Operations Flashcards
overstocking
It costs money to store stock (lighting, insurance, security)
Stock has a higher risk of being stolen
Stock may go out of date
understocking
Production might stop if there are not enough raw materials.
Customers might not receive their orders on time.
Unexpected orders cannot be met.
inventory control diagram terms
Maximum inventory level: the highest level of inventory that
the business will hold in order to minimise costs. Dependent on
usage and delivery times.
Minimum inventory level: this is the lowest level that
inventory should not fall below in order to ensure there are no
shortages and productions grind to a halt.
Reorder level: when inventory should be ordered in order to
avoid it dropping below minimum levels.
Reorder quantity: the amount of inventory that is ordered to
bring it back to maximum level.
Lead time: the time taken between an order being placed and it
arriving.
Buffer Inventory: emergency inventory that is kept in case a
delivery is not made/business runs out of inventory.
just in time
just in Time (JIT)
The process of ordering supplies only when they are either required for
production or when an order is placed by a customer.
adv
No wastage as all inventory is used for
production
Lower inventory levels are easier to monitor leading to less risk of theft
No warehouse is required, saving costs
dis
If deliveries are late, the business will
face negative consequences of
understocking
Requires excellent relationships with
the supplier which takes time to
develop
No room for errors in production
centrilised storage
Centralised Storage – involves one central location in a large,
purpose built warehouse
adv
Specialist staff are employed to maintain inventory – improves handling and security
Same procedures are used – improving consistency
May be cheaper to store inventory in one
large warehouse
dis
Specialist staff need to be employed to
maintain inventory – increasing wage costs
Inventory has to be delivered to each
division or department, causing delays.
decentrilised
advantages
Inventory is always close at hand when
needed for production
Smaller, local warehouses are more
responsive to local needs
Smaller amounts of inventory result in
no negative consequences of
understocking.
disadvantages
Can lead to wastage or theft as security
isn’t as good.
Lack of specialist staff can lead to
inventory control being inefficient.
Each division may handle inventory
differently, leading to inconsistencies.
computerised inventory control
adv
Databases keep balances of inventory
which are automatically updated.
Can be linked to tills through EPOS,
which update with each sale.
Accurate and constant monitoring of
inventory levels.
dis
Expensive to set up
Highly dependent on technology so if powercut occurs then the business will have no way in checking inventory untill it clear.
Breakdowns can hold up re-orders and
production.
automation
Automation refers to production being fully AUTOMATIC.
This involves computer aided manufacture (CAM) that control
fully automated assembly lines (robots).
adv
Robots don’t take breaks so can work 24/7 -
increasing production levels
dis
Huge investment is needed – this can reduce
profits
mechanisation
Mechanisation refers to labour and machines working
together produce products e.g. a machinist operation a sewing
machine in a textile factory.
adv
Using machinery improves accuracy over
handmade products – high quality goods
dis
Production cant be 24/7 as humans needs
breaks – this slows down production
labour intensive
This involves human doing most of the work e.g. cake
decorating.
adv
Employees can be creative and use their
own initiative – employees are motivated
dis
It is expensive and takes time to recruit,
select and train new employees
advantages of providing high quality products
Customers
are more
likely to
make repeat
purchases
Profits and
sales can
be
maximised
Good
reputation is
gained, will
encourage
more
customers
quality control
Quality control – checking the product at the end of production
Advantage
Less resources required as checks are only performed once.
Disadvantage
High levels of waste as products are not checked until the end
quality assurance
Quality Assurance – checking the product at each stage of
production
Advantage
Errors in production can be spotted and corrected quickly
Disadvantage
More expensive to check at each stage compared to just checking at the
end. E.g. wages and resources
quality managment
Quality Management – ensuring every product is made perfect
each time, this requires commitment from all in the organisation
Advantage
Employees work together which is good for teamwork and motivation.
Disadvantage
Quality policies and procedures need to be implemented and strictly
followed.
Quality standards and symbols
Quality standards are awarded to an organisation when it meets a particular specification
or set of criteria.
Advantages
Having a recognised symbol improves the image and reputation of the product.
Disadvantage
Time consuming process and involves a series of audits/checks to be carried out before
achieving the award.
benchmarking
Benchmarking
Involves comparing one product with another similar product – often using
the market leader’s standards as the benchmark.
The organisation attempts to match these standards with their own
products.
Advantage
If successful, the product will be as good as the best on the market.
Disadvantage
The business will only ever be ‘as good’ as the benchmark and will never
become market leader.
quality circlies
Quality circles are small groups of employees who meet at regular intervals to
discuss any problems with quality and how to improve them.
Advantage
Improves motivation as employees are given the opportunity to discuss work-related
issues.
Disadvantage
May reduce productivity when the meeting is taking place.
mystery shopper
A mystery shopper is a person who poses as a real customer whilst
assessing customer service levels and products offered by a company.
Advantage
Accurate reflection of consumer perspective with no bias.
Disadvantage
May not be fully representative of the whole business and therefore may
not be accurate
continual improvement
Continual Improvement
Businesses are always aiming to improve quality even if it has already
met its objectives
Advantage
Business stays ahead of competition
Disadvantage
Employees can become demotivated and under pressure to keep
improving
examples of being enviromentally friendly
Minimise Wastage training employees, ensuring machinery is
kept in good condition HOWEVER providing training and
maintaining machinery can be expensive
Recycle as much as possible by encouraging employees to put
rubbish in the appropriate coloured bins and recycling in the
production process
Reduce carbon footprint by using alternative sources of
‘renewable’ energy e.g. solar to power premises or electric
vehicles for deliveries
Try to minimise or use recycled packaging by only using the
necessary amount of packaging to maintain the products
quality, this will cut down costs and be good for the
environment
examples of philanthropy
Animal welfare by using synthetic materials instead of wool
and fur or use free range eggs to ensure good treatment
and welfare of animals
Fairtrade by ensuring suppliers of raw materials receive a
fair price for the work/goods they provide
fairtrade
Advantages
Stocking Fairtrade demonstrates
the retailers ethical commitments –
this gives them a good reputation
Businesses are awarded the
Fairtrade sticker on products – this
can entice customer to shop from
them instead of a competitor
disadvantages
Fairtrade products are more
expensive – if there is a recession,
customers may purchase cheaper
elsewhere
The business has a limited choice of
suppliers – this can limit the
variety of stock
technology in ops
Websites on the
internet can be used to
compare prices of raw
materials
Spreadsheets can be
used to keep track of
inventory levels
GPS could be used track
deliveries
Email can be used
to contact
customers to let
them know their
delivery has been
dispatched
