Topic 4 - Decision Making To Inprove Operational Performance Flashcards
What is operation managements
It refers to the administration of business practice to create the highest level of efficient possible with an organization
What are the keys of operations management
Capacity of the factory
Costs
Quality
What are the key operational objectives
Cost
Volume
Quality
Time
Flexibility
Dependability
Environmental
Added value
What is it valuable for a business to set clear operational objectives
Can help a company achieve its overall corporate objectives
Helps coordination between functional areas
Performance can be reviewed and assed
Motivation
What are the 4 internal influences
1.the nature of product e.g tech firm might focus on innovation targets
2.availability of resources e.g output targets might be limited by the resources
3. Other departments/functions areas Eg marketing
4. Overall company objectives Eg if the company is focused on the environment
What does external influence include ?
Competitions performance
Market conditions
Demand for the products
Changing customer needs
New technology
What is productivity
Labour productivity is a measure of efficiency
It measures the output of a firm in relation to labour inputs
It is the output per worker time period (hour,month or year)
How to work out productivity
There is 20 employers produce 40 tables per week at a furniture company.what is the labour productivity?
Total output / member of employees
40/20
What is efficiency
Labour productivity is a key aspects of efficiency.
Producing as quickly as possible -(productivity)
With the least possible waste materials
Using the lowest possible amount of energy
Causing the lowest possible pollution
Who to improve efficiency
Division of Labour
Down time reduction
Reduce wastage
Better communication
Training
Investment in capital
Why is productivity important
It’s very important measure of a firms performance
It has a direct impact on the cost of producing a unit of output
What is the formulae for Labour productivity
Output per period / number of employees
Eg a factory employs 90 workers to produce 9000 tvs per week
900/90 a=100 tvs per week
How can a business increase Labour productivity
Increase investment in modern equipment/technology
Improve the ability/skills of those at work
Improve employee motivation
What is the problems with increasing productivity
Very expensive Eg new tech
More productive workers may result in redundancies and lower morale
Overall
Business will base their decision about Labour productivity on the value added and efficiency
What is the importance of unit cost in operation
A key measurement of operational performance is ….
Unit cost is the average cost of producing one unit of output
The formula is
Unit cost = total cost /number of units
What is the formula for fixed costs
Total fixed cost / number of units
What is the formulae for unit costs
Total costs / number of units
What is the meaning of efficiency
It measures how well inputs (people or machines) are used to generate output (result)
If a process becomes more efficient it uses fewer inputs to produce a given output and the unit costs should fall
How can efficiency be improved
Increasing capacity utilization to spread fixed costs
Choosing the optimal mix of resources
Increasing Labour productivity
Using tech
What is capacity utilisation
It’s the measure of the extent to which the productive capacity of a business is being used can be defined as
The percentage of total capacity that is actually being achieved in a given period
What is the capacity utilization formula
Actual level of output /maximum possible output X 100
What are the concerns with operating at 100% capacity
It demand rises further you will have to turn customer away
You will struggle to service machinery and train/retrain staff
How could a firm with high capacity utilization of increase their capacity
Buy more machines
Increase productivity
I’m so facilities/resources more days: times during the working week
How to get towards full capacity utilization/or deal with under utilization
1.increasing demand meaning price cutting
2. Cut capacity meaning it makes some staff redundant
What does rationalization mean
Reorganizing a business to increase efficiency.This often implies cutting capacity to increase the percentage of utilization
What is Labour productivity
Is a measure of efficiency
It measures the output of a firm in relation. To Labour inputs
It is the output per worker time period like hour month or year
What is the formula for Labour productivity
Labour productivity = output per period/number of employees
Labour productivity vs Labour costs per unit
If Labour productivity has higher output per employee this means that Labour costs per unit will have a lower Labour costs per unit
Increasing Labour productivity means …
Invest in technology
Improve training
Change the way work is organized
Change the way employees are rewarded
Difficulties in increasing Labour productivity means
Unintended consequences meaning lower quality/customer service
Resistance from employees-fear of loosing jobs
Employees demanding higher pay-performance linked to productivity
Key points Labour intensive
Labour intensive production can provide an opportunity for small firms
Some people will demand and will always be able to afford unique products Eg a made to measure dress
What is the Labour intensive production like
They are a high proportion of total costs.Unit costs likely to be high
Low financial barriers to entry meaning it’s cheap to start up production
Management focus on the cost of Labour (possibly switch production to low cost countries)
Highly flexible- makes it possible for a small firm to compete without competition from large ones
Capital intensive production
Large % of TC tied up in the fixed costs of purchasing and operating machinery
High financial barristers to entry
-Can be inflexible difficult to switch products or to tailor products to individual customers needs
+ unit cost likely to be low in comparison
What are the 3 main targets in operations managers
- quality targets
- Capacity utilization targets
3.unit cost targets (linked to productivity)
What is the definition of quality product
A product or service that’s meets customers expectation and is there fit for purpose
What is the definition of quality standards
The expectation of customers expressed in terms of the minimum acceptable production or service standards
How can quality help determine a firms success?
Customer loyalty
Strong brand name
Retailers want to stock the product
Fewer returns and replacements lead to reduced costs
These points can each help support the marketing function in a business res
