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BUSINESS > Operational Management > Flashcards

Operational Management Flashcards

1
Q

Operating Management is an area of management concerned with…

A

An area of management concerned with designing and controlling the process of production and redesigning business operations to maximise efficiency.

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2
Q

Operational Objectives (6) :

A
  • Costs.
  • Quality.
  • Speed of response and flexibility.
  • Dependability.
  • Environmental objectives.
  • Added value.
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3
Q

(Operational Objectives) Costs :

A
  • Includes reducing unit costs, fixed costs and variable costs per unit.
  • Important to ensure survival, these need to be as low as possible. The more items you produce, the lower the unit costs.
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4
Q

(Operational Objectives) Quality :

A
  • Measured using customer satisfaction ratings, scrap rate and punctuality.
  • Important because it limits number of customer returns, they could also raise selling price of product, good reputation.
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5
Q

(Operational Objectives) Speed of response and flexibility :

A
  • For some businesses, the speed of response and having flexibility for change is vital.
  • Important since it will improve customer service, ensure deadlines are met, utilise capacity and have more efficient production processes.
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6
Q

(Operational Objectives) Dependability :

A
  • Some businesses don’t want to let customers down so focus on ensuring they meet promises or are dependable. Ensure there’s money for maintenance costs.
  • Important because they’ll have reputation of good quality, and if they have loyal customers they can increase the price.
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7
Q

(Operational Objectives) Environmental Objectives :

A
  • Include things like reducing waste and carbon footprint, increasing recycling etc.
  • Important because pressure groups could impact sales of business e.g. boycotts. Bad reputation. It can add value.
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8
Q

(Operational Objectives) Added Value :

A
  • It allows the business to develop a USP for its product.
  • Important because it’s necessary to make profit and can grow and improve businesses.
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9
Q

Efficiency :

A

All businesses try to be as efficient as possible. This means controlling costs when making goods or services.

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10
Q

Part of the Operational objectives is to be able to measure the efficiency of the business, this can be done using (4) :

A
  • Labour productivity.
  • Unit costs.
  • Capacity.
  • Capacity utilisation.
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11
Q

Labour Intensive :

A

When labour costs outweigh capital costs of a business.
- Spent more (investing in) people to complete their goods and services than the capital (money) they have invested in.
e.g. hospitality, nail technician, Alton Towers.

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12
Q

Capital Intensive :

A

Production methods that require a high level of investment in capital equipment and technology, rather than labor
e.g. Car manufacturers.

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13
Q

Labour Productivity Formula :

A

Output per period/
No. of employees in that period

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14
Q

Methods of improving Productivity (5) :

A
  • Increase hours worked.
  • Training.
  • Changing way work is done.
  • New technology.
  • Motivation.
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15
Q

Capacity :

A

The maximum total level of output or production that a business can produce in a given time period.
- A company that is producing at this level is said to be producing at full capacity.

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16
Q

Capacity Utilisation is a measure of the extent to…

A

A measure of the extent to which an organization is using its available resources.

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17
Q

Capacity Utilisation Formula :

A

Capacity output per
annum (or month)
—————————— x 100
maximum possible
output per annum
(or month)

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18
Q

Unit Costs, & FORMULA :

A

The cost of producing one unit of output.
Total Cost (in £)
———————-
Units of output (in volume)

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19
Q

Spare Capacity allows you to…

A

Plan maintenance time, this is essential, especially if the machine or tools are very high value to the firm.

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20
Q

___% capacity utilisation is the…
- Lower shows that…
- Too high means…

A

93% capacity utilisation is the optimum.
- Lower shows that resources aren’t being used, therefore high FC per unit.
- Too high means workers are pressured, no time for maintenance.

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21
Q

Advantages of Spare Capacity (4) :

A

+ More time for maintenance repair.
+ Less pressure on employees.
+ Improvements can be planned in.
+ Can cope with sudden increase in demand, especially in a fast moving industry.

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22
Q

Disadvantages of Spare Capacity (4) :

A
  • Higher proportion of fixed costs per unit.
  • Negative image of being un-successful.
  • Higher unit costs lead to lower profits, therefore lower sales volume.
  • With less work, employees become bored or demoralised.
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23
Q

Methods to increase capacity (4) :

A
  • Increase number of workforce hours (BUT, could demotivate them).
  • Outsource production (BUT, quality could slip).
  • Larger premises (BUT, risk of high-cost).
  • Improve machinery (BUT, expensive).
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24
Q

Capacity Utilisation :

A

The percentage of total capacity that is actually being achieved in a given period.

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25
Q

Lean Production :

A

Is an approach to production that aims to minimise waste, which can reduce costs and improve quality.

