PPQ Operations

Question 1

Discuss the use of a just-in-time stock control system. (6)

Answer 1

Just-in-time (JIT) stock control system reduces storage costs as stock is delivered as it is needed (1 mark).

This means that the organisation is more responsive to consumer demand (1 development mark) and that money is not tied up unnecessarily in buying large volumes of stock (1 development mark).

This can also result in less wastage of stock as it is only being ordered when it is needed (1 dev mark).
However, it also means that organisations can lose out on bulk-buying discounts (1 mark).  Having a JIT system relies heavily on suppliers’ co-operation in delivering stock when it is needed (1 mark).

Using a JIT system could result in high admin and delivery costs as there are many small deliveries (1 mark).

This could mean that production may be interrupted/halted if there is a delay with a delivery (1 development mark).

Deliveries of small quantities and not holding stock could mean the organisation is unable to meet sudden increases in demand (1 development mark).

Accept any other suitable response.
Award 1 mark for each valid discussion point. Award 1 mark for a development of a discussion point.
Full marks can be awarded for discussing
JIT in all positive terms, all negative terms or a combination of both.

Question 2

Explain the disadvantages of just in time stock control. (4)

Answer 2

It is harder to cope with unexpected changes in demand which means customers may go elsewhere

If customers are forced to go elsewhere for a product they may lose them completely to a competitor

Could cause delays in production or possibly halt production as there are no raw materials to use in production

Which can mean paying for workers who aren’t producing any goods

Continually ordering stock can mean increased administration costs

Increased transport costs due to the number of deliveries taking place

Can also increase carbon footprint

Increased unit costs as they are making small orders as opposed to buying in bulk

Relies of good communication/relationships with suppliers to work effectively which can take a long time to develop which means there may be more wage costs if you employ a supplier contact

Question 3

Discuss the advantages and disadvantages of centralised stock storage.

Answer 3

Advantages
Stock may be ordered in bulk and economies of scale taken advantage of
Reduced risk of pilferage as staff may be employed to monitor issues of stock
Stock is maintained in appropriate conditions which reduces waste
No space is taken up in departments with storage
Specialist staff handle stock more efficiently
Centralised warehouse can be cheaper than using multiple warehouses
Centralised ensures consistent stock handling procedures

Disadvantages
More time is taken to access stock – physically moving the stock to department and the paperwork involved
Additional staff increases costs
Cost of specialist equipment and storage facilities
Not reflective of actual stock usage in each division/branch
Pilferage/theft can also be a disadvantage as holding large volumes of stock can make theft easier to cover up.

Question 4

Discuss the use of just in time (JIT) production. (5)

Answer 4

Less storage may lower rent/premises costs.

Finance is not tied up in inventory.
So can be better used elsewhere.
Improved cash flow.

Reduced waste as less inventory is stored.
Reduced risk from perishables going ‘out of date’.
Reduced risk from fashion changes.
Reduced theft as inventory is easier to monitor.

Dependent on reliable suppliers.
If inventory does not arrive then production will halt.

Increased number of deliveries required eg increased administration costs.
May lose out on economies of scale/buying in bulk.

Question 5

Describe the advantages of centralised warehousing. (3)

Answer 5

Cheaper for a supplier to deliver to one location which may mean suppliers are more willing to supply you.
Bulk purchasing allows for economies of scale/reduced costs/ discounts.
Reduces costly duplication of administration/storage facilities.
Items can be found quicker as they are in one place rather than them being decentralised.
Specialist staff may be used.
Improved security as you just have one location to cover.
Theft is reduced as you just have one location to cover.
Standardised procedures can be used.
Accessible if located near infrastructure.
Less space is taken up in departments/outlets.

Question 6

Discuss the use of centralised warehousing. (3)

Answer 6

Advantages
get a bulk buying discount
reduced risk of pilferage
inventory is maintained in appropriate conditions
no space is taken up in departments with storage
specialist staff handle inventory more efficiently
centralised warehousing can be cheaper than using multiple warehouses
centralised warehousing ensures consistent inventory handling procedures
can monitor inventory usage in different departments/sites

Disadvantages
more time is taken to physically move the inventory from the central warehouse to each department
more admin staff required to deal with the paperwork involved
additional staff increases costs
cost of specialist equipment and storage facilities
may not be reflective of actual inventory usage in each division/branch.

