Operations Strategies Flashcards
What is leading edge technology?
Newly invented technology, such as robots or artificial intelligence
What is established technology?
Technology that is commonly used by businesses, such as computers or a forklift
Why might a business prefer established technology over leading edge technology?
- It is cheaper
- It is proven that it is reliable
Why might a business prefer leading edge technology over established technology?
- It is more efficient
- It may help to improve the quality of the product
What is the case study for technology?
Uber (leading edge smartphone technology)
What is quality management?
Strategies to reduce defects in production
What are the quality management strategies?
- Quality control
- Quality assurance
- Quality improvement
What is quality control?
Checking: inspections to detect defects in production
What is quality assurance?
Getting accreditation for having a such a well-designed production process that there are unlikely to be many defects
The most common example of accreditation is the ISO 9000
What is quality improvement?
Consistently seeking further ways to reduce defects
What are some ways to do quality control?
Feedforward inspections (check inputs)
Concurrent inspections (check products during production)
Feedback inspections (check finished products)
What are some ways to do quality control?
Feedforward inspections (check inputs)
Concurrent inspections (check products during production)
Feedback inspections (check finished products)
What are some ways to do quality improvement?
Quality circles (asking staff for ideas on how to reduce defects)
Six sigma process (a way of using data to identify ways to reduce defects in production)
What is the case study for quality management?
Coca-Cola (inspections and GFSI accreditation for supermarkets)
Why might management be resistant to change?
Financial costs such as:
- purchasing new equipment
- redundancy payments
- retraining
- reorganising plant layout
And also psychological inertia
What is psychological inertia?
People feel uncomfortable changing the way they’ve always done things
Which 2 of the reasons for resistance to change in the syllabus could also be considered ways to overcome resistance to change?
- Redundancy payments (so staff feel cared for if they lose their job)
- Retraining (so that staff know how to do the new process)
How else can management overcome resistance to change?
- Use change agents (who interact with staff to find out any concerns and to encourage them about the change)
- Use the unfreeze-change-refreeze model (unfreeze is convince of the need for change, and refreeze is to make people loyal to the new way of doing things)
What is the case study for resistance to change?
Toyota (democratic leadership to encourage new ideas; redundancy payments when they shut down in Australia)
How do businesses conduct new product design and development?
1) Conduct market research
2) Conduct research and development
3) Trial a prototype to see if it works / is popular
What are the benefits of new product design?
- Adapt to changing customer preferences
- Improve quality and differentiation
- Have a variety of products
What are the disadvantages of new product design?
- Expensive
- May be unpopular
- Could lead to negative publicity
What is the case study for new product design?
Coke Life being launched and then replaced by Coke No Sugar
What is outsourcing?
Paying another business to do a task that would usually be done by the business
What are 3 advantages of outsourcing?
- Cheaper
- Access to specialised skills
- Can focus on core activities
What are 3 disadvantages of outsourcing?
- Lose control of how product is made
- Loss of information security (e.g. confidential information on how the product is made)
- May have ethical criticisms if staff have poor working conditions
What is the case study for outsourcing?
Nannas Berries (outsourced packaging to China, but infected with hepatitis A)
What is supply chain management?
Ways to improve the flow of goods, from purchasing inputs through to delivering the product
What are the aspects of supply chain management?
- Global sourcing
- Logistics
- E-commerce
What is global sourcing and why is it good?
Purchasing inputs from overseas, where they may be cheaper or of better quality
What is logistics?
The transportation of goods
How can a business improve its logistics?
- Choose an appropriate transportation method (e.g. train, boat)
- Improve the packaging and storage to protect the product
- Use warehouses to organise stock
What is e-commerce?
Buying and selling online
How can e-commerce improve supply chain management?
- Can find cheaper suppliers online (e-procurement)
- Can automatically notify suppliers over the internet if stocks are low
- Can sell directly to consumers (or on platforms such as Amazon) without the need for a shop
What is the case study for supply chain management?
Amazon (outsourced delivery drivers; robots in their warehouses; global sourcing team in Shenzen)
What is inventory management?
How a business orders and stores its stock
What are the inventory management strategies?
- Holding stock
- Just-in-time
- Last-in-first-out
- First-in-first-out
What are the benefits of holding stock?
- Avoids running out of stock
- Bulk buying reduces costs
- Reduces delays for customers
What are the benefits of just-in-time inventory management?
