Topic 3-Business Operations Flashcards
Define production
The action of making or manufacturing from
components or raw materials
What is job production
Job production is where
one single product is
made at a time
• Products are made for a
specific client or customer
Features of job production
goods are made by
skilled craftspeople who will be well motivated
Advantages of Job productiom
Bespoke, unique, one off, to customers
measurements or specifications e.g. a kitchen
• Very motivated workers who can see one
item made from start to finish
• Motivated workers are normally more
productive and have lower rates of
absenteeism
• Higher prices can be charged to the
customers
Disadvantages of job productiom
Skilled labour and
craftsmen are
expensive
• Wide range of tools
may be required
• Hard to speed up if
demand increases
What is flow production
Flow production uses
production lines with
continuous movements of
items through the process
• Many mass produced
products are made this
way such as; cola, cars
and toothpaste
Advantages of flow production
A business can make larger quantities which
means they can bulk buy raw materials and save
money (economies of scale)
• Automated and computerised production means
improved quality and more complex designs can
be made in shorter times
• As production is continuous stocks of parts and
raw materials don’t need to be held this means a
business can use the JIT (just-in-time) system
Disadvantages of flow production
High costs to buy the factory and machinery
• Low motivation of staff due to repetitive tasks
• Break downs and lost production can be costly
• Very inflexible, hard to change the factory
machinery to make different products, the
production process will be set up to make just
one item e.g. bottled cola
What is lean production
Lean production uses JIT or just-in-time delivery
- the aim is that stock arrives at the factory just
as it is needed.Uses as few resources possible.
The 7 wastes
Transport,motion,inventory,waiting,over-proccesing,over production,defects
What is just-in-time delivery
Just-in-time means that a business does not
keep stocks of parts in a warehouse
• Instead they order the parts and get them
delivered same day from the supplier
Warehouse full of parts=?
Just-in-case
Parts arrive just when needed =?
just-in- time
Advantages of Just-in-time
As parts are ordered as
they are needed there is
no wastage
2) Parts are not warehoused
which is a massive cost
saving in terms of
premises and staff
3) Stock is less likely to go out
of date
4) The business will improve
their cash flow, as their
money is not tied up in
stock
Disadvantages of Just-in-time
The business won’t be
able to meet
unpredicted surges in
demand
2. The business won’t be
able to quickly replace
damaged parts
3. If the delivery does not
turn up in time this can
stop the whole
production line, which is
costly
Define procurement
Procurement is the process by which businesses
buy raw materials, component, products,
services, and other resources from suppliers
to produce their own products and services.
Benefits of reduced costs by using Jit for stock control
Less stock held
• No warehouse costs
Drawbacks of cost of
using JIT stock control:
making more frequent
purchases
• Buying in smaller
quantities means no
economies of scale
What is direct procurement
Buying raw materials that
are used in the making of
the product, or delivery
of the service.
Eg:window washing company buying soap and sponges.
What is indirect procurement
Buying maintenance
contacts, admin
stationary, marketing
advert space, ICT and
other support items.
Eg:window washing
company may need paper
to print their invoices on
List the 6 factors when choosing suppliers
- Quality and reliability
- Speed and flexibility
- Good service
- Value for money
- Communication
- Financial security
Choosing suppliers - quality and
reliability
The quality of the
business supplies needs
to be consistent - the
customers associate poor
quality with the business
and not their suppliers
Choosing suppliers - speed and
flexibility
Flexible suppliers help a
business to respond
quickly to changing
customer demands and
sudden problems
Choosing suppliers – Good service
The business will need
the suppliers to deliver on
time, or to give them
plenty of warning if they
can’t
Choosing suppliers - value for money
The lowest price is not
always the best value for
money
• Reliability and quality from
suppliers the business will
have to decide how much
they willing to pay for the
supplies
• The business will want the
suppliers to strike a balance
between cost, reliability,
quality and service
Choosing suppliers - communication
The best suppliers will
want to talk with the
business regularly to
find out what needs
they have now and how
they can serve them
better in the future
Choosing suppliers - financial security
The business will need to
make sure their suppliers
have sufficiently strong
cash flow to deliver what
is wanted, when its
needed
Relationships with suppliers: quality
A business will want its
suppliers to sell them the
best possible quality
products for the price
Relationships with suppliers: delivery
Some businesses may
