Operations Flashcards
What is operations?
The role of OPERATIONS in a business is to PRODUCE goods and services to a SUITABLE STANDARD as EFFICIENTLY (minimum in, maximum out) as possible
Factors to consider when choosing a supplier
-Price/cost of raw materials
-Discounts available?
-Quality of raw materials
-Location of supplier
-Lead time
-Reliability
Why should businesses consider PRICE OF RAW MATERIALS when choosing a supplier?
The more a business pays for a supplier, the higher its production costs will be, therefore it should aim to find a cheap supplier as keeping production costs down will result in higher profit
Why should businesses consider DISCOUNTS AVAILABLE? when choosing a supplier?
A business should consider whether a supplier offers any discounts when bulk buying as this would reduce production costs
Why should businesses consider QUALITY OF RAW MATERIALS when choosing a supplier?
-A business will need to purchase high quality raw materials to make their products if they want a high quality finished product
-Having a high quality finished product also means a business can charge a higher price for it
Why should businesses consider LOCATION OF SUPPLIER when choosing a supplier?
-The further away a supplier is from the company, the higher the costs might be for the supplier to deliver
-Transporting goods over a greater distance also has a higher carbon footprint, which is damaging the environment
Why should businesses consider LEAD TIME when choosing a supplier?
-Lead time is the time between a business placing an order and the supplier delivering the materials
-A business will have to ensure it chooses a supplier that can deliver within a time frame which means it doesn’t run out of materials
Why should businesses consider RELIABILITY when choosing a supplier?
-A business will also have to consider the reputation of the suppliers (dependable and reliable)
-An unreliable supplier that doesn’t deliver on time can result in production slowing or stopping altogether
What are consequences of UNDER STOCKING?
-Production slowing down or stopping altogether due to lack of materials
-Orders not being fulfilled on time, leading to dissatisfied customers
-Not being able to accept unexpected orders, resulting in a loss of sales
-Having to make frequent orders for small quantities of inventory, resulting in higher administration costs
What are the consequences of OVER STOCKING?
-Money is tied up in inventory that could be spent elsewhere in the business
-Inventory deteriorating or becoming obsolete before it is used resulting in high amounts of waste
-Increases storage and insurance costs meaning reduction in profit
-Becomes easier for staff to steal inventory undetected
Maximum inventory level:
The highest amount of inventory a business should hold at any one time to avoid overstocking
Minimum inventory level:
The lowest amount of inventory a business should hold at any one time to avoid under stocking
Re-order level:
When inventory levels reaches this point, a business should place an order with suppliers to purchase more inventory. A business would consider the suppliers lead time and how quickly it uses its stock when setting this level
Re-order quantity:
The amount of inventory a business will order to bring levels back to maximum
Lead time:
The time between a business placing an order with a supplier and it being delivered
What is JOB PRODUCTION?
The production of a one off, unique product. Products can be fully customised and made entirely to each individual customer’s requirements and specifications. This method means that one product will be completed from start to finish before production begins on the next unique product
Examples of JOB PRODUCTION:
-Bespoke wedding dress
-Customised birthday cakes
-Cutting a customers hair
Advantages of JOB PRODUCTION:
-Products are fully bespoke to customer’s requirements, meaning very satisfied customers
-Higher prices can be charged due to the unique nature of the products
-Workers are involved in all stages of production, which increases staff morale and motivation
Disadvantages of JOB PRODUCTION:
-Highly skilled workers are required, therefore will demand higher wages meaning high production costs
-Lead time tends to be slow compared to other methods of production
-A business will not be able to buy raw materials in bulk meaning it misses out on discounts
What is BATCH PRODUCTION:
The production of products in small groups known as batches. Products within each batch will be identical HOWEVER each batch of products can be different e.g a baker might bake a batch of blueberry muffins which are all the same and then a batch of chocolate muffins which are all the same but different from the batch of blueberry ones
Examples BATCH PRODUCTION:
-A baker baking a range of cakes and bread
-Food manufacturers making a variety of soup flavours
Advantages of BATCH PRODUCTION:
-Allows for a degree of customisation by the customer which increases satisfaction
-Large amounts can be made which means economies of scale can be achieved
-Usually requires less skilled workers than job production which reduces wage costs
Disadvantages of BATCH PRODUCTION:
-Equipment need to be cleaned and/or changed between batched which slows production
-A mistake in a batch can mean that an entire group of products are ruined which increases wastage
-Requires careful planning of production
What is FLOW PRODUCTION:
Flow production involves mass producing identical products. Products are made on an assembly line where a different component is added to the product at each stage. Workers and machinery will have one very specific take to complete at each stage. Flow production tends to be capital intensive meaning machines and robots carry out most of the work
Example of FLOW PRODUCTION:
-Car and electronics manufacturing
-Lightbulb and matchstick manufacturing
Advantages of FLOW PRODUCTION:
-Mass production of identical products allows businesses to achieve high economies of sale
-Use of machinery results in higher levels of output and consistent in quality
-Very large quantities of products can be produced
Disadvantages of FLOW PRODUCTION:
-Products cannot be tailored to customers requirements
-There is a high initial outlay in purchasing the computers and machinery needs to set up an assembly line
-When equipment breaks, the whole production comes to a stop
What factors will a business consider when choosing a production method?
-Nature of the product
-Demand for the product
-Availability of skilled labour
-Availability of technology
-Size of premises
Why would a business consider THE NATURE OF A PRODUCT when choosing a production method?
Depending on what is being made one method might be more suitable than others
Why would a business consider THE DEMAND FOR A PRODUCT when choosing a production method?
