Operations Flashcards
Examples of operational objectives
- cost and volume targets
- quality target
- efficiency and flexibility targets
- environment targets
- adding value
Internal influences on operational objectives
- finance
- corporate objectives
- Human Resources
- marketing issues
External influences on operational objectives
- economic environment
- competitor efficiency flexibility
- technological change
- legal and environmental change
Definition : innovation
Changing something that is already there
What are the two types of innovation
- product
- process
Definition : product innovation
Launching new or improved products (or services) onto the market
Benefits of product innovation
+ higher prices and profitability
+ added value
+ opportunity to build customer loyalty
+ increased market share
+ public relations
+ enhanced reputation
Definition : process innovation
Finding better or more efficient ways of producing existing products or delivering existing services
Benefits of process innovation
+ reduced costs
+ improved quality
+ more responsive to customer service
+ greater flexibility
+ higher profits
Definition : invention
Formulation of new ideas for products or processes
Definition : labour productivity
the measure of how much output is produced per employee
Influences on labour productivity
- extent and quality of fixed assets (equipment, IT systems)
- skills, ability and motivation of the workforce
- methods of production organisation
- extent to which the workforce is trained and supported (e.g. working environment)
- external factors (e.g. reliability of suppliers)
Calculate : labour productivity
output per period (units) / number of employees at work
Methods of improving labour productivity
- measure performance and set targets
- streamline production processes
- invest in capital equipment (automation and computerisation)
- invest in employee training
- improve working conditions
Definition : unit cost
Costs to manufacture a single product
Definition : capacity
measure of how much output it can achieve in a given period
Definition : capacity utilisation
how much a business uses of that capacity
Calculate : capacity utilisation
Actual output / what the business could produce x100
Calculate : average cost per unit
total production cost in a total time period / total output in a period
Importance of capital utilisation
- measures if there are any unused resources
- using more capacity means production costs tend to fall making a business more competitive
- the business might have an aim to use as much capacity as possible to keep the unit costs low
- a high level of capacity utilisation is required if a business has a high break even output due to significant fixed costs of production
Why might a business operate below 100%
- lower than expected market demand
- a loss of market share
- seasonal variations in demand
- recent increase in capacity
- maintenance and repair programmes
How can a business operate above capacity
- increase workforce hours
- sub contract some of production activities
- reduce time spent maintaining production equipment
What happens to operations at low utilisation
- higher unit costs can impact competitiveness
- less likely to reach breakeven output
- capital tied up in underutilised assets
What happens to operations at high utilisation
- negative effect on quality : production is rushed, less time for quality control
- employees suffer : added workloads and stress, de motivating if sustained for too long
- loss of sales : less able to meet sudden or unexpected increases in demand, production equipment may require repair
Definition : economies of scale
a proportionate saving in costs gained by an increased level of production
Definition : lean production
production method of reducing waste
Advantages of lean production
+ reduce waste
+ cut costs
+ they can be more responsive to customer needs
+ improved quality
Disadvantages of lean production
- increased time
- lack of strategic focus
Definition : just in time production
focuses on producing exactly the amount you need at exactly the time your customers need it
Definition : just in case production
stock control method that involved producing or purchasing stock with excess stock in place
What would a business need to have to ensure effective lean production takes place
- Good relations with suppliers
- Committed, skilled and motivated employees
- A culture of quality assurance
- Trust between management and employees
Definition : cell production
putting people into teams and giving them responsibility for part of the production process
Advantages of cell production
- enhances production environment and quality control
- improved capacity utilisation
- reduction in manufacturing time and waste
- develop a highly skilled and efficient workforce
- smaller workforce (less costs)
Disadvantages of cell production
- train staff to use the machinery (increase costs)
- machinery could breakdown
- making the set up, moving the machinery and - training can take time
What does having stock enable
- goods available for production
- delivery to customers
- enables customer demands to be met
- allows discounts to be given for bulk buying
Types of stock
- raw materials
- work in progress
- finished goods
Factors influencing stock levels
- level or unpredictability of demand
- degree of spoilage
- rental costs for storage
- bulk buying discounts
- reliability of suppliers
- competition
- just in time production or production methods
Benefits of holding stock
- satisfying demands
- coping with fluctuations in demand
- buffer stock to meet deliveries
- cost savings due to economies of scale
Drawbacks of holding stock
- storage costs
- opportunity cost
- admin / insurance costs
- out of stock costs
Definition : buffer stock
Difference between minimum stock and no stock
Elements of stock control
- maximum stock level
- minimum stock level
- re order level / order quantity
- buffer stock
Calculate : average stock level
(Minimum level + maximum level) / 2
What is a stock controls responsibility to avoid
- theft
- waste
- storage
What should a stock control ensure that stock is
- monitored
- controlled
- recorded
Storage of stock
- can be held in one central area
- or located in different areas in which they are used
Advantages of centralised stock storage
- improved security from theft as it is carefully supervised
- staff maintain stock by following agreed procedures
- Central stock of components or materials may cost less to hold than many small ‘on-site’ supplies
- Improved efficiency in stock handling and management
Advantages of decentralised stock storage
- Stock is always ‘at hand’ when required
- Orders of new stock reflect actual production usage or sales levels
- Speedier turnover of a small quantity of stock reduces the likelihood of its deterioration or decay
What is FIFO
- first lot of stock that goes into warehouse should be the first that goes out
What is LIFO
- most recent stock that comes into warehouse should be the first that goes out
