Operations Flashcards
name some operational objectives
Cost & volume targets
•Productivity & efficiency (e.g. units per week or employee)
•Unit costs per item
•Contribution per unit
•better utilisation of fixed costs (Labour productivity, Capacity utilisation)
Quality targets
Achieving or exceeding the required level of quality is also essential for a successful business. Some ways of measuring this is Scrap / defect rates, Reliability, Customer satisfaction.
Environmental targets
This is an increasingly important focus of operational targets as businesses face more stringent environmental legislation and consumers increasingly base their buying decisions on firms that take environmental responsibility seriously. Examples include:
•Use of energy
•Proportion of production materials that are recycled
•Compliance with waste disposal regulations / proportion of waste to landfill
•Supplies of raw materials from sustainable sources
ways of measuring productivity
Productivity measures the relationship between inputs into the production process and the resultant outputs. Productivity can be measured in several ways: e.g.
number of faulty/defective products Output per worker or hour of labour Output per hour / day / week Output per machine Unit costs (total costs divided by total output)
The unit cost measure is particularly important. A falling ratio would indicate that efficiency was improving.
why is high productivity important
Why is achieving high productivity important?
Most importantly, a more efficient business will produce lower cost goods than competitors. That means the business can either make a higher profit per unit sold (assuming that the product is sold for the same price as a competitor) or the business can offer customers a lower price than competitors (and still make a good profit)
Investing in production assets (e.g. equipment, factory buildings) is expensive – a business needs to maximise the return it makes on these assets
name some ways of improving productivity
There are various ways in which a business can try to improve its productivity:
Training – e.g. on-the-job training that allows an employee to improve skills required to work more productively
Improved motivation – more motivated employees tend to produce greater output for the same effort than de-motivated ones
More or better capital equipment (this links with the topic of automation)
Better quality raw materials (reduces amount of time wasted on rejected products)
Improved organisation of production – e.g. less wastage
how can you measure preformance
financial performance productivity efficiency of the business and workers progressions towards objectives customer satisfaction how strong and well known the brand is
calculations to use:
capacity utalisation
any profit revenue or cost based calculations
measuring the amount of customers that return
output per worker or machine
why is quality so important
Quality helps determine a firm’s success in a number of ways:
Customer loyalty – they return, make repeat purchases and recommend the product or service to others.
Strong brand reputation for quality
Retailers want to stock the product
As the product is perceived to be better value for money, it may command a premium price and will become more price inelastic
Fewer returns and replacements lead to reduced costs
Attracting and retaining good staff
These points can each help support the marketing function in a business. However, firms have to work hard to maintain and improve their reputation for quality, which can easily be damaged by a news story about a quality failure.
what is capital intensive production
Capital intensive refers to a business process or an industry that requires large amounts of money and other financial resources to produce a good or service. … Companies in capital-intensive industries are often marked by high levels of depreciation and fixed assets on the balance sheets.(using machinery is linked with capital intensive)
what is labour intensive
industry or process where a larger portion of total costs is due to labour as compared with the portion for costs incurred in purchase, maintenance, and depreciation of capital equipment. Agriculture, construction, and coal-mining industries are examples of labour intensive industries.
features of labour intensive
Labour intensive operations
Labour costs higher than capital costs
Firms benefit from access to sources of low-cost labour
features of capital intensive
Capital intensive operations
Capital costs higher than labour costs
Costs are mainly fixed in nature = higher breakeven output
Firms benefit from access to low-cost, long-term fina
what is lean production
Lean production is an approach to management that focuses on cutting out waste, whilst ensuring quality. This approach can be applied to all aspects of a business – from design, through production to distribution.
This approach sets out to cut out or minimise activities that do not add value to the production process, such as holding of stock, repairing faulty product and unnecessary movement of people and product around the business.
what are the benefits of lean production
it is a very good way of reducing the costs of a business
which puts it in a very strong position. Less waste therefore means lower costs, which is an essential part of any business being competitive.
name some methods used in lean production
Time based management Simultaneous engineering Just in time production (JIT) Cell production Kaizen (Continuous improvement) Quality improvement and management
what is inventory control
The overall objective of inventory (stock) control is to maintain inventory levels to that the total costs of holding stocks is minimise. A popular method of implementing stock control is through the use of inventory (stock) control charts and algorithms that automate the process.
what is a inventory control chart
The key parts of the stock control chart are:
Maximum level
Max level of stock a business can or wants to hold
Example chart: 800 units
Re-order level
Acts as a trigger point, so that when stock falls to this level, the next supplier order should be placed
Example chart: 400 units
Minimum stock level
Minimum amount of product the business would want to hold in stock.
Assuming the minimum stock level is more than zero, this is known as buffer stock
Buffer stock
An amount of stock held as a contingency in case of unexpected orders so that such orders can be met and in case of any delays from suppliers
Factors Affecting When / How Much Stock to Re-order
Lead-time from the supplier
How long it takes for the supplier to deliver the order
Higher lead times may require a higher re-order level
Implications of running out (stock-outs)
If stock-outs are very damaging, then have a high re-order level & quantity
Demand for the product
Higher demand normally means higher re-order levels
link to graph: https://www.tutor2u.net/business/reference/stock-control-charts