wish to enter into a JIT
agreement with a
supplier
• This may involve a
number of deliveries
being made a day
• If a delivery is late this
may stop production
and could cost the
business money
Relationships with suppliers:
availability
Once the business has an
agreement with a
supplier to deliver quality
stock on time – there will
be problems if the stock is
not available
• This may stop production
entirely
Relationships with suppliers: cost
Once a supply deal has
been made, both sides will
want the deal to last a long
time to reduce the costs of
having to find other
suppliers or customers or
renegotiate another deal
Relationships with suppliers: trust
Trust is important when
creating a supplier
relationship
• The best relationships
work well when there is
joint problem solving and
open communication
between the businesses
• Trust can be built
through:
– Reliable deliveries
– Quality products or
services
Define logistics
Logistics is the activity of transporting goods
to customers
What can logistics include
Transportation,packaging,inventory,security
Define a supply chain
A supply chain is all the
businesses which
provide parts of the
product until it gets to
the consumer
The impact of logistical and supply
decisions - Time
Suppliers need to make sure the goods or
services ordered arrive / are completed on
time
• There may be cost penalties if they are late
The impact of logistical and supply
decisions - Length of supply chain
The longer the supply chain – the more
intermediaries – the more businesses that
must be paid
• A short supply chain is easier to manage and
will cost less – these savings can be passed
down to the consumer as lower prices
The impact of logistical and supply
decisions - Customer services
Good customer service
will mean repeat
business
• It is cheaper to keep an
existing customer than
to gain a new one
Define quality
In manufacturing, a measure of excellence or
a state of being free from defects, deficiencies
and significant variations
Define TQM
TQM (Total Quality Management) is a
management approach to long term success
through customer satisfaction
What is TQM
TQM is a management
approach change in business
culture that puts quality at
the heart of everything in the
business
• In essence its getting it right
first time every time
Features of TQM
Quality circles, where
small groups of workers
meet to solve work
problems
TQM means Zero defects:
The business will make every
effort to ensure that every
product is made free from
defects
✓ the quality is added in every
process
✓ This means inspectors are not
needed as there are no
defects
TQM – internal customers
TQM means an internal
customer concept:
• For example; the robot
that sprays cars has
broken, the
maintenance worker
who has to fix it
responds to the
manager of the paint
shop as a customer
TQM – lean approach
TQM is a lean
approach:
– Continuous
improvement
(kaizen)
– Empowerment,
employees are made
accountable and can
make decisions about
the process they are
working on
Advantages of TQM
Not paying for inspectors means lower costs
– Empowered employees are motivated and
therefore more productive
– Improved quality means more satisfied customers
– Enhanced reputation means repeat business
– Builds good partnerships with suppliers which
means lower costs and higher quality
– More profit means happy shareholders
Disadvantages of TQM
Takes time to introduce, it demands time,
planning and resources which is expensive
– Some staff resistant to change in culture
– Will cost to train staff, might be too expensive for
some small businesses who cannot bear the cost
– Employees may not welcome extra responsibility
– Not a quick-fix solution 2/3 of businesses don’t
feel the benefit of the new systems for years*
Benefit of quality – additional sales
A good product won’t sell if no one knows
about it.
• But an inferior product won’t sell (at least not
for very long) even if everyone knows about it.
• The news of a quality product will spread by
word of mount and sales will rise
Benefit of quality – enhanced
reputation
A good reputation will ensure repeat business
• On a larger scale – UK products are perceived
as good quality and we have a reputation for
excellent production of the goods we export
Costs of quality
- staff training
Employees need to be trained in TQM
or quality, which will reduce the costs
of;
– Internal failure where costs can
include the cost of scrapped material
and rework and repair
– External failure where costs can
include product recalls, customer
complaint handling and loss of
reputation
Costs of quality – product recalls
Product recalls are made by traders about products
that have problems which could affect the safety of the
consumer.
• The product should not be used and should be
returned to the trader.
Costs of quality – the provision of
services
To provide a quality service a
business will have costs;
– To establish standards of
service to start with and then
train all the employees to
work to these standards
Outsourcing examples-Explain production
Some motor manufacturers now
outsource not only parts but complete assemblies –
steering, transmissions, engines, interior assemblies.
