Operations Strategies booklet Flashcards
Operational obj
targets a business sets in order to produce goods or services in the most effective way
Quality targets
Cost targets
Innovation
Efficiency
Environmental targets
Influences on objectives
Internal:
Finance
Marketing
People/HR
Scale- production types
Job production- each customer individual needs
Batch production- group orders
Flow production- mass- everyday standardised items
Mix will depend on
Relative price of resources
Nature of the product
Availability of resources
State of technology
Economies of scale- Internal
About spreading some form of fixed costs across more units Internal: Technical- auto production lines Purchasing- buying in bulk Specialisation- specialist managers Also financial and managerial
Economies of scale- external
About spreading some form of fixed costs across more units
External:
Labour- availability of skill in specific area
Joint ventures- spread cost and risk
Support services- cluster in certain areas
Diseconomies of scale
as business grows in size and produces more units of output it experiences rising average cost of production
Inputs in production
Land Labour Capital Natural resource Enterprising
Labour intensive- Advantages
High levels of workers in production Advantages: Staff flexible to meet demand Personal touch- customer needs Tailor made products Labour can provide feedback
Labour intensive- Disadvantages
High levels of workers in production Disadvantages: Expensive in long term Inefficient and inconsistent levels of effort Labour relation problems Shortage of skilled labour
Capital intensive- Advantages
Uses high levels of capital (machinery) in production Advantages: Reduces human error Greater speed and uniform effort Technical economies of scale No problem with labour shortage
Capital intensive- disadvantages
Uses high levels of capital (machinery) in production Disadvantages: Initial high cost and possible training Lack of flexibility- fall in demand Machinery lacks initiative
Innovation- Aims
Means bringing a new idea into being within market place or workplace Aims: USP Better quality Efficient ways of producing Better ways of doing things
Innovation- process
Means bringing a new idea into being within market place or workplace Process: Increasing efficiency Improve quality of manufacture Improve quality of service
Innovations- Implications
Means bringing a new idea into being within market place or workplace Finance- investemtn expensive HR- Staff consulted about changes Wokrforce planning issues Staff need to be trained Marketing- market research- demand 4p's customer needs and wants Advertising to launch new product
R&D- aims
Extensive scientific research into the product and its design- prototypes Aims: USP Better quality Efficient production
Spending on R&D Benefits
Creates USP
Differentiate- comp advantage
Efficient production process
Premium pricing
Spending on R&D drawbacks
Costs Risk of failure Timing of release Risk of being copied Intellectual property protection
Influences on innovation
Cannot raise necessary funds pressure from investors Low success may deter investors Business culture business strats- risk
Benefits of innovation/R&D
USP
Firms reputation- quality innovative
Higher levels of efficiency
Intellectual P.P
Drawbacks of innovation/R&D
Cost- R&D
R&D time consuming
Other firms launch ‘me too’ products
Image- failure
Good location benefits
Competitive unit cost Optimal revenue opportunities Acceptable ARR Sufficient production capacity Labour force access Diversity
Factors affecting location decision
Cost and availability of land Cost and availability of labour Communication links Transport costs/Proximity to the market Availability of raw materials Government location incentives
Advantages of multi site locations
Closer to customer/markets- monitor trends better
Prestigious location as well as cheaper sites elsewhere
Abroad- reduce costs
Reduce risk of supply disruption
Smaller businesses operating as conglomerate- each element in optimal place
Delegation of authority
Marketing and management economies of scale
Easier to flex capacity
Disadvantages of multi site locations
Co-ordination and communication problems
Lack of control and direction
Different cultural standards and legal systems in different countries
Increased strategic risk
Cannibalism- too close together
Greater operating costs- transporting materials
International location- Quantitative
Tax advantage
Exchange rates
Lower overseas cost
International location- Qualitative
Access to new market
Political Stability
Ethical issues
Image
Offshoring
Shifting production overseas
Reshoring
Bringing manufacturing back to the UK
Lean Production
range of measures used in attempt to reduce waste and cost in production
Critical path
'network analysis' 1. Right to left EST top quadrant Take highest result 2. Right to left LFT bottom quadrant Take lowest result
Benefits of critical path
Identify what activities involved in project or process
Calculate earliest time when project completed
Identify critical activities- influence speed of whole project
Produce/develop faster than competition
Implement just in time ordering
Use CPA as control to review progress
Limitations of Critical path
Relies on estimate
JIT- reliability of suppliers
CPA- shows quickest way but not most effective resource use
All projects must be managed properly
Just in time
Aims to minimise:
Production time
Production costs
Amount of stock held in the factory
Advantages of JIT
Less cost of holding stock
Less working capital required
Less ruined stock
Lower associated stock costs
Disadvantages of JIT
Little room for error Very reliant on suppliers Unexpected orders harder to meet High initial set up costs Complex system
Cell production
Manufacturing an item, organising workers into cells (teams)
Cell Production advantages
Improved communication Workers become multi skilled- adaptable Greater motivation Quality improvements Increased productivity Reduced absenteeism + labour turnover
Cell Production disadvantages
Trust and participation- exploitation
Not worthwhile- small scale
Efficient scheduling of workers
Good recruiting/ training needed
Benchmarking
Measuring performance vs competition- learnt from best in the world
Kaizen
Business with continually update and improve their products and marketing
