Operations Management Flashcards
What are the three different types of stock?
Raw Materials, Work In progress, Finished Goods
Explain two benefits of holding stock?
Being able to satisfy demand: If you create a demand that cannot be satisfied often leads to potential customers turning elsewhere for their goods, this leads to a loss of revenue.
Coping with fluctuations in demand: Being able to take advantage of a surge in demand for whatever reason, may lead to further sales and a potential increase in orders and revenue.
Buffer stock to meet late deliveries: Ensures that there is limited downtime, as there will have to be no waiting for late deliveries
Cost savings due to economies of scale
Explain two costs of holding stock?
Storage costs:Using warehouse space is expensive. The actual costs of purchasing the warehouse to hold stock, or the cost of rent has to be covered either immediately or if rented or a regular basis.
Opportunity cost: Paying for stock prevents the business from undertaking alternative expenditure.
Depreciation: Stock may depreciate over time, especially if it is perishable and reaches its sell-by date. It may also be damaged and will therefore lose value.
Security costs: Most goods will require some form of security. CCTV cameras or security guards are both expensive.
Insurance costs: As the risks of holding stock increase, the cost of insurance will increase. Insuring stock is an unavoidable cost.
What is stock out?
A situation in which the demand or requirement for an item cannot be fulfilled from the current inventory.
Explain two disadvantages of stock out
Loss of potential future sales: As you cannot supply the item that is demanded consumers of the product may not purchase the product in the future due to you not being able to supply them at the moment.
Downtime: As there is limited stock productivity is lower as there increased downtime (when production is not taking place) as employees are waiting for stock to arrive. Resulting in a higher cost of production.
What is buffer stock?
Buffer stock is the difference between the minimum stock level and holding no stock, it shows the emergency stock of a business.
What is lead time?
Lead time is the amount of time it takes for the reordered stock to arrive.
What is the economic order level?
This represents the result of attempting to balance, the cost holding stock compared to the savings that can be made from economies of scale of buying stock in bulk.
How is the average level of stock calculated?
Maximum stock + Minimum stock level/2
If the maximum stock level was 25,000 units and the minimum was 4,000 units, calculate the average stock level?
14,500 (25000+4000/2)
What is the difference between Last in first out and First in first out
Last in first out, is used on non perishable goods such as headphones, as no there don’t have a date they need to be sold by.
First in first out, is used on perishable goods such as milk, as the oldest stock will have the shortest sell by date it needs to be sold first to avoid wastage.
Why is an electronic point of scale import for stock control?
It ensures stock levels and the reordering of stock is done efficiently. The EPOS information is scanned by bar codes. Each product has a unique bar code number which is read electronically at the checkout desk, and the information is passed via electronic data to a computer that will automatically reorder stock at the required level.
Define Lean production?
Lean production is an approach to management that focuses on cutting waste, whilst ensuring quality.
How does the use of lean production enable a business to be competitive?
Lean production enables a business to be competitive, as the reduction of waste will result in a lower cost of production, as it costs less than can charge lower and as a result be more competitive.
What is Total quality management?
Total quality management considers the efficient usage of all the resources used within the production process, whether directly or indirectly related to the actual production process. Total is a significant factor as it considered vital that all employees are responsible for the welling of the business.
What are the benefits of using Total quality management in business?
Customer satisfaction. Since the company has better products and services, and its interactions with customers are relatively error-free, there should be fewer customer complaints. Fewer complaints may also mean that the resources devoted to customer service can be reduced. A higher level of customer satisfaction may also lead to increased market share, as existing customers act on the company’s behalf to bring in more customers.
Defect reduction. TQM has a strong emphasis on improving quality within a process, rather than inspecting quality into a process. This not only reduces the time needed to fix errors, but makes it less necessary to employ a team of quality assurance personnel.
What is Jidoka?
This is a process for building into the production process, an ability to detect and reject faulty goods and components at the earliest possible moment in the production of the good.
Explain two reasons why Jidoka can save a business money.?
Jidoka can save the business money as it reduces the downtime that can take place what is very expensive cost to a business.
Jidoka also stops faulty goods and components of goods this will mean that there will less unsatisfied consumers whom will ask for refunds.
What is Kaizen?
Kaizen means striving to ‘continuous improvement’.
Why is Kaizen beneficial to a business?
Increases efficiency in the business, as employees are striving to continuously improve causing an increase in productivity in the firm, as a result as employees become specialized and have lower production costs.
Employee satisfaction is higher, as they ask employees to suggest ways to improve the process, becoming involved in the decision makes the employees feel valued, that may result in a lower labor turnover.
What is time based competition?
This is an attempt to reduce the time taken between the generation of the idea for a production and it going into production.
How can time based competition be improved.
This can be speed up the use of Computer aided design.
What is cell production?
Cell production is a form of teamwork, Employees are placed in different teams, with each team responsible for a particular part of the production process.
Why may cell production motivate employees?
Cell Production may motivate employees as they are working part of a team communication, this will make work more enjoyable and are motivated and efficient at work.
Continually cell production may motivate employees as employees have more responsibility and as a result feel valued by the business, if they feel valued by the business they are more likely to be more motivated to work harder.