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26
Q

(Lean Production) The includes the waste of (4) :

A
  • Materials.
  • Times
  • Energy.
  • Human effort.
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27
Q

Aims of Lean Production (5) :

A
  • Zero delay.
  • Zero stocks.
  • Zero mistakes.
  • Zero waiting.
  • Zero accidents.
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28
Q

Techniques involved in Lean Production (5) :

A
  • Time-based management.
  • Cell production.
  • Benchmarking.
  • Kaizen.
  • Just-in-time.
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29
Q

Lean Production and Employees (3) :
- Requires all employees to…
- Managers need to motivate…
- Managers must ensure good…

A
  • Requires all employees to involved in improvement of business processes.
  • Managers need to motivate staff to find better ways of doing processes such as Kaizen.
  • Managers must ensure good relations with staff so that the production process is not stopped.
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30
Q

(Lean Production) Just-in-time :

A

Production that holds as little stock as possible.
- Items are ordered just in time to be used.

31
Q

(Lean Production, Just-in-time)
- JIT reduces…
- Suppliers must respond…

A
  • Reduces waste so that production of products only takes place when an order is made.
  • Suppliers must respond very quickly to orders so products are delivered on time and without any defects.
32
Q

(Lean Production) Advantages of Just-in-time (5) :

A

+ Reduced stock holding.
+ Smaller warehouses.
+ Less staff needed to manage and control stock.
+ Improved relationship with suppliers.
+ Less risk/waste as stock will not perish or go out of date.

33
Q

(Lean Production) Disadvantages of Just-in-time (4) :

A
  • Production line could stop completely, leaving staff and machinery idle.
  • Reliability of suppliers : could be problems with quality or delivery of items.
  • Reliability of raw materials : could be problems with quality or availability.
  • Reduced options for responding to customers demands.
34
Q

Kaizen :

A

Means ‘continuous improvement’.
- It is an approach to production that aims to achieve change from a series of small steps.

35
Q

Benefits of Kaizen (7) :

A

+ Improve employee motivation (feel like they’re being listened to/job is easier).
+ Higher capacity utilisation.
+ Less waste.
+ More energy efficient.
+ Reduced risk.
+ Better customer experience.
+ More accurate information.

36
Q

Just-in-case :

A

Produce lots of buffer stock just in case.

37
Q

Just-In-Time vs Just-In-Case :

A

JIT : Less waste, order only what’s needed, lower cost, smaller warehouse, higher risk if delays, difficult to respond to increase in demand.
JIC : More waste, have buffer stock, higher cost, bigger warehouse, less risk, production precision.

38
Q

Cell Production involves organising…

A

Organising production around teams instead of a production line.
- Production is divided into a series of different stages which are undertaken by teams or ‘cells’.

39
Q

Cell Production, + (3) :

A

+ Team or ‘cell’ members can divide the work among themselves ; can also share skills & expertise.
+ Motivating as employees feel they have more control.
+ Improved quality as one ‘cell’ can refuse work of previous ‘cell’ if poor quality (encourages workers to take responsibility0.

40
Q

Cell Production, - (3) :

A
  • Business may need to invest heavily in new machinery because each ‘cell’ may require the same capital items.
  • Different ‘cells’ may work at different speeds, can lead to conflict & tension.
  • Output may be lower than a ‘flow’ production system.
41
Q

Technology and Operations :

A

Using technology helps businesses become more capital intensive, more efficient and can change the production process.

42
Q

Benefits of Technology & Operations (7) :

A

+ Reduce costs.
+ Improve quality.
+ Reduce waste.
+ Financial monitoring.
+ Improve productivity.
+ New and better products and services.
+ Better working-conditions.

43
Q

Using Technology includes (4) :

A
  • Robotics.
  • Automation.
  • Communication.
  • Design.
44
Q

(Factors that lead to good quality product/service) INTANGIBLE (5) :

A
  • Customer service.
  • Interior design.
  • Marketing/logo.
  • Convenience.
  • Reputation.
    etc.
45
Q

(Factors that lead to good quality product/service) TANGIBLE (5) :

A
  • Raw materials.
  • Durability.
  • Design of product.
  • Packaging.
  • Technology.
46
Q

Benefits of High Quality Products (7) :

A
  • Creating USP.
  • Impact on selling price.
  • Pricing flexibility.
  • Cost reductions.
  • Improved reputation.
  • Higher demand.
  • High customer satisfaction.
47
Q

Quality Control :

A

A system that uses inspectors to check the quality of work at the end.
- Good for low-skilled workers.

48
Q

(Quality Control) Advantages & Disadvantages :

A

+ Inspectors can spot problems and put them right.
+ Quality checks at the end can stop faulty goods reaching customers (would damage reputation).
- Expensive to operate.
- Doesn’t encourage team responsibility.
- Responsibility rests with inspectors, therefore staff take no responsibility, could reduce motivation.

