Operations Management (Sec 4) Flashcards
What is productivity?
Productivity= (Quantity of Output) / (Quantity of Input)
What is labour productivity?
Labour productivity =
Output (over a period of time)) / (No. of employees
How can a business increase productivity?
- Motivate/train workers
- Improved quality & inventory control
- New technology, Automation
What are the befits of increased productivity?
- Increased output
- Less cost per unit
- Less workers needed
- Higher wages boosts motivation
What is the buffer inventory level?
It is the inventory held to deal with uncertainty in consumer demand and deliveries of supplies
What is lean production?
Lean production refers to methods used by businesses to decrease waste, which increases efficiency
What are the seven type of waste?
- Overproduction: Too many goods, costly storage
- Waiting: When goods aren’t moving or being processed
- Transportation: Damage can occur
- Unnecessary inventory: Too much inventory is useless
- Motion: Employees moving unnecessarily
- Over-processing: Complex machinery doing simple tasks
- Defects: Faulty products
Benefits of lean production?
- Less storage costs, less waste
- Faster production, some processes get cut out
- Less injury
- Machines used more productively
- No need to repair faulty products
What are the types of Lean Production?
- Kaizen
- Just-in-time inventory control
- Cell production
What is Kaizen?
Kaizen means continuous improvement through elimination of waste
What are the benefits of Kaizen?
- Improved productivity
- Less space needed for production
- Work-in-progress is reduced
- Improved factory layout may allow some jobs to be combined
What is just-in-time inventory control?
It is a production method in which reduces/eliminates the need to hold inventories of raw materials/unsold products. The supplies arrive at the time they are needed
What are the benefits of just-in-time inventory control?
- No storage costs
- No need for warehouses needed
- Products are sold fast, so profits flow in quickly
What is cell production?
It is a production line divided into separate, self-contained units, each making a part of the product
What are three methods of production?
- Job production: A single product is made at a time
- Batch production: Products are made in batches
- Flow production: Lots is produced continuously
Advantages/disadvantages of job production?
+Suitable for personal services, so higher prices charged
+Product meets exact requirements of consumers
+Workers have various jobs, so more motivation
-Skilled labour
-Higher costs, time-consuming
-Errors occur, Expensive materials
Advantages/disadvantages of batch production?
+Flexible, lots of variation in product and workers’ jobs
+Damaged machines don’t affect work much
-Expensive, machines need to be reset after each batch
-Warehouse space needed
Advantages/disadvantages of flow production?
\+High output, sales & efficiency, low costs \+Little training required \+Can produce all day -Boring, low motivation -High storage costs -High initial costs
Advantages/disadvantages of using new technology?
\+High productivity, output \+More job satisfaction, better quality products \+Quicker communication \+More accurate data on consumer wants -Higher unemployment -Expensive -Tech gets outdated quick
What are fixed costs?
Costs which do not vary with the amount of sales in the short run. Also called overhead costs (e.g. rent, electricity)
What are variable costs?
Costs which vary directly with the number of items sold or produced
What are total costs & average cost per unit?
- Total cost=Fixed costs+Variable costs
- Average cost=(Total costs of production) / (Total output)
What is meant by “economies of scale”?
Economies of scale are factors that lead to a reduction of average costs as a business increases in size
Name the five economies of scale
- Purchasing economies: Discounts on bulk buying
- Marketing economies: Easy to distribute, develop, market
- Financial economies: Faster raising capital
- Managerial economies: Can afford to hire specialists
- Technical economies: Can use flow production, etc.
What are dis-economies of scale?
Factors which lead to an increase in average costs as a business grows larger
Name three dis-economies of scale
- Poor communication
- Slow decision-making
- Low morale
What is the break-even level of output?
It is the quantity of goods that must be sold for total revenue to be equal to total costs
Advantages/disadvantages of break-even charts?
+Expected loss/profits can be seen
+Can be redrawn
+Shows safety margin
-They assume all goods are sold
-Don’t take into account other aspects of the business
-Often data will not be able to be plotted as straight lines
How is break-even point calculated?
Break-even= Total fixed costs / Contribution(selling price-variable cost)
Advantages of good quality products?
+Good brand image/reputation
+Increases sales
+Builds brand loyalty/attracts new customers
What is quality control?
Checking for quality at the end of the production process is called quality control
Advantages/disadvantages of quality control?
\+Eliminates fault before product reaches customer \+Less training required -Expensive -Doesn't find source of the problem -Failed products wasted
What is quality assurance?
Checking quality standards throughout the production process
Advantages/disadvantages of quality assurance?
+Eliminates fault before consumer gets product\
+Less complaints, reduced costs
-Expensive training
-Dependant on employees
How can a good quality product be ensured?
- Quality control
- Quality assurance
What is Total Quality Management?
TQM is the continuous improvement of products and processes by focusing on quality at each stage of production
Advantages/disadvantages of TQM?
+Eliminates all faults
+No complaints
+Less waste
-Expensive, dependant on employees
How can a consumer be assured of quality of a product/service?
The product should bear a quality mark. The company has to follow regulations to receive the mark, so quality is assured
Which factors affect the decision of where to manufacture products?
- Market
- Power, water, rent, climate, raw materials, transportation
- Labour availability
- External economies of scale
- Government influences
