Operations Flashcards
Production
The process of converting inputs such as land, labour and capital into sale-able goods
Productivity
A measure of the efficiency of inputs used in the production process
Calculating productivity
Total output/ Number of production workers
Improving labour productivity
- Increasing output with same number of workers
- Keeping output at the same level but with fewer workers
Inventories
The stock of raw materials, work-in progress and finished goods held by a business
Lean production
The production of goods and services with the minimum waste of resources
Advantages of Lean production
- New products can be brought to the market quicker
- Quality is improved
- Wastage of time and resources is reduced or eliminated
- Unit costs are reduced
JIT inventory control
No inventories are held by the business. Raw materials arrive from suppliers just as they are needed for the production process.
Eval of JIT
:) Reduces costs
:( Businesses need to communicate very well with suppliers
:( Workers and the machinery used in production must be flexible
Job production
The production of items one at a time
Batch production
The production of goods in batches. Each batch passes through one stage of production before moving on to the next
Flow production
The production of very large quantities of identical goods using a continuously moving process
Eval of job production
:) Unique, high quality products are produced
:( Uses skilled labour rather than machinery so selling prices are higher
Eval of batch production
:) Larger numbers are made so unit costs are lower
:( Workers are less motivated because the work becomes repetitive
Eval of flow production
:) More capital intensive than job or batch production so lower labour costs
:( Requires large capital investment in production line technology
Eval of new tech for businesses
:) Reduces costs and time taken to design new products
:( Can be expensive to invest in and it is constantly changing
Eval of new tech for customers
:) Better quality products
:( Products may become out-of-date more quickly
Eval of new tech for workers
:) Tech completes simple and repetitive tasks that workers find boring
:( Can result in redundancy as less importance on workers
Costs
- Fixed costs
- Variable costs
- Total costs
- Average costs
Fixed costs
Costs that do not change with output
Variable costs
Costs that change in direct proportion to output
Total costs
All the variable and fixed costs of producing the total output
Average costs
The cost of producing a single unit of output
Economies of scale
The reduction in average costs as a result of increasing the scale of operations
Economies of scale: finance
Banks prefer to lend to larger businesses because they consider them less of a risk than smaller businesses. As a result large businesses find it easier to borrow money and often can at a lower rate of interest.
Economies of scale: management
As a business grows it often employs specialist managers for different areas of the business. They improve the quality of business decisions and make fewer mistakes.
Economies of scale: marketing
Price of marketing falls as output and sales increase
Economies of scale: purchasing
Large businesses usually buy greater quantities of things than small businesses. Suppliers often offer discounts on bulk purchases.
Economies of scale: technology
Large businesses usually use flow production to produce their output. This method of production often uses the latest tech. This tech enables them to produce higher levels of output at lower unit costs.
Diseconomies of scale
Factors that cause average costs to rise as the scale of operations increases
Poor communication
If a business becomes too large, managers may no longer be able to communicate directly with workers. This leads to slow and poor decision making
Demotivation of workers
In large businesses managers may no longer have day to day contact with workers. This can lead to demotivation. This leads to poor quality and a fall in productivity.
Poor control
The control of the business can be slow. There might be a waste of resources so costs are increased unnecessarily.
Quality standards
The minimum acceptable standard of production or service to consumers
Quality control
Checking the quality of goods through inspection
Quality assurance
A system of setting standards for each stage of production
Eval of Quality Control
:( The work can be repetitive
:( Problems that occur at the beginning are not found soon enough
:( Workers do not see quality as a responsibility
Eval of Quality Assurance
:) It encourages teamwork and this is motivating
:) It reduces the cost of wastage and faulty products
:) Quality issues are found when they occur and not at the end of the production process
