operational decisions- increasing effiency and productivity

Question 1

what’s efficiency?

Answer 1

this means using resources effectively. unit costs is a key way of measuring efficiency

Question 2

define labour productivity

Answer 2

measures the amount of goods produced in relation to the number of employees

Question 3

what’s lean production?

Answer 3

the adoption of operational techniques that reduce waste

Question 4

what is just in time? (JIT)

Answer 4

a method of minimising the amount of stock held by a business

Question 5

what’s kaizen?

Answer 5

improving efficiency by making a small but continuous improvements to operational processes

Question 6

what’s labour intensive?

Answer 6

when operations process uses a high proportion of labour in production compared to the amount of capital equipment used

Question 7

what’s capital intensive?

Answer 7

when operations process uses a high proportion of capital equipment in production compared to the amount of labour used

Question 8

2 ways how you can improve capacity utilisation when capacity is low?

Answer 8

• boost sales by changing aspects of the marketing mix

- reduce capacity permanently (rationalisation/downsizing) if it is a long term problem

Question 9

2 ways in which a firm could improve capacity utilisation if capacity is high?

Answer 9

• outsource production to other firms to meet demand

- reduce demand by changing elements of the marketing mix

Question 10

2 ways which increasing labour productivity can improve efficiency

Answer 10

• investing in machinery and equipment including technology

- training workers so they have the skills required to do their job

Question 11

2 problems of increasing labour productivity

Answer 11

• employees may demand higher pay as reward for their higher output
• output per worker may increase but it may be done in a wasteful manner so overall efficiency may not improve

Question 12

what are the 3 factors which will affect a business’s choice of whether they will be capital or labour intensive?

Answer 12

• the size of the firm- large firms more capital intensive (economies of scale)
• type of product- large quantities (capital) one off specialist products (labour)
• finance available to them- finance available (capital)

Question 13

what are the 4 components involved in lean production?

Answer 13

• quality (total quality management)
• time based management
• just in time (JIT)
• kaizen

Question 14

3 characteristics of just in time (JIT)

Answer 14

• customer focus- reacts to consumer demand rather than on pushing product out to the market
• suppliers are part of the system so a partnership approach to suppliers is essential
• significantly reduces all 3 types of stock freeing up storage and production space

Question 15

3 advantages of JIT systems

Answer 15

• less money tied up in stock so cash flow is better
• close links with suppliers; seen as partners
• less chance of having out of date stock; waste is reduced

Question 16

3 disadvantages of JIT systems

Answer 16

• vulnerable to supply problems
• loss of custom if deliveries are late
• higher delivery charges

Question 17

what are the 6 ways in which new technology is used in business

Answer 17

• automation- replacing workers with machines
• robotics- science of using machines in production
• 3D printing/ additive manufacturing
• computer aided design- designers use computer modelling to develop new ideas
• computer aided manufacture- computers to operate machinery
• computer aided process planning- computers to identify the most efficient ways to manufacture products

Question 18

define capacity

Answer 18

maximum output a business can produce with its current resources