Outsourcing examples-Payroll
is the most common task that companies
outsource. Services include
weekly/monthly/quarterly payroll and normally
attending to the completion of the (many)
Government returns
Outsourcing examples-Purchasing and maintaining information systems
hiring and evaluating IT staff and
training users can all be very difficult. By
outsourcing the information systems function,
the business can obtain the latest technology and
suitably skilled personnel
Outsourcing examples-Delivery
Larger businesses might prefer to
contract a major delivery firm rather than
maintain their own fleet. Either way, the business
can hire the expertise to keep delivery problems
and decisions off their desk
Problems with outsourcing
quality can suffer this can lead to;
angry customers, a fall in repeat business and
a reputation for low quality
Define a franchise
A franchise is where a small business owner buys the
rights to sell the goods and services of a large, well-
established company
What is a franchisee
this is the small business owner who is
buying the rights.
What is a franchisor
this is the large business who are selling
the rights e.g. Subway
Quality issue - franchising
They can only control the quality up to a point,
they can send out the products and give the
signage but the customer service is down to the
individual franchisee
• Franchisees don’t uphold the quality standards
What is customer service
The assistance and advice
provided by a company to
those people who buy or
use its products or services
When does customer service act
Before the sale – a customer may
wish to get some advice,
particularly if they are spending
lots of money or it’s a complex
item
• At the time of the sale – a
customer may want gift wrapping
or easy payment terms – see
website
• After the sale – a customer may
need to call the helpline if the
product doesn’t work or if they
need further advice
Methods of good service-product knowledge
Good product
knowledge will build
confidence and trust
with the customer
• It will also help the
customer find the
product that best meets
their needs
What is customer engagement
Customer engagement means creating a
positive experience for the customer
What are post sale services
Post sales services, mean services that are
carried out by the business AFTER the buyer has
paid for the goods
What does post sale services include
• A policy for customers
returning goods
• A repair service
• A maintenance service
• Spare parts available
• A policy for dealing with,
and investigating,
customer complaints
• An advice service for
customers with technical
problems
BENEFITS OF GOOD CUSTOMER
SERVICE-Customer service
Good customer service
will mean satisfied
customers
• Satisfied customers come
back to the business and
buy again and again
BENEFITS OF GOOD CUSTOMER
SERVICE-Customer loyalty
When a customer is
happy with the level of
service they will stick
with the brand and not
shift to competitors
BENEFITS OF GOOD CUSTOMER
SERVICE-Increased spend
One of the easiest ways to
increase revenue in a
business is to sell more to
the existing customers
• Cross selling and up-selling
only works if the goods
are relevant to the
customer
BENEFITS OF GOOD CUSTOMER
SERVICE-Profitablity
How customer service impacts
profits;
• Word of mouth; social
networks are a powerful
source of sharing information,
positive or negative about the
business
• Repeat business, retaining
customers will make sure they
make a contribution to
revenue and profit
• Increased spend, in some
businesses the top 25% of
customers account for the
majority of the profits,
encourage these customers to
spend more and the business
will be more profitable
DANGERS OF POOR CUSTOMER
SERVICE-Dissatisfied customers
Unhappy customers now
have more channels than
ever to complain to e.g.
twitter, Facebook etc.
DANGERS OF POOR CUSTOMER
SERVICE-Poor reputation
If they provide poor customer service and a poor service in general reviews may be put online which gives them a reputation of having a bad service limiting new customers
DANGERS OF POOR CUSTOMER
SERVICE-Reduction in revenue
It costs 6 – 7 times more to acquire a new
customer than retain an existing one*
• If customers are having problems or unhappy
with the customer service they will not return
• Less repeat business means lower sales
• Lower sales means lower revenue for the
business
What are websites used for in a business
Live chats so customers can speak in real time to customer support,automated sale process,contact info,faq pages
Advantages of social media
Customers increasingly look to engage with
businesses or brands online in multiple ways,
social media can be an easy and cheap way to do
this
• Compelling and relevant content will grab the
attention of potential customers and increase
brand visibility
• A business can deliver improved customer service
and respond quickly to complaints and feedback
Disadvantages of social media
A business will need to commit resources to
managing their social media presence,
responding to feedback and producing new
content
• It can be difficult to measure the return on
investment and the value of one channel over
another
• Ineffective use - for example, using the network
to push for sales without engaging with
customers, or failing to respond to negative
feedback - may damage the business reputation
How to check for quality
Stage 1-Check raw materials from suppliers
Stage 2-Random samples taken to check quality of work in progress
Stage 3-Random samples taken of finished products-items removed if they dont meet required quality
Describe lean production
a production strategy that aims to use as few resources and produce the least amount of waste possible
