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AQA A-Level Business > Operational Objectives > Flashcards

Operational Objectives Flashcards

1
Q

What is Operational Management?

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

Why are Costs important for a business?

A

Costs need to be low enough for the business to be making profit -> survival.

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3
Q

Why is Quality important for a business?

A

It will improve customer service and so will reduce the amount of customer returns, therefore less scrap output is made/wasted.

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4
Q

Why is Speed of Response and Flexibility important for a business?

A

If they are quick then they can meet deadlines and it will improve customer service.

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5
Q

Why is Dependability important for a business?

A

Helps improve a businesses reputation and brand image so it means you can gain loyal customers as they can depend on the business.

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6
Q

Why are Environmental Objectives important for a business?

A

Recycling can help reduce the waste a business produces which lowers carbon emissions -> which allows you to charge more and gain a better reputation -> allows value to the product -> satisfies pressure groups.

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7
Q

Why is Added Value important for a business?

A

Can maximise profitability by improving the brand image.

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8
Q

What is Efficiency?

A

All businesses try to be as efficient as possible. This means controlling costs when making goods or services. Part of the operational objectives is to be able to measure the efficiency of the business.
This can be done using:
-Labour productivity
-Unit costs
-Capacity
-Capacity utilisation

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9
Q

What does labour intensive mean?

A

When labour costs outweigh capital costs of a business / when the business has spent more on (invested in) people to complete their goods or services than the capital (machinery) they have invested in.

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10
Q

What is the Formula for Labour Productivity?

A

Output per period/number of employees in that period

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11
Q

What are examples of Labour Intensive businesses?

A

-Hospitality
-Luxury clothing (tailors)
-Hairdressers
-Morgan Motors (handcrafted)

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12
Q

What are the Methods of Improving Labour Productivity?

A

-Training to improve output
-Investing in new technology and equipment
-Increasing the number of hours worked
-Changing the way work is done
-Motivating employees

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13
Q

What is Capacity?

A

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

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14
Q

What is the Formula for Capacity Utilisation?

A

Capacity output per annum (or month)/Maximum possible output per annum (or month) x100

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15
Q

What are Unit Costs?

A

The cost of producing one unit of output

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16
Q

What is the Formula for Unit Costs?

A

Total costs (£)/Units of output (in volume)

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17
Q

What is Spare Capacity?

A

-Capacity that allows you to plan maintenance time - this is essential, especially if the machine or tools are very high value to the firm.
-Most people recognise that 93% capacity utilisation is the optimum.

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18
Q

What are the Advantages of Spare Capacity?

A

-More times for maintenance and repair.
-Less pressure on employees.
-Improvements can be planned in.
-Can cope with sudden increases in demand especially in a fast moving industry.

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19
Q

What are the Disadvantages of Spare Capacity?

A

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

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20
Q

How can a business Increase it’s Capacity?

A

Operate for more hours, higher more employees, outsource production.

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21
Q

What is Job Production?

A

Production done by people, hand made, tailored to customer e.g. suit tailor, wedding cake baker.

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22
Q

What are the Advantages and Disadvantages of Job Production?

A

+High quality
+Can customise products
-Time consuming/inefficient
-Human error

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23
Q

What is Flow Production?

A

Production done by machines, products are all the same, mass production and continuous lines e.g. household food production, car manufacturer.

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24
Q

What are the Advantages and Disadvantages of Flow Production?

A

+Less time consuming/efficient
+Economies of scale (lower unit costs)
-Can’t differentiate the product
-Not tailored

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25
Q

What is Lean Production?

A

An approach to production that aims to minimise waste, which can reduce costs.
This can include the waste of:
-Materials
-Time
-Energy
-Human effort

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26
Q

What are the Aims of Lean Production?

A

-Zero delay
-Zero stocks
-Zero mistakes
-Zero waiting
-Zero accident

27
Q

What is Just In Time Production (JIT)?

A

Production where the business holds as little stock as possible. Items are ordered just in time to be used.

28
Q

What are the Strengths of JIT?

A

-Reduce warehouse costs
-Reduced waste
-Products can be tailored/customised by customers
-Increased efficiency -> lower unit costs
-Reduced stock holding
-Improved relationship with suppliers
-Less risk as stock won’t perish

29
Q

What are the Limitations of JIT?

A

-Can’t meet surges in demand -> as you have to call a supplier for each order
-Chance of supplier delay
-Heavily reliant on supplier
-Procurement process may take longer
-Less options for responding to customer demands

30
Q

What is Kaizen?

A

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

31
Q

What are the Benefits of Kaizen?

A

-Higher capacity utilisation
-Less waste
-Reduced risk
-More energy efficient
-More accurate information
-Better customer experience

32
Q

What are the Key Difference of Just In Case production and Just In Time production?

A

JIC:
-More waste
-Bigger warehouse
-Procuts can’t be tailored
-Can respond to increases in demand
-Poor communication
-Production approximation
JIT:
-Less waste
-Smaller warehouse
-Products can be tailored
-Difficult to respond to increases in demand

33
Q

What are the Benefits of using Technology in the Production Process?

A

-Cheaper labour costs
-Improved quality
-Quicker/more efficient -> increased productivity and lower unit costs
-Can be open for more hours (extended operational capacity/hours)
-Reducing waste
-Better working conditions for staff
-Financial monitoring
-New products and services

34
Q

What is Cell Production?

A

Organising production around teams instead of a production line. The production is divided into a series of different stages which are under taken by teams or ‘cells’.