Question 7

Describe the features of an effective inventory management system (4)

Answer 7

Maximum inventory level
To minimise inventory costs

Minimum inventory level
If minimum level is not accurate shortages could result

Re-order level
Lead time for delivery of order

Re-order quantity

Buffer inventory should be set where some inventory is in reserve

Lead time is the time between an order being placed to when it is received

Organisations could operate a just in time system where inventory levels held are low and new orders arrive in time to be used in production

Organisations should ensure inventory rotation

Electronic inventory management systems eg EPOS can be used to link inventory levels with sales o
Inventory orders can be placed automatically
Can allow decisions to be made on best sellers/slow moving inventory

Appropriate storage conditions eg temperature level

Question 8

Discuss the use of capital-intensive production. (4)

Answer 8

ADVANTAGES
24/7 operation possible/no need for breaks
Products can be mass produced
Business can benefit from economies of scale
Machinery provides consistent quality/standardised
Reduced possibility of human error
Will save on labour costs

DISADVANTAGES
Huge set-up costs
Breakdowns can be catastrophic
Technology will need to be improved/maintained

Question 9

Describe the factors to be considered when deciding on a method of production. (4)

Answer 9

if the product requires specialist skilled labour
if each product needs to be identical (standardised)/needs to be unique
the quantity of the product that needs to be made
the required quality of the product
initial set up costs involved
the resources available to the business

Question 10

Distinguish between labour-intensive production and capital-intensive production. (3)

Answer 10

Labour Intensive
production has to come to a halt if staff are ill or absent

individual customer requirements can be met

quality may vary from employee to employee

costly due to recruitment/ selection/training costs

Capital-intensive

machines can work 24/7

production can be standardised/products are mass produced

allows for consistent quality

costly due to purchasing/ maintaining machines

Question 11

Discuss the methods of ensuring quality identified in the case study. (5)

Answer 11

Quality inputs
Products are carefully sourced from local/reliable suppliers which results in better quality output eg fresher produce (materials)
Staff are trained meaning they are skilled so less likely to make mistakes (labour)
Can be motivating for staff to receive training

Taste panel/Quality circle
A group of employees who taste the goods to check the quality
May reduce complaints from customers/retailers if produce is checked thoroughly
May empower employees who are involved, increasing motivation

Quality assurance
Quality checked throughout production
Mistakes are identified quickly reduces waste/saves money
Can be expensive due to the requirement of regular checks

Quality control
Checks of only inputs and outputs
Cheaper than quality assurance as less checks are required

Continuous improvement
Better machinery can result in better output
Requires a commitment from management

Benchmarking
Best practice is identified from a competitor/market leader and targets are set
Increases competitiveness

Question 12

Discuss the use of benchmarking to ensure quality (4)

Answer 12

Identifies best practice in the market therefore will improve the performance of the organisation if those techniques are adopted
It enhances competitiveness

It is a continuous process of striving to improve

Can be motivational for employees giving them goals to achieve

May identify other functions that could be improved

It can be difficult to gather all the relevant information needed as it isoften not publicised

It can be time consuming to study and analyse competitors’ techniques

Techniques may not be able to be adopted by the organisation due to internal constraints eg limited finance

Can only be as good as the benchmark set

Minimise the risk of the product failing when launched onto market

Question 13

Describe the benefits to an organisation of using quality circles. (4)

Answer 13

Systems can be improved based on suggestions from staff
Information from workers doing the job is valuable
Employees will feel empowered
Employees will be more motivated
Productivity may increase/lower staff turnover (1 max)
Will improve employee relations
Improves communication between employees and management

Question 14

. Justify the use of each of the following quality measures in the production process: Quality Control, Quality Assurance, Benchmarking (3)

Answer 14

Quality control
trained inspectors check for faulty products before they get to customers
production is not continually interrupted for checks

Quality assurance
picks up problems as soon as possible
keeps waste levels low
as faults are detected early it may be possible to recycle/rework the products

Benchmarking
helps to identify how improvements can be made
may show how cost savings could be made in production

Question 15

Justify the expense of investing in robotics for mass production. (2)

Answer 15

Identical products can be made.