49
Q

Quality Assurance :

A

A system that improves quality by arranging every process to get products right the first time.
- Check at different stages.
- Everyone is responsible.

50
Q

(Quality Assurance) Advantages & Disadvantages :

A

+ Reduced costs (less waste, rep too).
+ Greater consistency.
+ Motivates workforce due to increased responsibility.
- Needs a change in the company culture.
- Could increase short-term costs (e.g. staff training).
- Can take time to imbed the system,

51
Q

Total. Quality Management :

A

An approach to quality in which everyone is focused on preventing errors occurring and ensuring quality at each stage of the production process.

52
Q

Job Production :

A

Each product is bespoke to customer needs.

53
Q

Flow Production :

A

Mass production, little to no variation.

54
Q

Difficulties of improving quality (6) :

A
  • Production costs.
  • Staff training costs.
  • Research & development costs.
  • Resistance to change.
  • Skills + availability of staff.
  • Firm’s reputation.
55
Q

(Managing Inventory) Low Stock Levels (4) :

A
  • Consistent with lean production.
  • Less cash tied up in working capital, can be used elsewhere in the business.
  • Lower stock holding costs (e.g. storage).
  • Lower risk of stock becoming obsolete.
56
Q

(Managing Inventory) High Stock Levels (4) :

A
  • Better able to hand unexpected changes in demand.
  • Production fully supplied - no delays.
  • Potential lower unit costs ordering in bulk.
  • Less likelihood of going out of stock.
57
Q

Supply Chain :

A

All the businesses, people and activities that take part in the production processes from the start until it gets to the customer.
- e.g. effective supply chain is Amazon.

58
Q

Inventory :

A

Otherwise known as “stock”, inventories are the raw materials, work-in-progress and finished goods held by a business to enable production to take place and to meet customer demand.
e.g. restaurant has low levels, retailer has high.

59
Q

What factors influence amount of Inventory held by a business? (3)
- The need to…
- The need to manage…
- Risk of…

A
  • The need to satisfy customer goods.
  • The need to manage working capital.
  • Risk of losing value.
60
Q

(Stock Control Chart) Maximum Stock Level :

A

The highest amount of stock that a company is able to hold.

61
Q

(Stock Control Chart) Re-order Level :

A

Acts as a trigger point, so that when stock falls to this level, the next supplier order should be placed.

62
Q

(Stock Control Chart) Lead Time :

A

Amount of time between placing the order and receiving the stock.

63
Q

(Stock Control Chart) Minimum Stock Level :

A

Minimum amount of product the business would want to hold in stock.

64
Q

(Stock Control Chart) Buffer Stock :

A

An amount of stock held as a contingency in case of unexpected orders so that such orders can be met and in case of any delays from suppliers.

65
Q

Outsourcing is the delegation of…

A

The delegation of one or more business processes to an external provider, who then owns, manages and administers the selected processes to an agreed standard.
- Entire business functions.

66
Q

Subcontracting :

A

The practice of outsourcing specific tasks or projects to other companies or individuals who specialise in those tasks.
- Element of production, e.g. cake maker.

67
Q

Factors to consider when Outsourcing (7) :

A
  • If there are Language barriers.
  • If there’s an Educated workforce.
  • If there’s Political stability.
  • If they’re Close to large markets.
  • If it has Established Infastructure.
  • Culture of place.
  • Ethics of place.
68
Q

Advantages of Outsourcing/Subcontracting (4) :

A

+ Access of specialist suppliers with greater capabilities and higher quality.
+ Reduce costs (through economies of scale).
+ Business can focus on its core activities - where it can “add value”.
+ Makes operations more flexible - e.g. easier to change capacity when needed.

69
Q

Disadvantages of Outsourcing/Subcontracting (4) :

A
  • Risk that outsourcing supplier will fail to meet quality standards or otherwise not deliver.
  • Potential loss of expertise from the business.
  • No guarantee that costs will be lower.
  • Could cause bad reputation (ethics & quality).
70
Q

Economies of Scale vs Diseconomies of Scale :

A

Economies of Scale : Arise when unit costs fall as output rises.
Diseconomies of Scale : Occur when a business grows so large that the costs per unit increase, usually due to difficulties of managing a larger workforce.

71
Q

Mass Customisation involves mass production techniques… :

A

A production process involving mass production techniques where the output is tailored (to some extent) to the requirements of the customer.

72
Q

Mass Customisation Production, ADVANTAGES (4) :

A

+ Lower unit costs combined with personalised product = higher added value.
+ Can change a premium price.
+ Builds brand strength and loyalty.
+ Lower inventory (cash flow benefit).

73
Q

Mass Customisation Production, DISADVANTAGES :

A
  • More time consuming.
  • If faulty, may not be able to sell on.

BUSINESS (9 decks)

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