Operations Flashcards
operational objectives
- quality
- costs
- efficiency
- innovation
- environment
- speed of response
internal factors influences operational objectives
- nature of product - tech products have a focus on innovation
- avaliability of resources- increasing output requires capacity
- other departments- finance, marketing, HR
- overall objectives- if business is very environmentally friendly this must be considered
external influences on operational objectives
- competitors performance
- market conditions
- demand for product- flexibility of production to ensure output doesn’t go over demand
- changing customer needs
- new technology
Added value
sales revenue – cost of Brought in goods and services
Capacity utilisation formula
(current output/max capacity) x 100
effects of high capacity over 90
- decline in quality
- potentially need to turn away customers
- NO downtime = machines are on ALL the time
- NO margin of error
- can’t temporarily increase capacity , to deal with increase in demand
- potential surplus stock if output is higher than demand
How to increase capacity
operating more and for longer
- buying more machines
- increase staff levels
- increase productivity
- if demand increase is temporary they could sub-contract employees
Effects of low capacity utilisation
- increase costs/ unit costs
-
Dealing with under- utilisations (low capacity)
- aim to increase demand = changing marketing mix
- subcontracting work for other firms
- reduce capacity by closing down stores
- reducing overtime, allocating staff to work for other businesses, not renewing temporary contracts (SHORT TERM)
- redundancy, selling off equipment (LONG TERM)
Labour productivity calculation
output during period/ number of employees
How to increase labour productivity
- improving employee motivation
- training
- new technology
Lean production
keeping waste to a minimum
- save business costs
- can allow businesses to meet objectives like reducing costs, being environmentally friendly etc
- JIT, time- based management, Kaizen
JIT
holding little stock, all orders are made just in time for when customers order them
- lower storage costs
- improved cash flow, less money tied up in stock
- customers cannot be supplied during production strike
- supplier HAVE to be reliable
Time- base management
reducing wasted time within the businesses production process.
- allows companies to compete on time, by getting there products to the market quickest
- depends on flexible production techniques
- effective communication between manages and staff is essnential, NEED FOR CULTURE TRUST
- staff need to be multi skilled- training is important.
Advantages and disadvantages of capital intensive business
- cheaper than manual labour in the long term
- machinery is often more precise = limits human error
- machinery is able to work 24/7
-machines are easier to manage than people
HOWEVER - high set up costs
- machines are inflexible
- machines break downs take longer to fix
- fear of workers being replaced by machines can lead to decreased employee motivation.
advantages and disadvantages of labour intensive production process
- people are flexible and can be retained
- cheaper for small- scale production
- cheaper where low labour costs are available (China)
- workers can solve any problems that arise during production and suggest ways to improve quality
HOWEVER - its harder to manage people
- people can be unreliable
- people can’t work without breaks/holidays
- wage increases mean increases in costs
-labour costs as a percentage of turnover are high
Quality control
- assumes errors are unavoidable
- detects error and puts them right
- quality control inspectors check other peoples work and are responsible for quality
Quality assurance
- asumes you can avoid errors
- prevents error and aims to get it right first time
- employees check their own work. Workers are responsible for passing on good faulty work
Affects/ Needs for quality assurance
- empowering for employees therefore highly motivating
- training is very important
- ## workers must be motivated and committed
Total quality management
Meaning the whole workforce is committed to quality improvements Adv: - helps build team morale - boosts company reputation - fewer faulty products being made Disadv: - time consuming - can demotivate staff - usually expensive to introduce (Training)
Quality circles
Groups that meet regularly to discuss quality control issues
- knowledge of employees from various departments
- great way to get staff involved and improve motivation and productivity
- however suggestions can sometimes be unrealistic and management may not listen
Kaizen
Lean production method, employees should be improving their work slightly all the time
- employees have some control over decision making
- helps workers feel involved in quality assurance
- cheap to introduce
- not great when businesses are need of urgent improvements to quality
- firm needs to be committed to methods in the long term
Disadvantages of holding stock
- high storage costs
- wastage costs (perishable goods )
- opportunity costs - business could potentially invest the capital they have tied up in stock
Stock control element s
Lead time - the time it takes to receive goods after ordering them from supplier
buffer stock - the stock a business needs to have when they re-order to prevent them running out
Re-order quantity- the amount the company orders from supplier
Peripheral workers
employees who aren’t essential to a business but that the business empties when they need more staff.
Allow businesses to meet demand
keeps fixed costs low.
Outsourcing (demand)
when businesses contract out some activities to other businesses
can allow businesses to accept contracts they would otherwise turn down
- can allow a business to benefit from specialised knowledge
- can keep fixed costs low
however
- outsourcing means the business doesn’t have control over the quality of the work = may have a negative effect on the businesses reputation
Impacts of good supplier relationship
- improve operational performance
- productivity will increase
- cause costs to fall and so profit increase
- allows businesses to meet customer expectations
- Linked networks = allowing both supplier and business to have access to inventory levels can improve efficiency cost costs and improve customer relations
- companies who work closely with supplier can share new ideas and ultimately save money on innovative ventures
Ways to improve supply chain
- only buy supplies that the business needs
- understanding the different between strategic (essential goods and services to the business) and non-strategic(non essentials/low value stationary) suppliers
- limit the number of suppliers they have to be more costs effective HOWEVER can be risky to have 1 supplier if their are issues with sed supplier
- having alternative supply source