Can be reprogrammed.

Fewer mistakes/flaws/consistent quality.
Reduces waste.
Less returns/customer complaints.

Reduction in labour costs as fewer employees are needed.

Reduced need for supervision.

Robots do not require a break/holiday/absence/operate 24/7 – 1 max.

Robots can do work which is repetitive.

Robots can work in conditions employees would not be allowed to for health and safety reasons eg in extremely hot conditions.

Question 16

Describe the advantages and disadvantages of using computer aided design (CAD). (3)

Answer 16

Advantages of CAD
more accurate design process
meaning less wastage
amendments can be made without having to rebuild prototypes
images can be seen in 3D
will allow you to have an idea of how the finished product will look

Disadvantages of CAD
the software is expensive
staff need to be trained to use the software
time consuming to design the product
each variation needs to be redesigned

Question 17

Describe the ways in which technology can be used in the Operations department. (2)

Answer 17

computer facilities can be used for online purchasing of raw materials

email can be used to confirm orders have been placed/to let the operations department know that orders have been despatched

websites can be used to compare supplier prices/delivery times

using tracking number/QR codes/barcodes to locate where goods are in the delivery process

databases can be used to store supplier and inventory details

spreadsheet can be used to store/monitor inventory levels

Computer Aided Design (CAD) can be used to design a product before it goes into full production

Computer Aided Manufacture (CAM) uses machinery to produce the product
Electronic Point of Sale allows inventory levels to be monitored

EPOS can automatically reorder new inventory when the re-order level is reached

Question 18

Describe the benefits of achieving Fair-trade certification. (2)

Answer 18

Fairtrade certification improves the image of the organisation
Attracts consumers who have positive attitudes towards products which are ethically made
The Fairtrade trademark can be used as amarketing tool
The trademark shows international standards have been met
Higher prices can be charged for Fairtrade products
May attract staff who wish to work for an ethical company

Question 19

Describe ways an organization can become environmentally responsible (3)

Answer 19

Purchase recyclable materials
Reusing waste from the production line
Reduce carbon footprint
Minimise noise pollution created by the manufacturing process
Use sustainable energy eg install solar panels or build a wind farm
Use less packaging of products

Question 20

Discuss costs and benefits of Fairtrade. (3)

Answer 20

producers are protected from low and volatile market prices
farmers’ and workers’ rights are protected o to ensure appropriate working conditions/fair wage/quality of life
it can be time consuming and costly to become Fairtrade certified
certain rules and regulations can be difficult to meet
products tend to be more expensive for the consumer
consumers can be attracted to buying Fairtrade products
can give an organisation a positive ethical image

Question 21

Explain the advantages of JIT stock control (4)

Answer 21

Stocks arrive just in time to be used in production
Goods are not produced until orders are received
Capital is not tied up in stock and can be used elsewhere
Less space required
Reduced deterioration or obsolescence of stock
Reduction in costs involved with stockholding
Must have a description to gain maximum – otherwise max 3

Question 22

Describe the JIT stock control system (2)

Answer 22

JIT is a system that involves only ordering stock when it is needed and when an order has been placed.

Stocks arrive just in time to be used in the production process.

Goods are not produced unless an order is placed from a customer.
Relies on efficient suppliers.

Question 23

Describe the advantages and disadvantages of using the JIT stock control system (5)

Answer 23

Advantages
Money is not tied up in stock.
Less space is required to store stock.
A close relationship is built up with suppliers.
Less wastage due to deterioration.
Less wastage due to fashion changes.
Reduces costs – max 1.

Disadvantages
If suppliers don’t deliver production is affected.
High dependence on suppliers.
High admin costs due to continual ordering.
Higher transport costs.
May lose discounts due to bulk buying.

Question 24

Discuss the use of just in time production (6)

Answer 24

Capital is not tied up in stock and can be used elsewhere in the organisation.

There is less warehouse space needed for stock.
Less stock is stored which should result in less wastage.

Theft will be reduced as stock is more tightly controlled.

Changes in fashion or trends will have less of an impact.

If stock does not arrive production can stop.

May lose out on bulk buying discounts.

There will be an increase in delivery costs as more frequent transportation exists.

There is a high dependence on suppliers.

May increase administration costs due to more ordering.

