Operations Flashcards
List the factors that business should consider when picking a Supplier.
-Price
-Location and Transport Cost
-Lead time (delivery time)
-Product quality
-Reliability and Reputation
-Discounts available
Define the factor ‘Price’ for supplier
The more a business pays for supplies, the higher the production cost will be. Therefore, it should aim to find a cheap supplier as keeping production costs down will result in high profits
Define the factor ‘Location and Transport Cost’ for suppliers
The further away a supplier is from a business, the higher the costs might be for delivering the goods to the business
Transporting goods over a great distance also results in a higher carbon footprint, which is damaging to the environment.
Define the factor ‘Lead time’
Lead time is the amount of time taken between an order being placed and an order being received.
The business should choose a supplier than can deliver within a time frame that is suitable for the business
Define the factor ‘Product Quality’
A business needs to purchase high quality raw materials to make their profit if they want the finished product to also be of high quality.
Having a high quality finished product also means that a business will be able to charge a higher price for it.
Define the factor ‘Reliability and Reputation’ for suppliers
If a supplier does not deliver at the agreed time, or with the correct quality goods, this can affect the business’s ability to produce and deliver their product to the customer
A suppliers with a good reputation will be more likely to fulfil orders on time and provide a high quality product
Define the factor ‘Discounts offered’
A business should consider whether a supplier offers any discounts e.g. bulk buying as it would reduce costs
Outline why it is essential that a business control the level of stock they have in inventory
-To ensure resources are not wasted
-to ensure that stock does not deteriorate or become spoiled
-To ensure production is not stopped and machinery becomes idle
-To ensure understocking or overstocking does not take place
Define ‘Maximum Inventory (Stock) level’
This is the highest level of stock that should be held at any one time
Define ‘Minimum Inventory (Stock) level
This is the stock level that ensures that there will always be stocks available for production, allowing for ordering and delivery times
Define ‘Re-order Level’
This is the level at which new stock should be ordered
Define ‘lead time’
This is the time from placing the order to the good being delivered
What are the advantages of computerised stock control?
-Avoids over-stocking and under-stocking this means that stock levels will be known at all times
-Reduces the need for manual stocking
-Can be linked directly to the supplier meaning goods are ordered automatically
-Stock can be re-ordered automatically when the re-order level is reached. This means that production will not be affected
-Up-to-date stock levels can be found instantly this can provide customers with accurate information and improve customer satisfaction
What are the consequences of understocking?
-The firm may have to place orders more often, this means that high administration costs and the firm may lose out on discounts for bulk buying
-The business may not be able to cope with an unexpected number of orders if stocks are low. This may upset customers who may take their business somewhere else. Also means the business reputation may suffer
-If there is not enough stock, production may have to be stopped therefore sales will be lost. This means less profit as well as having to pay stuff who are doing nothing
What are the consequences of overstocking?
-greater chance of theft by employees meaning an increase in costs as more stock to be bought and lost production if parts are missing
-costs: insurance, heating, lighting, wages of warehousemen, space taken in storage meaning less profit for the business resulting in increased costs
-If social factors change (trends/fashion), the stock might be wasted which leaves the business with stock it cannot sell
-A great deal of cash is tied up as stock is very expensive item this means less money for other areas of the business which could be making a profit
What are the 2 types of production?
-Capital intensive: mostly machines and robots are used in production e.g. car production by robotic machine
-Labour intensive: mainly people are involved in production e.g. skilled chefs in a restaurant
What are the advantages and disadvantages of Capital Intensive production?
Advantages:
Less employee wages and costs, quality can be standardised, the same every time, machines can work continuously 24/7
Disadvantages:
More difficult to customise orders, breakdowns in production can be costly, initial set up costs of machinery are high
What are the advantages and disadvantages of labour Intensive production?
Advantages:
Customised products are easier to make, less expensive machinery costs, humans can use their own initiative and problem solve
Disadvantages:
Quality of products can vary due to expertise of the worker, skilled workers take time to train, skilled workers will be paid more than unskilled
Distinguish between Capital and Labour Intensive Production
-Capital intensive organisations rely heavily on machinery in production whereas labour intensive rely heavily on their workers
-A standard product can be produced more easily with capital intensive whereas individual, one-off products are easily created with labour intensive
Define Job production
This is where a company produces a single product or small number of products to specific customer requirements.
It is a one-off job, each product is completed before the next one is started and is made by hand by highly skilled workers
e.g. a designer wedding dress, wedding/birthday cake
What are the advantages of job production?
-Products are fully bespoke to customers requirements, meaning very satisfied customers
-higher prices can be charged due to the unique nature of products
-workers are involved in all stages of the making of the product, which increases staff morale and motivation
What are the disadvantages of job production?
-highly skilled workers will need to be paid 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
Define Batch production
This method involves making products in small groups known as batches.
Products within each batch will be identical however each batch can be different
e.g. a bakery making a range of baked goods
What are the 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
