Operations Flashcards
Operational objectives
Costs
Quality
Speed of response
Flexibility
Dependability
Environmental
Added value
Increase in labour productivity leads to..
Fall in cost per unit - less workers, same output
Soft strategy to improve labour productivity
Training, teamwork, motivational methods
Hard strategy to improve labour productivity
Price rate pay(TAYLOR)
Job threaten , replace workers
Labour productivity equation
Output/ no of workers
Unit costs
TC/ output
Reducing unit costs does..
Higher profit margins -
Can cut selling price and retain same profit margin- more competitive
When do unit costs fall
When TC fall but same output is produced
How to cut unit costs
Increase labour or capital productivity
Reduce costs of raw materials
Reduce storage costs
Reduce waste
Capacity utilisation formula
Actual output/ max output x100
What does low capacity utilisation mean
Assets not utilised
Ie, workers not producing enough goods, factories slow
What does Hugh capacity utilisation
Under High pressure
Stressful to cope with sudden changes in demand, unexpectedly high order, disappoint customers
Target cap U
80-90%
Advantage of high cap u
Efficient use of resources
Lower unit cost
Higher profitability- if sold
Motivation for workforce
Disadvantages of high cap u
May not be able to to respond to non-standard orders, sudden surge in demand
Lack of time for maintenance and repair
Stress
Impact on strategic planning time ( dont have time to think of bigger picture) chaotic
Impact on quality
Why fall in effciency bad
Lowers competitiveness , resources not utilised to full potential , lead to higher unit costs, can result in fall in profit margins, might have to raise prices to compensate, lead to fall in market share. If product is elastic, consumers will switch to alternate
Methods of increasing efficiency
Fewer inputs, reduce waste, electricity bills
higher outputs , training, replace labour with capital- Hugh start off but long term
Advantages of JIT
Reduced storage cost
Less chance of perishable items becoming out of date
Incentive to improve quality- cant replace
Products can be customised for each order
Disadvantages of ~JIT
No economies of scale
Can’t respond/ supply for sudden surge in demand, may loose customers/dissapoint them
Damage to brand if cant meet customer orders
Relies on suppliers, need to maintain good relationship
Customer may experience waiting time
Kaizen
Rather than making big changes- continuous improvement
Regular communication with workers, they can contribute ideas to improve production
They know what should be the best changes
Managers prepared to listen and implement new ideas
Workers need genuine decision making planning- no centralises
Types of lean production
JIT
KIAZEN
Managers best for KAIZEN
Decentralised, join leader
Allow workers to communicate ideas, and managers should listen and implement them -
Need training cost
Example of manager using KAIZEN
Continuous improvement, 1% gains in everything they do
- painted floor in veichles that they carried bikes in, see dust easier, dust can comprise tires of bikes- they won Olympics
Took own mattresses , good night sleep, better riders- small, continuous improvements
Advantages to kaizen
Find problems quick- ideas from workers, they know the problems
Improve motivation for workers, valued, involved
Reduce waste, and therefore production costs
Reduce capital investment
Easier to implement than big ones
Disadvantages of kaizen
Meeting everyday, time consuming , reduce labour productivity
Managers may resist change, not implement - traditional view of manager, he makes choices
Cost of unsuccessful ideas
+ of labour intensive
Each product adjusted to suit customer needs
Work varied, improves motivation
Customer satisfaction high
Workers ideas used to improve production processes
- of labour intensive
Highly skilled workers demand high wage
Training costs and Time
Strike- industrial action
Difficulties recruiting right skill level
+ capital intensive
Products standardised
Higher output- economies of scale
Useful for mass production and customisation
- of capital intensive
High set up costs
Lack of innovation
Expensive, change to new products, variations
Quality importance
Price- can charge premium price if Hugh quality
Impact on brand image
Reputation- brand loyalty, repurchase
Costs- replacement, dealing with complaints
Quality control
Inspectors
Monitor quality throughout system of inspection
Specific job to control quality- can scrap products
Prevent products that are not worthy, getting out to consumers
Quality assurance
Staff
Involving staff in improving quality assessing throughout production process
Benefits of o quality assurance- staff
Empowered to make decisions- motivation
Problems spotted earlier r
Fewer wanted products
Drawbacks of quality assurance- staff
Training cost
Delays in production process
Cultural change - used to centralised, hard to adapt
Total quality management TQM
Whole business is about quality
All objectives revolve around quality
Responsibility of all employees
Flexibility
Business ability to adapt its supply to match demand
Volume flexibility
Deal with sudden changes in demand
Product flexibility
Adapting peridots to suit customer needs/ producing a range of products
Delivery flexibility
Being able to get product to wherever customer is
- delivery doesn’t have this, cant deliver everywhere
Mass customisation
Mass production
Products on large scale
Baked beans
Mass customisation
Many tailored products , individual preferences,
Flexible production line
+ of mass customisation.
Ability to charge premium price
Increased profit Martians
Highly satisfied customers
Comp advantage
Economies of scale, raw materials - large output
High price, low cost = high profit margins
Motivated workforce, different production, variety of tasks, more interesting
- of mass customisation
Heavy investment - training, communcations( specific model made), capital equipment that is adaptable
Reliance on suppliers, may need multiple
Getting it ‘right first time’- might not
+ to part time staff
Lower costs
Staff value flexible time
Gives busines access to different skills
- to part time
Recruitment and training costs
Motivational issues
Negative effect of 0 hour contract, staff morale, publicity
Influence of choice of supplier
Price
Payment terms
Quality
Capacity
Reliability
Flexibility
