Section 4 - Operations management

Question 0

Labour productivity

Answer 0

productivity measured against labour

Labour productivity = Output (over a given period of time / Number of employees

Question 1

Productivity

Answer 1

The output measured against the inputs used to create it

Productivity = Quantity of output / Quantity of inputs

Question 2

How to improve productivity

Answer 2

improve the quality control; improve employee motivation; introduce new technology; use machines instead of people to do jobs (automation); train staff to be more efficient; improve inventory control

Question 3

Benefits of increased productivity

Answer 3

Increased output relative to the inputs required; lower cost per unit; fewer workers required; higher wages for other workers lead to increased motivation

Question 4

Buffer inventory level

Answer 4

the inventory held to deal with uncertainty in customer demand and deliveries of supplies

Question 5

Lean production

Answer 5

a term for those techniques used by businesses to cut down on waste and therefore increase efficiency, for example, by reducing the time it takes for a product to be developed and become available for sale

Question 6

lead time

Answer 6

time taken for goods ordered to be delivered

Question 7

What are the seven types of waste?

Answer 7

over production, waiting, transportation, unnecessary inventory, motion, over processing, defects.

Question 8

Kaizen

Answer 8

A Japanese term meaning continuous improvement through the elimination of waste. Small groups of workers meet regularly to discuss problems and potential solutions. +increased productivity +reduced amount of space needed +work-in-progress reduced +allows jobs to be combined

Question 9

Just in time

Answer 9

a production method that involved virtually eliminating the need to hold inventories of raw materials or unsold inventories of the finished product. Supplies arrive just at the time they are needed. +no cost of holding inventory +warehouse space not needed +finished product sold wuickly, improve cash flow -the business needs very reliable suppliers

Question 10

Cell production

Answer 10

When the production line is divided into separate, self-contained unites, each making an identifiable part of the finished product. +improved employee motivation +less likely to have a strike

Question 11

Job production

Answer 11

Where a single product is made at a time
+best for personal services +meets exact customer requirements +varied jobs= employee motivation +flexible +niche market
-skilled labour required -labour intensive= high costs -long production time -errors are expensive -no economies of scale :(

Question 12

Batch production

Answer 12

Where a quantity of one product is made, then a quantity of another item will be produced
+flexible +variety=employee motivation +more consumer choice +machinery not super necessary
-expensive -machines need to be reset -warehouse space needed

Question 13

Flow production

Answer 13

When large quantities of a product are produced in a continuous process. Also known as mass production.
+high output +low costs +unskilled workers +economies of scale +24 hour production +quick
-boring= no employee motivation -significant storage requirements -high initial capital investment -if one machine breaks=not good!t

Question 14

factors affecting which method of production to use

Answer 14

nature of product (unique? standard?); size of market (small? big?); nature of demand (steady? seasonal? infrequent?); size of business (access to capital?)

Question 15

how technology has changed production

Answer 15

Automation (machines controlled by computer); mechanisation (machines controlled by people); computer aided design (computer software aids in design process); computer aided manufacture (computers monitor production process); Computer integrated manufacturing (integration of CAD and CAM); electronic point of sale (checkout bar code scanner); electronic funds transfer at point of sale (credit cards etc.)

Question 16

advantages of new technology

Answer 16

+productivity is greater +boring jobs done by machines (greater job satisfaction) +better quality +more accurate consumer demand +more info to managers +quicker communication +new methods of production= new products

Question 17

disadvantages of new technology

Answer 17

-unemployment -expensive to invest in -employees dislike changes -businesses quickly become outdated

Question 18

Fixed costs

Answer 18

costs which do not vary with the number of items sold or produced in the short run. They must be paid whether or not the business is making any sales. Also known as overhead costs.

Question 19

Variable costs

Answer 19

costs which vary directly with the number of items sold or produced

Question 20

Total costs

Answer 20

fixed and variable costs combined

Question 21

Average cost per unit

Answer 21

the total cost of production divided by total output. Also known as unit cost.
Average cost per unit= Total cost of production (in a time period) / Total output (in a time period)

Question 22

uses of cost data

Answer 22

setting prices; deciding whether or not to stop production (if the business is making a loss); deciding on the best location (get the best location affordable)

Question 23

Economies of scale

Answer 23

The factors that lead to a reduction in average costs as a business increases in size

Question 24

What are the economies of scale?

Answer 24

purchasing economies (getting a discount for buying in bulk); marketing economies (can afford more marketing); financial economies (easier to raise capital); managerial economies (can afford specialist managers); technical economies (can use flow production)

Question 25

Diseconomies of scale

Answer 25

the factors that lead to an increase in average costs as a business grows beyond a certain size

Question 26

what are the diseconomies of scale?

Answer 26

poor communication; low morale (employees feel they are not valued by managers); slow decision making (takes a long time for top level decisions to reach employees)

Question 27

Break even level of output

Answer 27

the quantity that must be produced/ sold for total revenue to equal total costs. Also known as beak even point.

Question 28

Break even charts

Answer 28

graphs which show how costs and revenues of a business change with sales. They show the level of sales the business must make in order to break even.

Question 29

revenue

Answer 29

the income during a period of time from the sale of goods or services. Total revenue =quantity sold * price

Question 30

Break even point

Answer 30

The break even point is the level of sales at which total costs =total revenue

Question 31

advantages and disadvantages of break even charts

Answer 31

+managers are able to read off profit at any level of production +can show impact of business decisions +shows safety margin
-assume all products are sold -doesn’t account for change in scale of production -doesn’t show how to reduce wastage -assumes that costs and revenues can be drawn with a straight line

Question 32

contribution

Answer 32

the contribution of a product is its selling price minus it variable costs

Question 33

quality

Answer 33

quality means to produce a good or service which meets customers expectations

Question 34

Quality control

Answer 34

checking for quality at the end of the production process, whether it is the production of a product or service.

Question 35

Quality assurance

Answer 35

checking for the quality standards throughout the production process, whether it is the production of a product of service.

Question 36

Total quality management

Answer 36

the continuous improvement of products and processes by focusing on quality at each stage of production

Question 37

Factors affecting location of manufacturing business

Answer 37

production method (do you need a small or big factory?); market (especially if the product weighs a lot); raw materials (do the supplies weigh a lot?); external economies of scale (are support businesses nearby?); availability of labour (demographics); government influence (do they offer grants?); transport (infrastructure); power/water supply (power cuts can be devastating); climate (will your business fall into the sea?)

Question 38

factors affecting location of service sector business

Answer 38

customers (where do they live?); preference of owners (nobody wants to work in a dump); technology (maybe you don’t have to be so close after all with skype and amazon etc.); availability of labour (if you sell coffee go to Seattle where they know how to make coffee); climate (does tourism affect you business?); near to other businesses (close to repairing firms); rent/taxes (being in the city is expensive)

Question 39

factors affecting the location of a retailing business

Answer 39

shoppers (is your product in high demand); nearby shoppers (competitors? altruistic business visitation); parking; availability (like is there space for you); access for delivery vehicles; security (break ins, vandalism); legislation (you can’t sell pot in Chicago)

Question 40

factors affecting multinational location

Answer 40

new market overseas; cheaper or new sources of materials; difficulties with the labour force and wage costs; rent/taxes; availability of government grants; trade/tariff barriers

Question 41

role of legal controls on location decision

Answer 41

> to reduce unemployment
to stop natural areas from being ruined
planning regulations (legally restrict the business activities allowed); grants or subsidies (encourage business to go to undeveloped parts of country)