Operations management Flashcards
Productivity
>Tells a business how effective their workers are
>A productive business uses its factors of production best
>Investors invest in a productive business
>Companies will move their business where they know their workers will be most productive
Labour intensive - Requires a high level of manual work and people to do the job
Capital intensive - Requires a high level of capital to invest to carry out a job - generally machinery
Problems when market conditions change:
Labour - If the market went into decline it will mean high levels of redundancy. Unskilled staff are the first to go.
Capital - Machinery which is specific and expensive no longer has any use. They do not have the staff to lay off and reduce costs.
Production = How much of something that is made or how much of a service that is provided.
Productivity = How much of a product that is made or a service that is provided per person.
Calculated by:
Amount produced / per worker, hour, amount paid
Capacity Utilisation
Capacity is the amount of product a business can make with its resources.
Capacity used / Available X 100 = %
> Utilisation is a key measure of a business performance.
World class companies aim to use 85%+ of their available capacity
Using 100% is not desirable and can cause problems
Operating Under Capacity Negatives:
>This is when the business is not using its resources, machines and people to full effect.
>There is a cost of using a resource and an opportunity cost of not using it.
>Opportunity cost - This is the cost of not using a resource, paying someone when they’re not busy with work.
>Under capacity can have negative effects - drop in production can lead to drop in morale/ motivation.
Positives of working under capacity:
+ As a sales tool - when a business is looking to win a big order they’re available
+ Can help reassure a customer there product will be made on time
+ It can be a sales opputunity
Operating Over capacity:
Operating over capacity opens up the opportunity for additional income and work. A solution if this becomes to much is to sub contract some of the work which can throw up some problems along with helping out.
Negatives of operating over capacity:
- People working long hours, tired and stressed with constant high demands, mistakes arise and morale falls.
- No time to stop and service machines
- Subcontracting means losing control - Need someone who can do the work to the same high standard
- Not all the time this works out
Lean management, this minimises the:
>Wastage of stock - just in time
>Wastage of time products spend in production stage
>Wastage of labour due to inefficient workers
Stock Control, Stock isn’t just finished products its also:
>Raw materials - the materials used to create product
>WIP - work in progress, as products are made more value is added to them.
Lead times - Time from order to time of delivery
(Delivery date - Date of order)
These need to be as short as possible because this minimises the time it is in transit and the time it is kept in storage.
This gives a competitive advantage to a business supplying a product by responding faster than other businesses both within and outside of the country.
Stock Control
Stock is delivered from suppliers to companies exactly when it is needed in the most economical way
Just in time or JIT Stock Control
>This is where smaller quantities are delivered in exactly when needed by the business
Advantages
+No need for mass storage or to keep old stock
+Money is working efficiently not spent storing products
+No need to buy large amounts of stock
Negatives:
- No room for error
- Times of congestion need to be managed
- Administration and setup costs are high
- Hard for small companies
Most companies setup their own supplier trucks
Kan Ban - Just in case stock
Production methods
>The range of methods used to make products
Selection of correct method is important in terms of:
>Maximising output
>Maintaining the correct level of quality
>Keeping costs low between labour and capital expenditure
Job Production >One off products >Unique require high skill level >Expensive - custom made >High quality >Percentage of or full price paid up front.
Batch Production >Used for medium to high volume >Product will go through many processes >Processes broken down into batch sizes - these are manageable. Batch number = Full trace-ability >Limited by slowest part of the process
Assembly Production
>Products require many components to be configured
>Traceable products - effort is put in to achieve this
>Very high tech, Capital intensive
Flow Production >Very high volumes - Mass production >Capital intensive >Few components >Little human intervention - Very high startup costs
Cell production
>Operators work as a cell (Number of operators broken down into stages)
>Each operator has their own task
>Aim to remove unnecessary operators - Lean management
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Quality
>Quality control is checks on the finished product
>Quality assurance is checks on products throughout production - this is said to be better than quality control.
Safety critical - One part could take a life
Quality and zero defects
>Companies aim to have no defects with their products
>Difficult due to product variation and human involvement in manufacturing
>Getting to 0 is often deemed impossible but companies try to minimise defects as much as possible
Aim for 100 part defected per million 0.01%
Total Quality Management
>Teams of people work in quality circles - they are empowered to take control of their own work and find ways to improve what they do
Kaizen
>Japanese term developed by Toyota meaning to continuously improve