Stock may have to go straight into production and may not be time to check it for quality.

Production not started until order arrives − this can improve cash flow.

Question 26

Describe the risks to an organisation running with low stock levels. (4)

Answer 26

A business cannot cope with unexpected changes in demand.

If new deliveries are late, the organisation may have nothing to sell or may have to cease production.

More frequent ordering leads to increased administration costs.

No discounts received from bulk buying.

Could result in loss of customers

Unexpected losses of stock eg theft, fire etc

Question 27

For any organisation, describe the problems of (I) under-stocking (ii) overstocking (6)

Answer 27

Under-stocking
Cannot cope with unexpected changes in demand
Production line may have to stop – therefore firm is paying an idle labour force
Cannot meet customers’ orders so they may choose to go elsewhere
Increased administration costs if firm is frequently re-ordering

Overstocking
High costs of storage and maintenance
High insurance costs
Possible need for security measures
Large amount of space needed
Money is tied up in stock which could be used elsewhere
Stock may deteriorate or become obsolete
Safe disposal incurs extra cost (2 points)

Question 28

Describe the factors which must be taken into account when setting a stock reorder level. (4)

Answer 28

Minimum stock level – the level which ensures there is always stock for production

Maximum stock level – the level above which stock should not rise as it is uneconomic

Lead Time – the time a supplier takes to deliver influences the quantity ordered at any one time

Type of product – some products used in manufacturing may be unsuitable for stock piling (eg fresh goods)

Reliability of supplier – a supplier who delivers quickly and as promised can be relied on to make deliveries more often reducing the need to hold high levels of stock

Usage – the quantities used on a daily basis affect the quantity ordered at one time

Question 29

Explain how ICT can help stock control management (4)

Answer 29

Scanning bar codes means stock records are updated immediately on receipt or issue of stock

Managers can identify best sellers and non movers easily

Managers can obtain the total stock figure at any time of the day

Can identify which products sell best at certain times of the day or year
Computer can be linked to
the supplier resulting in product being automatically recorded when re-order level is reached

Spreadsheets could be used to record information and totals and balances will be calculated using formulae

Fax/email allows accurate orders to be placed

Question 30

Discuss the advantages and disadvantages of a centralised stock control system (6)

Answer 30

Security is improved.

Can reduce costs as bulk purchasing uses economies of scale.

Less smaller purchases are necessary.

Reduces duplication of stock held throughout the organisation.

Specialist staff are used to control ordering, issuing and purchasing of stock.

Agreed procedures can be set up for the whole organisation.

Can be time consuming to receive stock when needed in departments.

If large amounts are held there is an increased likelihood of wastage.

Specialised requirements of departments is harder to maintain.

Central stock may be remote from production wasting time moving materials.

Moving stock from remote store has cost implications.

Question 31

Explain the problems that can arise from under and over stocking (5)

Answer 31

Understocking
Becomes harder to cope with unexpected changes in demand which means customers may go elsewhere to purchase the product if the firm doesn’t have it in stock
If customers go elsewhere they may lose them completely and not just the one time
Production may have to stop completely as there are no raw materials to use in production which can mean paying for workers who aren’t producing any goods
Continually ordering or restocking can mean increased administration costs.
Increased transport costs
Increased unit costs due to not bulk buying

Overstocking
Carry large amounts of stock will increase the cost of storage reducing profit
May result in having to pay larger insurance costs
Increased security costs
(Max 2 on stock storage costs)
Capital is tied up in stock which means that the money cannot be used elsewhere such as advertising
The stock may deteriorate resulting in larger wastage costs
Changes in trends and fashion will mean that stock might become obsolete and not be able to be sold
Higher risk of pilfering

Question 32

Describe the features of an effective stock control system (5)

Answer 32

Maximum stock level: The level of stock that should be held to minimise costs
involves examining storage space available and finance required for this level

Minimum stock level: level that stock should not fall below
shortages could result and production could be halted if this is not accurate

Re-order level: the level which stock should be re-ordered at, takes into account usage and lead times, which is the time taken between the order being placed and the delivery of the stock

Re-order quantity: the amount that is ordered to take the stock back up to maximum level once it is delivered.

