Operations Flashcards
Purpose of stock/ inventory management
To prevent overstocking
To prevent understocking
Purchasing mix (factors to consider for suppliers)
Cost of raw materials
Quality of raw materials
Lead time of delivery
Distance from supplier to customer
Reliability /reputation
Credit facilities
Quantity of raw materials
Overstocking consequences
Supplies go out of date
Supplies could go out of fashion
Increase risk of theft
Increased storage costs
Money tied up in capital
Consequences of understocking
Production may have to stop
Customers may not be able to purchase product
Lose economies of scale, increasing cost of raw materials
Inventory management diagram labels
X axis - time
Y axis - stock level
Maximum level - top line
Reorder level - middle line
Minimum level - lowest line
Gap between minimum and zero - buffer stock
Point where stock line meets reorder level - reorder line
Point where stock line meets minimum level - delivery time
Difference between min and max level - reorder quantity .
Lead time - the difference between the reorder time and delivery time .
Maximum inventory level
The level of stock in a business which is used to prevent the business form overstocking
Minimum inventory level
The level of stock used to prevent the business from understocking and running out of stock
Reorder level
The level of inventory where a new order is sent to supplier, to refill inventory before business hits the minimum inventory level.
Reorder time
Where a business sends a new order to a supplier.
Lead time
The time it takes for a supplier to deliver an order, after the order has been sent to them.
Computerised stock control
Where a business uses an electronic system, such as epos to ensure that the business doesn’t over or under stock.
Manual stock control
Where a business keeps track of their stock level using human labour, and someone has to count stock.
Advantages of computerised stock control
Inventory is always up to date
Automatic reordering
Managers can gather sales statistics to see how well products are performing, and make management decisions
More secure, deterring theft
Just in time
An alternative inventory management system where a business orders the raw materials for the business exactly when the raw materials are required.
Advantages of Just in time
No waste of raw materials
No money tied up in capital
Cuts out need for storage
Business is more responsive to external factors changing
Relationship with supplier is dependable (could be bad)
Disadvantages of JIT
Late deliveries stop production
Admin and order costs increase
If there is a surge in product demand the business won’t be able to respond
Economies of scales can’t be taken advantage of
Can be time consuming to constantly check quality of raw materials entering the business production chain.
Disadvantages of computerised stock control
If power is down stock system breaks down
High startup cost
Centralised storage definition
Where a business uses one large storage location to store stock, which delivers to all retail locations, and us typically purpose built.
Decentralised storage definition
Where a business uses multiple small storage locations to store stock, and each location will only deliver to one retailer or department.
Advantages of centralised storage
Suppliers deliver to one location -reduce admin costs
Store more stock - Economies of scale
Often located close to infrastructure -easily accessible
Greater uniformity over whole business, meaning business may be more efficient
Better security since security
is in one location.
Disadvantages of centralised storage
Increased waste for products which go out of date
It may take longer to get stock from storage to some retailers
Staff is specialised meaning they will need higher wages
Increased storage costs and cost of specialised equipment
Advantages of decentralised storage
No delays since stock is close at hand
Will respond better to local external pressures
Decrease waste - since less stock may go out of date.
Decreased cost of specialised equipment
Disadvantages of decentralised storage
Less security distributed amongst storage
Less specialised staff, meaning lower expertise
Less uniformity, decreasing business efficiency.
What do logistical managers do
They ensure there are the right materials, at the right location at the right time, for the lowest cost.
Methods of production
Job
Batch
Flow
Job production
Where a business manufactures a one off product one at a time, each product is unique and specifically customised to the order of the customer.
Advantages of job production
Customisable
May be seen as higher quality
Can charge a higher price
More motivated employees
No high startup cost
Disadvantages of job production
Higher cost of wages
Requires skilled staff, which may make training necessary
Human error
Less productive than other methods of production due to employee breaks
Slower
Batch production def
Where a business manufactures many different groups of products, products within all groups are identical, however groups have small variations.
Batch production advantage
Small customisability since batches can be adapted for customer requirements
Can be capital or labour intensive
May not need skilled workers
Batch production disadvantages
Employee mistakes can have a huge impact on whole groups of products
Employees can be idle in between batches
Equipment may need to be cleaned in between batches.
Flow production
Where a business manufactures the product on a capital intensive assembly line, which manufactures identical standardised products.
Advantages of flow production
Can take advantage of economies of scales
Products standardised/identical ensures quality
Products can be manufactured 24/7
Decrease wage costs.
Disadvantages of flow
Standardised so no customisation
High startup cost
Low employee motivation
Breakdown in equipment can stop production/ be costly
Capital intensive production
Producing products that primarily use machinery and equipment, which is typically flow production.
Automation definition
Where machinery completely replaces employees manufacturing the product.
Mechanisation
Where machines and labour work together to manufacture a product.
Capital intensive production advantages
Lower employee wage cost
24/7 productivity
Quality is standardised
Can carry out dangerous tasks
Can carry out repetitive/ boring tasks
Labour intensive production advantages
Can customise product
Have skilled workers, and will be more motivated
Decrease cost of machinery
Labour intensive production dsv
Quality of the product isn’t standardised
Increase wage costs due to skilled work
Workers require breaks so continuous production isn’t available
Increases human error
Capital intensive production dsv
Can’t customise product
High start up cost
Demotivated employees
A break in equipment could stop production.
