operations Flashcards
why is operations important?
-makes the best use of limited resources available to maximise output
-helps reduce costs by identifying and minimising wastage in the production process
-it ensures a quality product which will satisfy customers and meet their needs
-decides on the most appropriate inputs and processes to produce the best output
centralised purchasing
> one order sent to the supplier for the whole organisation
✅centralised purchasing department- more efficient purchasing procedures
✅specialist purchasing staff employed - ensure best deal is negotiated and agreed
✅cost effective - can gain discounts through economies of scale/bulk buying
✅approved supplier - supplies come from known quality and reliable sources
✅huge range of suppliers - greater choice of goods and services available
features of effective inventory control
-employ a trained inventory clerk who is responsible for setting up procedures and monitoring/issuing/controlling inventory - have correct documents filled in and approved, inventory rotation, appropriate storage conditions eg temperature
-regularly monitor inventory levels for usage using suitable method:
>spreadsheet with embedded formulae that automatically and accurately calculates current balance
>movement of stock recorded using bar code and reader
>electronic inventory management systems for up to date balance
>best sellers/slow moving inventory identified so decisions can be made on changes to balances
>a physical count of inventory still carried out to get an accurate closing inventory figure to use in period end financial statements
-appropriate inventory levels set to prevent problems associated with over/understocking:
>maximum/economic inventory level
>reorder level
>reorder quantity
>minimum inventory level
>buffer inventory
what are the different inventory levels?
-maximum level, the balance that should not be exceeded
-reorder level, the balance when an order must be placed so inventory doesn’t run out, influenced by lead time
-reorder quantity, physical amount ordered, difference of maximum and minimum level
-minimum level, the balance inventory should not fall below so production doesn’t halt/run out of inventory
-buffer inventory, inventory below the minimum level kept ’just in case’
purpose of inventory control
having effective inventory control means:
✅anticipate when inventory is going to run out so action can be taken
✅production line in separation as there is inventory available at all times
✅fulfilling customer orders not delayed by lack of inventory, helps improve customer satisfaction and public image
✅administration costs should be controlled as inventory is controlled and ordered at regular intervals so no need for expensive rush orders to be sent
✅a skilled inventory clerk helps prevent theft, wastage and shortages that negatively impact production
just in time (JIT) inventory control
JIT involves:
>frequent deliveries
>of small quantities of inventory
>that are recieved just before it is needed
successful JIT depends on having:
>close relationship with reliable suppliers who deliver what was ordered on time
>consistently good quality supplies as it is not checked before it is used in production
>staff who accept the responsibility for identifying when more inventory is needed
advantages and disadvantages of just in time inventory control
✅funds are not tied up in inventory so can be invested elsewhere
✅reduced inventory holding costs eg staff, space
✅less deterioration/wastage as smaller amounts held for shorter periods
✅less vulnerable to changes in fashion/taste so less likely inventory will have to be sold off cheaply
❌if supplies are delayed then potential for production will be disrupted
❌sales lost if a customers rush order cannot be met
❌greater dependence on suppliers that may let the organisation down
❌loss of bulk buying discounts with small orders so loss of potential cost saving
features of a good storage area
-storage capacity of area should be more than supplies held at any time
-offer the correct environment eg freezers
-provide security and protection by having lockable doors, screens, cctv etc
-must be covered by insurance to protect against unforeseen events
-use FIFO to ensure oldest inventory is used first which prevents deterioration
-clearly labelled shelves etc to make things easy to locate
advantages and disadvantages of centralised storage
> all inventory stored in one area for entire organisation
✅improved security and control
✅lower storage costs as one large area
✅greater efficiency in inventory handling and management
✅bigger orders benefit from bulk buying discounts
✅precise balance always known and no duplication of items
❌staff need to travel to a centralised area resulting in time wastage movement around building
❌cost of specialist staff to operate stock room eg wages
❌difficult to meet individual needs of departments if they are highly specialised
❌if large amounts of inventory are held there is more chance of wastage or obsolescence
advantages and disadvantages of decentralised storage
> different areas where inventory stored depending on where it is most likely to be used/needs of functional areas
✅inventory always nearby when staff need to access/use it
✅orders placed reflect what is actually used by individuals departments
✅small amounts of inventory turnover more quickly so less risk of obsolescence or deterioration
❌theft and loss more likely as there is less control/management
❌increase in the amount of space taken up with several small rooms being used
❌difficult to get an accurate balance so actual amount of inventory held at any moment may be unknown
features of a good warehouse
-carefully designed to ensure a smooth operation and efficient use of space
-best located on ground floor to make it easier to move inventory
-use inventory handling equipment and machinery eg fork lifts to reduce human effort
-correct storage conditions for each item prevents deterioration
logistics
logistics manages how and when to move resources to the places they are needed
>the process of dealing with the whole order from start to finish
-2 basic forms of logistics:
>along the production line to coordinate sequencing of resources
>the transportation and storage network
benefits of good logistical management
✅prevent shortages that could halt production or leave customers unsatisfied
✅minimise transportation costs to maximise efficiency and meet social responsibility
✅minimise time taken to obtain materials and inventory which will optimise workflow
✅reduces storage requirements, length of time an item is unused and funds ties up
logistical planning
logistical planning means identifying the sequence in which particular resources are used and then arranging to send the resources to that location so they arrive when needed
> must consider transportation capacity to ensure transportation is evenly spread and also full loads are sent out whenever possible
scheduling
scheduling is the part of logistics that coordinates the way resources work together into a whole process
> it involves raw materials, components, workers, machinery, transport & sales outlets being brought together so work flows smoothly and delays are avoided
a Gantt chart helps coordinate task or batch completion