Accept an appropriate description of JIT system (no max)
Stock rotation
Computerised stock control
Warehousing

Question 33

Describe the use of ICT in a stock control system (5)

Answer 33

Databases can be used to keep balances of stock which are automatically updated

Linked to tills through EPOS

Can then order the stock automatically when it reaches the re-order level

Allows for accurate/constant monitoring of stock levels

Can allow for decisions on slow moving stock/view best sellers to be made by managers from their computer

Can highlight regional variations in stock from head office

Is a deterrent to theft by staff

Question 34

Describe the different stages involved in setting an appropriate stock level. Use a diagram to support your answer. (6)

Answer 34

Maximum stock level: the level of stock that should be held to minimise costs and involves examining storage space available and finance required for this level
Minimum stock level: level that stock should not fall below as shortages could result and production could be halted
Re-order level: the level which stock should be re-ordered at, takes into account usage and lead times
Re-order quantity: the amount that is ordered to take the stock back up to maximum level once it is delivered
Lead time: the time taken between ordering new stock and it arriving at the organisation

Question 35

Describe the disadvantages of centralised storage. (4)

Answer 35

inventory has to be delivered to each department or division
which may cause delays
can incur additional transport cost
additional security staff may need to be employed

increased communication is required from divisions/departments to accommodate for fluctuations in inventory

specialist equipment needs to be purchased/maintained

wage costs of specialist staff can be high
a central area for storing inventory could be expensive to set up/ maintain

Question 36

Explain the factors that would affect the choice of production method used (5) 2009 (2) q4cii

Answer 36

The skills of the workforce – where low skilled labour is employed, a mechanised process may prove more effective
The finance that the organisation has available
The technology available to be used in the production method
The size of the business
The actual product being made
The number of the product required for the market
Standard of quality required

Question 37

Justify the use of 2 different methods of production. (4)

Answer 37

Labour intensive
Capital Intensive

Question 38

Describe other means by which quality food and service can be guaranteed at all times. (6)

Answer 38

Quality Assurance
At certain points in the process, products are inspected/checked
Processes are organised so as to prevent mistakes happening
Emphasis on the whole process
May involve individuals being responsible for self-checking

Quality Control
Product is checked at the end of the process
Any unacceptable products are thrown away or reworked
Materials used in production are checked before being used

TQM
No errors are tolerated
A clearly defined quality policy is required
All staff are involved in ensuring quality of output (emphasis on quality chain)
Work processes are scrutinised
Constant strive to make processes more efficient and reduce waste
Focus on customer satisfaction
Constant checking of the process
Commitment required from all staff

Quality Circles
Where groups of workers meet to discuss problems and solve them

Human Resources
Appropriately qualified staff must be employed
Staff must receive training to update their knowledge
Staff should be supervised
Use of appraisal
Staff must be clear in the role they have to play in the organisation

Raw Materials
Handling of raw materials/storage
Up-to-date/new equipment

Question 39

Explain some of the measures companies take to ensure their products are of a high quality. (9)

Answer 39

Benchmarking
Copying the best techniques used by other organisations

Quality control/assurance
Products are checked at various stages during production
Unacceptable products are discarded

Quality circles
Small groups of workers meet to discuss where improvements can be made
Suggestions are made to management for approval
Results in a more motivated workforce

TQM
No errors tolerated
All staff involved and committed to ensuring high quality
Work processes scrutinised
Constant strive to make processes more efficient and reduce waste
Focus on teamwork
Training provided

BSI
A national standard for certain products
When a business meets the standard its product can carry the BS Kitemark
Other quality standard symbols also exist (Lion marks on eggs)

Recruitment
Quality staff need to be appointed
Staff with appropriate qualifications, skills and qualities must be appointed

Question 40

Describe the costs involved in ensuring an effective quality system (4) 2002 (1)

Answer 40

Higher quality raw materials cost more

Training staff increases costs of paying for specialist trainers
Increases costs of paying for overtime for staff being away
Increased wastage if checking for quality at the end of production
Checking products at each stage slows down production

Question 41

Explain the measures organisations can take to ensure they produce a quality product or service (9)

Answer 41

Benchmarking − using best methods identified through best practice in industry.

Quality assurance − products are checked at certain points in the production process. Unacceptable products are discarded.