Labour intensive production
Where a business manufactures a product using workers and employees.
Factors affecting the method of production
Finance
Quality
Technology
Skill of workforce
Cost of labour
Size of market/ demand
Methods of quality
Quality control
Quality assurance
Quality circles
Benchmarking
Mystery shoppers
Quality standards
Total quality management
Quality control def
Where a business checks the standard of a product at the end of production.
Advantages of quality control
Ensures faulty goods aren’t sent to customer
Limits the potential for bad reputation
Disadvantages of quality control
Creates high waste
Products may have to be recycled or reworked if not up to standard, decreasing productivity.
Quality assurance
Where a business checks the standard of their product at the end of every stage of production.
Quality assurance advantages
Less wastage
Easy to identify where there are faults in production
Quality assurance disadvantages
Can slow down production
Can increase the cost of production
Benchmarking
Where a business sets their quality standards to the same as a competitor to steal away their customer base.
Advantages of benchmarking
Can steal away customer base of competitor increasing market share
Can identify opportunities to save money on production
Disadvantages of benchmarking
May not be easy to gather information on competitor production line
May need a better marketing mix for the business to succeed
Quality circle s def
Where a business gathers a group of workers to come together to suggest improvements and resolve problems in production .
Advantages of quality circles
May motivate employees
Different backgrounds may gather more p/ better ideas on how to improve production
Disadvantages of quality circles
Decreases employees productivity
Training may be needed for employees in the focus group to do their job well.
Mystery shopper
Where a business employs customers to anonymously buy the product and report back on their experience of the product.
Advantages of mystery shopper
Procedures can be improved by feedback
May fix bad habits of workers and teach them how to manufacture the product to a higher standard.
Disadvantages of mystery shopper
Expensive
Staff may feel pressure or threatened by a mystery shopper
Total quality management def
Where a business uses multiple different quality methods at once, to ensure that a higher quality level is achieved.
Advantages of Total Quality Management
Should result in zero errors in production , increasing business efficiency
Motivated staff may be consulted on improving quality standards
Customers can be confident in the highest quality of product, establishing brand loyalty.
Dsv of total quality management
The increase in quality monitoring will slow down production and cost more money
Substantial staff training may need to be undergone
Quality standard’s definition
Where an industry have their own set of requirements and guidelines that businesses must adhere to, to receive a mark/award.
Adv of quality standards
Proves a specific approved standard is met
Can be used as a promotional tool if seen as ethical or environmental
Quality standards dsv
Standards of the product cannot be dropped or the business will lose the mark and customer satisfaction
It’s time consuming to get an award.
Advantages of ethical operations
Awards can be granted which can be used for promotion
Can gain a brand loyal customer base concerned about the issue
Can gain a motivated staff base
Disadvantages of being ethical in operations
May limit choice of supplier
Audits are needed to ensure standards are met
Increase cost of production
Philanthropy
Where a business gives back to those in need.
Animal welfare examples
Leaping bunny - cruelty free
Free range class eggs
Use of synthetic materials instead of animal materials.
Fair trade definition
Where suppliers receive a guaranteed fair price for their raw materials
Advantages of fair trade
Could be used to promote the product as ethical
Better supplier -business relationship
Can increase supplier productivity if they are more motivated,
Fair trade disadvantages
Losing a fair trade mark may be bad publicity so standards have to be kept
Fair trade products are more expensive due to higher cost of production
Business has a limited choice of suppliers,
Environmental advantages
Their business is sustainable in the future
Gains a positive/ ethical reputation
Awards can be granted which can be used for promotion
Renewable energy can save costs in the long run, due to oil, petrol and gas not needing to be paid for.
Methods of being environmentally friendly
Carbon footprint
Sustainable raw materials
Waste
Packaging
Methods of being environmentally friendly
Carbon footprint
Sustainable raw materials
Waste
Packaging
Ways of improving carbon footprint
Using renewable energy
Low emission vehicles
More environmentally friendly methods of distribution.
Carbon footprint definition
The impact of using fossil fuels on the environment
Sustainable raw materials def
Where a business raw materials are not being depleted significantly, and can be used in the long run.
Ways of being sustainable
Replanting
Reusing or recycling
Only use up a certain amount of the raw materials in an area
Renewable energy
Waste definition
Where a business has a legal responsibility to properly dispose of any production byproducts without harming the environment
Methods of environmental waste
Segregate waste appropriately
Store waste appropriately
Transport waste appropriately and securely
Methods of environmentally friendly packaging
Reusable bi products
Recyclable
Biodegradable
Environmental packaging definition
Where a business uses packaging which helps the environment.
Use of technology in operations
Epos
CAM
Email
Spreadsheets
CAD
Epos
Electronic point of sale is used to manage inventory level, and reorder stock
CAD
Computer aided design is used to help in developing prototypes of the product and improve operation efficiency.
CAM
Can be used to program machines to produce product 24/7, and prevent human error.
Spreadsheets
Can be used to plan out production budgets for operations.
Email can be used to send out new orders to suppliers.
