Resource management 2.4 Flashcards
What is the definition of capacity utilisation?
The proportion of maximum possible output that is currently being used by a business
How is capacity utilisation calculated?
Actual output/maximum possible output X 100
What are 2 weakness of having a low capacity utilisation?
-Fixed costs are spread over fewer units of output leading to higher average total costs
-Workers may be made redundant leading to current employees having fears of being let go
What is one strength of having a low capacity utilisation?
Allows flexibility, and the business can respond to sudden changes in demand
What are three weakness of high levels of capacity utilisation?
-Staff under a lot of pressure
-Machines prone to breakdowns
-Less flexibility to respond to new orders
What are three ways to improve capacity utilisation?
-Outsourcing, increasing level of output
-Reduce capacity to decrease maximum poss. output
-Increase sales, requires more units to be sold
What is the maximum stock level?
The maximum amount of stock a business is able to hold in normal circumstances
What is the reorder level?
The level at which a business places a new order with its supplier
What is the minimum stock level?
Also known as buffer stock
The lowest level at which a business is willing to allow stock levels to fall
What is the lead time?
The length of time from the point of stock being ordered from the supplier to it being delivered
What are two disadvantages of holding buffer stock?
-Cost, requires storage space
-Opportunity cost, ties up capital that could invested elsewhere
What are two strengths of holding buffer stock?
-Competitive advantage, gain a reputation of being reliable
-Stable stock, able to respond in unexpected demands
What are two problems with holding too much stock?
-Storage costs are higher than necessary
-Risk of spoiled stock if products are perishable
What are two problems with holding too little stock?
-Business may run out of stock
-Sudden increases in demands can’t be met
What is Just in time stock management?
A process where raw materials are ordered as required and delivered as production starts
What are three advantages of JIT?
-Stockholding costs are minimised
-Cash flow is improved as money is not tied up in stock
-Teamwork is encourage, leading to motivation
What are three disadvantages of JIT?
-Bulk buying EOS is generally not possible
-Unreliable suppliers halts all production
-Administrative costs and complex planning
Give three ways to minimise waste
-Planning
-Sales tactics, reduce prices to encourage purchases
-Storage, careful stock rotation
What is lean production?
The minimisation of the resources used in production
What three examples of steps involved in lean production?
-Fewer materials used
-Less labour is used, normally capital intensive
-Space required for production is reduced
What are two competitive advantages from lean production?
-Lower unit costs so prices may be lower than competitors
-Better quality of output due to carefully managed production process
What is quality control?
Inspecting the quality of output at the end of the production process
What are two advantages of quality control?
-Specialists check the quality
-Inexpensive and simple way to check quality
What are two disadvantages of quality control?
-Bad quality products are waste of resources
-Little focus of the cause of defects
What is quality assurance?
Inspecting the quality of production throughout the process
What are two advantages of quality assurance?
-Quality issues identified early so less waste
-Cause of defects are identified so future products have better quality
What are two disadvantages of quality assurance?
-Staff have to be trained, increasing costs
-Reworking may lengthen the production process
What are quality circles?
Groups of workers meet regularly to solve quality problems in the production process
What are two advantages of quality circles?
-workers may more motivated as they are involved in decision making
-Relevant and focused solutions are likely
What are two disadvantages are quality circles?
-Management need to have trust in employees views
-Meetings must be organised regularly
What is total quality management?
Organisation of the business with quality at its core and every worker responsible for quality
What are two advantages of TQM?
-Quality in all aspects improves efficiency
-A culture of constant improvement exists
What are two disadvantages of TQM?
-All workers must be committed and receive training regularly
-Careful monitoring and control is required
What is Kaizen?
A business takes continuous steps to improve productivity through the elimination of all types of waste
What are two competitive advantages from Quality management?
-Unit costs are likely to be low allowing to reduce its selling price to better compete
-High levels of quality can be used as an USP
What is the definition of Production?
The transformation of resources into finished goods
What is job production?
Manufacturers produce on product at a time as ordered by the customer
What are two advantages of job production?
-High quality product
-Motivated workers
What are two disadvantages of job production?
-Production is slow
-Raw materials are expensive
What is flow production?
continuous manufacturing of standardised products
What are two advantages of flow production?
-Low unit costs due to EOS
-Rapid production
What are two disadvantages of flow production?
-Customisation is difficult
-Machinery can be expensive to purchase
What is batch production?
Groups of the same product are produced as a batch
What are two advantages of batch production?
-Workers can specialise
-Production can take place as the previous batch starts running out
What are two disadvantages of batch production?
-Require careful coordination to avoid shortages
-Money is tied up in stock
What is the formula for labour productivity?
Output/number of worker
What is the formula for capital productivity?
output/number of machines
What is productivity?
The output per input per hour
What are three factors affecting productivity?
-Employee motivation
-Skills of staff
-Investment in capital equipment
What is the link between productivity and competitiveness?
Businesses that increase their productivity are likely to be more competitive as prices can be lower
What does efficiency mean?
The ability of a business to use its production resources as cost-effectively as possible
When does maxima efficiency occur?
The point where the costs are at their lowest
What are three factors affecting efficiency?
-Relocating or downsizing
-Standardisation of production process
-Lean production
What is labour intensive production?
Using mostly physical labour in production
What is capital intensive production?
Using mostly machinery and technology in production
What are two advantages of labour intensive production?
-Low-cost production
-Provides opportunities for workers
What are two disadvantages of labour intensive production?
-workers may be unreliable and need regular breaks
-Incentives and training costs
What are two advantages of capital intensive production?
-Low cost production where output is high
-Machines can run without breaks
What are two disadvantages of capital intensive production?
-Maintenance costs
-Breakdowns can delay production