Quality circles − groups of workers including managers and grass roots workers, meet to discuss the best methods and where improvements can be made.
Allows the actual workers doing the job to make suggestions.

TQM − focuses on quality products every time.

Zero defects are aimed for.

Must have commitment of whole organisation and all workers.

Clearly defined standards and policies are implemented to ensure quality at all times.

Products are scrutinised at all stages of the production process.

Quality standards/marks − BSI awards are used to show quality has been approved.

Use of trade logos − such as red Lion Mark on eggs, or woolmark, show that products have met industry standards.

Quality control – products are checked at the end of the process.

Question 42

Describe how the introduction of Quality Management (formerly TQM) techniques could ensure a quality product or service (5)

Answer 42

Constant improvement philosophy.
Zero errors are tolerated therefore cuts down on wastage.
All staff are committed to producing a perfect product.
Quality circles are set up to make the processes more efficient.
Clearly defined policies regarding quality exist.
Teamwork is carried out at all levels.
Staff training is an ongoing process.
The organisation focuses on customer satisfaction.
All processes are evaluated on a regular basis to ensure quality.
Motivated staff should ensure a quality product/service.

Question 43

Discuss the use of quality standards, such as the BSI Kitemark, for an organisation. (6)

Answer 43

Proves the product/service has met an agreed level of quality
Can be used as a marketing tool to gain a competitive advantage
Will give customers confidence when purchasing the product
May ensure repeat sales of the product
Higher prices can then be charged
Less customer complaints/less returns
Limits waste
Involves a very lengthy and time consuming process
Agreed standards need to be maintained at all times
Will require thorough checks and audits by BSI staff to prove the standards have been met
Rigorous record keeping of purchases and production must be kept
Expensive staff training
Might not see the benefit for a number of years

Question 44

Discuss the use of quality inputs for an organisation. (5)

Answer 44

Using high quality raw materials will lead to a quality product or service
Highly skilled staff will result in good customer services
Using up-to-date machinery will help standardise product quality
Should result in fewer products being faulty or not of a proper standard
Should result in fewer customer complaints
Should result in repeat sales
Should result in the organisation having a good reputation
May mean higher purchasing costs for raw materials
Can result in high staff training costs
Increased expense of inputs – 1 max

Question 45

Explain the benefits to Santander UK plc of receiving quality awards shown in Exhibit 3. (3)

Answer 45

Moneyfacts awards attract new business customers – as they are more trusting of Santander’s service
Santander may increase its prices – as it offers an award-winning service
increased product profit margins
Santander may use the Moneyfacts awards in its marketing – this will help it gain a competitive edge over rival banks
Britain’s Top Employer award can attract staff in the recruitment process –
Which can provide Santander with a better pool of candidates to choose from
Positive About Disabled People award can improve the image of the business

Question 46

Describe quality management systems that can be used within an organisation (7)

Answer 46

Benchmarking – using best methods identified through best practice in industry would help raise the quality of products/services
Quality assurance – products are checked at certain points in the production process
Unacceptable products are discarded_ _
Quality circles – groups of workers including managers and grass root workers. Meet to discuss the best methods and where improvements can be made
Allows the actual workers doing the job to make the suggestions
TQM – focuses on quality products every time
Zero defects are aimed for
Must have commitment of whole organisation and all workers
Clearly defined standards and policies are implemented to ensure quality at all times
Products are scrutinised at all stages of the production process
Quality standards/marks – BSI awards are used to show quality has been approved
Use of trade logos – such as red Lion Mark on eggs, or woolmark, show that products have met industry standards
Quality control – products are checked at the end of the process
Kiazen

Question 47

Discuss the use of quality standards for an organisation (2011)

Answer 47

Proves the product/service has met an agreed level of quality.
Can be used as a marketing tool to gain a competitive advantage.
Will give customers confidence when purchasing the product.
May ensure repeat sales of the product.
Involves a very lengthy and time consuming process.
Agreed standards need to be maintained at all times/.
Will require thorough checks and audits by BSI staff to prove the standards have been met.
Rigorous record keeping of purchases and production must be kept.
Higher prices can then be charged.
Less customer complaints/less returns.
Limits waste.
Increase sales/repeat sales/gain sales from competitors.
Discuss invites the use of positives and negatives but can gain all marks from one side only