How much capacity a business is using

Question 14

How do you calculate CU?

Answer 14

Output ÷ Capacity x100

Question 15

Why is 90% CU better than 100%?

Answer 15

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

Question 16

How can a firm increase its capacity to meet output with demand?

Answer 16

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

Question 17

What is under utilisation?

Answer 17

Low capacity utilisation and it is inefficeint as it means a business isn’t making use of the machines and facilities

Question 18

What doe UU mean for unit costs?

Answer 18

Unit costs increase as fixed costs are spread over fewer units

Question 19

How do you calculate unit costs?

Answer 19

Total costs ÷ unit output

Question 20

How can a firm increase capacity?

Answer 20

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)

Question 21

Whats the difference between Productivity and efficiency?

Answer 21

Productivity - Measured as the output per worker in a given period
Efficiency - Getting more output from a given number of inputs

Question 22

What does labour productivity measure?

Answer 22

How much each employee produces, the higher it is the better the workforce is doing

Question 23

How do you calculate labour productivity?

Answer 23

Output per period ÷ number of employees

Question 24

How can a manager increase labour productivity?

Answer 24

Training to increase productivity,new technology to increase speed & improving motivation

Question 25

Why can increasing labour productivity not always be good for a business or its workers?

Answer 25

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

Question 26

What are examples of lean production methods?

Answer 26

Just In Time Production

Time Based management

Question 27

What is JIT?

Answer 27

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

Question 28

What is the system of repeating orders in JIT production?

Answer 28

Kanban

• Reduces storage costs and cash flow is improved as no stock is held up in stock

Question 29

Whats a disadvantage of JIT?

Answer 29

-No stock means that during strikes customers can’t be supplied with goofs

Question 30

What is time based management?

Answer 30

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

Question 31

What is needed for time based management and what are the advantages of it?

Answer 31

• 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

Question 32

What is quality control?

Answer 32

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

Question 33

What is quality assurance?

Answer 33

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

Question 34

What are the methods of improving quality?

Answer 34

Quality circles- Employees meet at regular intervals to discuss quality control issues.
-Use knowledge from all departments

Question 35

What is Kaizen?

Answer 35

Lean production method where employees should be improving work all the time
-Helps workers feel involved in in quality assurance

Question 36

What is total quality management?

Answer 36

Means the whole workforce is committed to quality improvements, every department focuses on quality in order

Question 37

What are the advantages of total quality management?

Answer 37

• Helps bonding as everyone is involved
• Boosts company reputation for good quality products
• leads to fewer fault so less waste

Question 38

What are the disadvantages of TQM?

Answer 38

• Takes a long time to introduce TQM

- can demotivate staff

Question 39

What is the opportunity costs?

Answer 39

Costs of investing money into stock rather than something else

Question 40

What are the ways of matching supply and demand?

Answer 40

1) Peripheral workers
2) Outsourcing
3) Mass customisation
4) Temporarily increase CU to 100%

Question 41

What is a peripheral worker?

Answer 41

aren’t essential but are employed when ore staff is needed e.g on temporary or part time contacts

Question 42

What is outsourcing?

Answer 42

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

Question 43

What factors should be considered when choosing a supplier?

Answer 43

• Reliability
• Price
• Payment (how much and when)
• quality (is it consistent)

Question 44

What are the several ways of building a relationship with supplier?

Answer 44

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