- Reduces storage costs
- Avoids spoilage (e.g. damage, expiry)
- Avoids risk of theft
- Improves cash flow by spreading out costs
What are the disadvantages of holding stock?
- Increases storage costs
- Risks spoilage (e.g. damage, expiry)
- Risks theft
- Worsens cash flow by requiring large lump-sum payments
What are the disadvantages of just-in-time inventory management?
- Risks running out of stock
- Not bulk buying increases costs
- Increases delays for customers
What is the case study for holding stock?
Ikea (flat pack to store more)
What is the case study for just-in-time?
Toyota (kanban system to avoid potential stock-outs)
Why would a business use a LIFO inventory management strategy?
The products are bulky and non-perishable, so it is easier to sell the most recent purchase rather than having to reorganise them to access to the older stock
Why would a business use a FIFO inventory management strategy?
The product is perishable, so the oldest one should be sold first
Which inventory management strategy would be best for milk?
FIFO
Which inventory management strategy would be best for tomatoes if the shop wants to have good quality?
FIFO
Which inventory management strategy would be best for tinned tomatoes if the shop wants to be cheap?
JIT
Which inventory management strategy would be best for tinned tomatoes if the shop wants to be reliable?
Holding stock
Which inventory management strategy would be best for bricks?
LIFO
What does a FIFO inventory valuation method mean?
On your financial statements, your costs of goods sold reflect the cost of the OLDEST stock you purchased, and the remaining stock on your balance sheet reflects the cost of the NEWEST stock you purchased
What does a LIFO inventory valuation method mean?
On your financial statements, your costs of goods sold reflect the cost of the NEWEST stock you purchased, and the remaining stock on your balance sheet reflects the cost of the OLDEST stock you purchased
What are the effects of a FIFO inventory valuation strategy?
Understates costs of goods sold
Overstates your profit
Overstates the value of your remaining stock
What are the effects of a LIFO inventory valuation strategy?
Overstates costs of goods sold
Understates your profit
Understates the value of your remaining stock
What are the global factors in operations?
- Global sourcing
- Economics of scale
- Research and development
- Scanning and learning
What is an economy of scale, and why does it happen?
As volume of production increases, costs per unit fall.
Reasons include:
- spreading the cost of machinery across more products
- bulk buying materials
Why are economies of scale a ‘global’ factor?
As you expand to sell globally, you make more sales so volume of production increases (and therefore costs per unit fall)
What is research and development?
Finding ways to improve existing products or invent new ones
Why is research and development a ‘global’ strategy?
You can do the R&D in other countries where costs are lower or skills are better
What is scanning and learning?
Observing how other businesses do operations to learn from them
Why is scanning and learning a ‘global’ factor?
You can observe businesses in other countries
What is the case study for global sourcing?
Amazon (global sourcing team in Shenzen)
What is the case study for economies of scale?
Amazon (global size spreads costs of cloud computing and TV show production across more users)
What is the case study for research and development?
Amazon (Hyderabad campus in India)
What is the case study for scanning and learning?
Alibaba (who copied the technology used in Amazon’s warehouses)
What are the 6 performance objectives?
Cost
Quality
Speed
Customisation
Flexibility
Dependability
What is flexibility in operations?
Being able to quickly change when circumstances or customer preferences change
What is dependability in operations?
Being reliable, such as rarely having delays or stock-outs (running out of stock)
What is customisation in operations?
Changing the product for each individual customer
Why is it important to have performance objectives in operations?
1) By choosing a performance objective, it helps you decide which operations strategies to use (e.g. if your objective is cost, use JIT; but if your objective is dependability, use holding stock)
2) Use the targets as benchmarks to measure if operations is performing effectively
What is a case study about achieving the performance objective of quality?
Coca-Cola’s quality management strategies to reduce defects
What is a case study about achieving the performance objective of speed?
Amazon (logistics)
What is a case study about achieving the performance objective of flexibility?
Toyota (JIT and overcoming resistance to change)
What is a case study about achieving the performance objective of dependability?
Ikea (holding stock to prevent stock-outs)
What is a case study about achieving the performance objective of customisation?
McDonalds’ Create Your Taste menu
What is a case study about achieving the performance objective of cost?
Any case study about reducing costs - e.g. Coles Uber, Amazon etc.