35
Q

What are the Advantages of Cell Production?

A

-Team or ‘cell’ members can divide the work among themselves; they can also share their skills and expertise.
-Cell production can be motivating as they feel they have more control over their work.
-One ‘cell’ can refuse the work of the previous ‘cell’ if production is of poor quality. Each cell is taking responsibility for its own work.

36
Q

What are the Disadvantages of Cell Production?

A

-Different ‘cells’ may work at different speeds causing conflict or tension between cells.
-Output may be lower than a flow production system
-Business may need to heavilty invest in new machinery and equipment as each cell may require the same capital items.

37
Q

What does using Technology Include?

A

-Robotics
-Automation
-Communication
-Design

38
Q

How does Technology help a business?

A

It helps a business become more capital intensive, more efficient and can change the nature of the production process.

39
Q

What are the Intangible Factors that lead to a product being perceived as High Quality?

A

-Price
-Reputation
-The instore experience (lighting, scent) -> interior design of the brand
-Customer experience
-Post sales service -> refundabiltiy
-Marketing
-Delivery speed/convenince
-Brand image/logo
-Availability/exclusivity

40
Q

What are the Tangible Factors that lead to a product being perceived as High Quality?

A

-Durability
-Design of the product (feel)
-Packaging
-Quality of the raw materials
-Technology

41
Q

What are the benefits of High Quality?

A

-Improved selling price
-Improved reputation
-Increased sales

42
Q

What is Quality Control?

A

A system that uses inspections to check the quality of work at stages of the manufacturing process (checked at the end).

43
Q

What are the Advantages and Disadvantages of Quality Control?

A

+Inspectors can stop common problems and put them right.
+Quality checks at the end can stop faulty goods reaching customers.
-Expensive to operate
-Responsibility rest with the inspectors, therefore staff take no responsibility, which could reduce motivation.
-Does not encourage team responsibility.

44
Q

What is Quality assurance?

A

A system that improves quality by arranging every process to get products right first time.

45
Q

What are the Advantages and Disadvantages of Quality Assurance?

A

+Reduced costs (less waste).
+Greater consistency.
+Motivates workforce -> Worker takes responsibilty.
-Needs a change in the company culture (need to train staff)
-Could increase short term costs
-Can take time to enable the system.

46
Q

What is Total Quality Management?

A

An approach to quality in which everyone is focused on preventing erros occuring and ensuring quality at each stage of the production process. The whole business is focused on quality not just on aspect or element like production.

47
Q

What are the Difficulties of Improving Quality?

A

-More expensive -> may require more training
-Time consuming -> may lower production output
-May be difficult to find new suppliers if the business wants higher quality materials (raw materials costly)
-High initial costs
-Research and development costs
-Firm’s reputation e.g. budget retailer
-Skills and availability of staff
-Resistance to change

48
Q

What are the Advantages of Low Stock Levels?

A

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

49
Q

What are the Advantages of High Stock Levels?

A

-Better able to handle unexpected changes in demand.
-Less likelihood of going out of stock.
-Production fully supplied.
-Potential lower unit costs by ordering in bulk.

50
Q

What are Supply Chains?

A

All the businesses, people and activites that take part in the production processes from the start until it gets to the customers.

51
Q

What is 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.

52
Q

What Factors influence the amount of Inventory held by a business?

A

-Demand (the need to satisfy customer demand).
-Warehouse costs/ storage space available.
-Whether it is perishable.
-Method of production (JIT or JIC).
-Reliability of suppliers.
-Economies of scale.
-Budget.
-The need to manage working capital.
-Risk of inventory losing value.

53
Q

What is the Maximum Stock Level?

A

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

54
Q

What is the Re-order Level?

A

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

55
Q

What is the Minimum Stock Level?

A

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

56
Q

What is the Lead Time?

A

The amount of time betwen placing the order and receiving the stock.

57
Q

What is the Buffer Level?

A

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

58
Q

What is Outsourcing?

A

The delegation of one or more business processes to an external provider, who owns, manages and administers the selected process to an agreed standard -> outsourcing an entire element e.g. production.

59
Q

What is Subcontracting?

A

The practice of outsouring specific tasks on projects to other companies or individuals who specialise in those tasks -> outsourcing a specific element/task of production.

60
Q

What are Factors that Effect Outsourcing?

A

-Language barriers.
-Legislation.
-Costs of shipping and employee costs.
-Quality.
-Shipping time/Lead time.
-Business regulations.
-Skillset of employees/educated workforce.
-Tariffs.
-Ethics.
-Cultural differences
-Political factors/stability e.g. war -> may not want to associate with the place.
-Close to large markets
-Established infrastructure including IT and internet.

61
Q

What are the Advantages of Outsourcing and Subcontracting?

A

-Businesses can react to changes in demand quickly.
-Supports developing nation - regulation.
-Economies of scale.
-Reduced costs.
-Reduced HR/operations management at home.
-Business can concentrate in their ‘core’ business.

62
Q

What are the Disadvantages of Outsourcing and Subcontracting?

A

-No direct control over quality of the products.
-Costs more to ship.
-Changes in quality -> may lead to a bad reputation.
-Damages USP.
-Tariffs.
-Negative PR.
-High initial costs.

63
Q

What is Mass Customisation?

A

The personalisation or custom tailoring of goods or services to meet customer needs but at near mass production prices (personalisation and production line) e.g. Toyota.

64
Q

What are Logistics?

A

The transportation of the product at each part in the supply chain.

AQA A-Level Business (6 decks)

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