The business will have to choose a method which will allow it to make enough products to fulfil customer demand
Why would a business consider AVAILABILITY OF SKILLED LABOUR when choosing a production method?
The business will have to establish whether the is sufficient skilled labour available to allow it to use job production if it seem appropriate
Why would a business consider THE AVAILABILITY OF TECHNOLOGY when choosing a production method?
The business will have to establish whether the machinery and technology it currently has is sufficient to allow it to set up a slow assembly line if it seems appropriate
Why would a business consider THE SIZE OF ITS PREMISES when choosing a production method?
How much space a business has available to make products must be considered, production systems for batch and flow may require a lot of space
What is quality?
The process issue of PRODUCT QUALITY deals with making sure that the products produced DO WHAT CUSTOMERS EXPECT and are RELIABLE (relative to the price they are sold for)
How can a business use RAW MATERIALS to ensure quality?
A business simply cannot make a high quality product using poor quality materials. A business should spend time finding a supplier that can consistently provide high quality materials.
HOWEVER a supplier will charge a higher price for higher quality materials
How can a business use EMPLOYEES to ensure quality?
A company’s workers must have the correct level of skill and knowledge to make a product to a high standard. A business can ensure staff are adequately skilled by providing training to employees. A business should also have a good, rigorous recruitment and selection process to ensure it is employing the best staff for the job
HOWEVER it can be time consuming to train all staff and skilled workers will often expect higher pay
How can a business use TECHNOLOGY to ensure quality?
The machinery and technology used in the production of a company’s product should be well maintained to ensure its functioning. A business might also strive to keep technology up to date by investing in the latest technology
HOWEVER purchasing new machinery and technology can be expensive
What is QUALITY CONTROL?
-Quality control involves two quality inspections
-A sample of raw materials are checked before production to ensure they are of the required standard
-The second inspection happens at the very end of production when the finished good is inspected to ensure ur meets all quality standards
Advantage and disadvantage of QUALITY CONTROL
Adv : reduces the change of a faulty or substandard product
Disadv: likely to result in high amounts of waste as faults in products are not detected until the very end
What is QUALITY ASSURANCE?
-Quality assurance involves a product being inspected at every stage of production
-A product will not continue along the production line unless it meets required standards at every stage
Advantage and disadvantage of QUALITY ASSURANCE
Adv : results in very little wastage as faults are detected and fixed quickly
Disadv : inspecting the product at every stage makes production take longer
Advantages of introducing quality methods to a firm
-Mistakes are minimised (saves firm money on wastage)
-Good reputation for producing quality products (price can be raised)
-Advantage over competition as can be seen as better quality
-Less likely to revive returned faulty products (saves firm money)
-Firm can charge higher prices and so maximise profit
-Easier to build up customer loyalty with quality products
-Easier to gain approval from the Quality standards organisations
Disadvantages of introducing quality methods to a firm
-Workers are taken away from their work during initiatives such as quality circles (lost production)
-Introducing quality into a firm is expensive as staff have to be employed to check quality and a quality manager is often hired
-Cost of training to get workers familiar with systems such as JIT
-Cost of designing the system, installing checks of production lines
-Better raw materials will cost extra
-Extra paperwork required to validate quality checks etc
Examples of ETHICAL OPERATIONS
-Paying employees the living wage which exceeds minimum wage rates
-Not using child labour or sweatshops in production of goods
-Ensuring high farming standards
-Avoiding testing products on animals
-Supporting initiatives such as fair trade etc
Advantages of ETHICAL OPERATIONS
-Improved reputation and image
-Higher prices can be charged for products seen as ‘ethical’
-Gaining competitive edge over rivals
Disadvantages of ETHICAL OPERATIONS
-Often more costly meaning increases production costs
-Less profits will be made due to increased production costs
Examples of ENVIRONMENTAL OPERATIONS
-Reducing the amount of packaging used for products
-Minimising the amount of waste created and disposing of it in a safe, responsible manner
-Recycling as much as possible, making sure products and packing where possible are recyclable
-Using renewable energy sources such as wind and solar energy to reduce energy consumption
-Reducing their CARBON FOOTPRINT and levels of production
Advantages of ENVIRONMENTAL OPERATIONS
-Recycling more and cutting down on packaging can reduce production costs
-Winning awards for being environmentally friendly can be used as a marketing tool
-Higher sales and profits as customers are attracted to companies that help the environment
Disadvantages of ENVIRONMENTAL OPERATIONS
-Can be a time consuming process
-Customers may perceive products to be inferior if recycled materials or packaging is used (paper straws/bags)
-Acting in an environmentally friendly way can often be more expensive increasing production costs
6 types of technology in OPERATIONS
-Electronic point of sale (EPOS)
-Databases
-Computer aided manufacturing (CAM)
-Computer aided design (CAD)
-Internet
-Global positioning systems (GPS)
EPOS
-By scanning barcodes on materials, an EPOS system will be able to automatically keep track of inventory levels in real time as inventory is added or removed
-EPOS systems can also be programmed to automatically place orders with suppliers when inventory reaches re-order level
How may an operations department use databases?
Databases can be used by an operations department to keep record of all the suppliers that a company uses. They can also be used to hold information on customer details
CAM
Computer aided manufacturing involves the use of computer controlled machinery and robots in the production of goods. Once programmed the machinery will work independently with little human input
CAD
Computer aided design software allows an operations department to design and create digital models of a product to see how it would look and test its functionality without having to make a prototype
Internet
The operations department could use the internet to find and compare possible suppliers ro purchase raw materials from and to place orders using their websites
GPS
Global Positioning System tacking software can be used to track deliveries from suppliers and track a company’s own delivery vehicles as they deliver orders e.g. DPD
