Operations Management Flashcards
Lean Production
Working practices that focus on removing waste, whilst maintaining or improving quality.
Time Based Management and Lean Design
Reducing waste by managing resources, ensuring products are fit for the market in the shortest time. Aims to reduce wastage and time wasted on unproductiveness, to increase efficiency.
Simultaneous Engineering
Aims to minimise development times, where separate design and engineering stages are tackled at the same time.
Just-In-Time
Ordering materials just before they are needed. Lower storage / wastage costs. Suppliers are nearby and are flexibility / reliability. Late delivery could be costly.
How JIT is achieved
Based on pulled demand, aiming to operate with zero or minimal buffer stock. Needs to be 0 defects at every stage of production. Removal of hidden inefficiencies.
Critical Path Analysis
A technique used to identify which tasks can be done simultaneously and the order to when they need to be completed.
Nodes Thirds
Big One - Node Number
Top Right - Earliest Start Time
Bottom Right - Latest Finish Time
CPA Problems
CPA doesn’t ensure effective management
Project requires many activities, CPA may be confusing
Resources available
Kaizen
Continuous improvement - employees make suggestions for small-scale improvements. Provides motivation for employees given power / opportunity to increase efficiency
Kaizen Advantages
- Efficiency of production
- Removal of waste resources
- Reduction in cost
Total Quality Management
This is when the idea of quality is instilled throughout the business, where quality is checked after each stage.
Operation Management Definition
The attempt to ensure that the right goods/services are produced at the right time at the right cost at the right quality.
Operational Targets
Predetermined targets which relates to a number of efficiency measures e.g unit costs, quality, capacity utilisation.
Under Utilisation
May increase costs, fixed costs spread over less output increasing unit costs.
Higher capacity creates economies of scale decreasing variable costs.
Capacity Utilisation
Current output as a percentage of potential output.
Benefits of Quality
- Less wastage rate.
- Motivation increase productivity Recognition.
Improve Cashflow
Short term/long term finance i.e factoring, loans, sale and leaseback.
Lengthen the credit time to pay back suppliers.
Factors Affecting Suppliers
Price, Payment Terms, Quality, Capacity, Reliability, Flexibility
Quality Definition
This is when the good/service meet customer expectations.
Quality Assurance Measures
Each Stage of the production process, the product is checked to meet the quality requirements.
Advantages of CPA
Individually assessing tasks CPA ↓ time
Resources can be ordered/hired on their EST, ↓ costs
CPA can show the implications of the delayed task
Economies of Scale
Factors that cause unit costs to fall as the amount of output a business produces increases.
Purchasing Power
Large businesses have the power to negotiate large discounts on bulk-orders with their suppliers, therefore reducing their variable costs
Technological EofS
Large businesses are able to afford the capital needed to invest in new, up-to-date equipment / tech. Machinery can decrease unit costs and increase productivity.
Specialisation EofS
opportunity to hire specialists like IT consultants / accountants. Able to advise the business on how to reduce costs
Diseconomies of Scale Definition
Factors that cause the unit costs to rise.
Poor Comms DofS
Communication (may) harder when a business grows. Quality / motivation may suffer / mistakes - costly. Written comms (may) less motivating than face-2-face. Large firm time to communicate face-to-face so emails / letters.
Management DofS
Small businesses managing easy. When businesses start to grow and more people become involved, it can be hard to monitor aspects like productivity. Regular meetings may be required which will add to costs
How to change DofS
Delegate power and enrich jobs to increase motivation, hold regular training to improve management, and decentralise a business structure and empower staff in order to improve coordination.
Quantitative Decision making
Payback - How quickly the investments will be recovered
ARR - Average annual profit generated by the project
Qualitative Factors
Locate near where staff live
Economies of scale
Access to customers/suppliers and infrastructure
Multi-Site Advantages
Closer to customers + geographical market
Easier recruitment
Marketing/Managerial EofS
Flex capacity by adding/removing locations
Understanding of local market cultures
Multi Site Disadvantages
Duplication of activities
Harder to control operations
Challenging to communicate
Strategic risk not understanding local market
Problems with international location
Language/Cultural differences - Costs, working hours, public holidays
Economics/Political/Legal stability
Impact on public image using cheap labour
Communication
Stock Wastage
Stock wastage – loss of stock either in production or service process, e.g. scraps thrown away, reworking of items that were not done correctly initially or defective products that cannot be put right, damaged products due to improper handling or storage, stealing, passing the sell-by-date.
Stock Rotation
FIFO (First In First Out) or LIFO (Last In First Out). FIFO avoids the problems of leaving older stock to become unusable at the back of the shelf or warehouse.
Needs of Kaizen
CORE principle – Commitment (underlying drive), Ownership (opinions and have a say of the performance), Responsibility of having an opinion and personal Excellence.
Marginal gains – little improvements work together to collectively find new ideas.
Cell Production
Organising production around teams, each team given responsibility to a stage improving quality
Stakeholders Affected - Lean Production
Employee - J-I-T, Kaizen
Suppliers - J-I-T, CPA
Shareholder - Long vs Short term
Competitors - Loss in market share, pricing, less qualified labour stay with Kaizen
Internal Influences on Ops Obj
Corporate Objective
Finance - investment/cost
HR - quality/capacity of workforce
Marketing - Product determines operational set-up changes to marketing mix may strain operations
External Influences on Ops Obj
Economic Environment - PED changes in D/S
Competitors - Efficiency
Technological - Innovation important
Legal/Environmental - Regulation
Operational Strategies
Growth - Organic/Takeovers acquiring others operations
Economies of Scale - Purchasing, Technical, Managerial
Minimum Efficient Scale
Output for a business in the long run where internal economies of scale have been fully exploited, lowering unit costs
Diseconomies of Scale
Problems experiences as a firm increases the scale of production leading to a rise in unit costs
- High Capacity breakdowns
- Controlling productivity levels
- Communication - Alienation losing morale.
DofS Solutions
Delegation, job enrichment, autonomous teams.
Training for communication and listen to worker’s views.
Decentralise power, empower with wider spans of control.
Capital Intensive
Minimise costs, small labour costs
Large part is fixed costs buying capital
High financial barriers to entry
Inflexible hard to switch products
Labour Intensive
High Labour costs
Flexible to meet needs
Operational Innovation
Improve Productivity Lower unit costs Better Quality meet needs Product range risk bearing EofS USP creation adding value Competition innovated products hard to protect Availability of finance
