Topic 4: Decisions to improve Operational performance

Question 1

What are the main operational objectives?

Answer 1

• Quality
• Costs
• Flexibility
• Efficiency
• Speed of Response

Question 2

Which internal factors could influence an operational objective?

Answer 2

• The nature of the product
• Availability of resources
• Overall objectives of the business
• Other departments objectives

Question 3

Which external factors could influence an operational objective?

Answer 3

• Competitors performance
• Market conditions
• Demand for Product
• Changing customer needs
• New technology

Question 4

How can we analyse operational performance?

Answer 4

• Labour productivity
• Unit costs (average costs)
• Capacity
• Capacity utilisation.

Question 5

What is capacity?

Answer 5

The maximum output with the resources with currently available. it can also depend on the number of employees and how skilled they are, as well as the technology a business has.

Question 6

What is capacity utilisation?

Answer 6

How much a capacity a business is using.

Question 7

How do you calculate capacity utilisation?

Answer 7

capacity utilisation (%) = output/capacity x100

Question 8

How can a business increase their capacity utilisation?

Answer 8

• Use facilities for more of the working week.
• Buy more machines
• Increase staff levels
• Subcontract work

Question 9

Why isn’t 100% capacity utilisation ideal?

Answer 9

100% capacity utilisation isn’t ideal because the business may have to turn away potential customers because they cannot increase capacity any more.

Question 10

How do you calculate unit cost?

Answer 10

total cost/units output

Question 11

Why does high capacity utilisation improve unit cost?

Answer 11

Higher capacity utilisation means an increase in the number of units output without increasing the fixed costs so the total costs are spread over more units.

Question 12

Define efficiency

Answer 12

Efficiency is about getting more output from a given amount of inputs. Being efficient means reducing the waste of all the inputs e.g time and materials.
Greater efficiency should decrease unit costs and increase profits.

Question 13

Define productivity

Answer 13

Output per worker in a given time period.

Question 14

What is the formula for labour productivity?

Answer 14

output per period/number of employees

Question 15

Why is labour productivity important?

Answer 15

The higher the labour productivity, the better the workforce is performing. As labour productivity increases, labour costs fall per unit falls.

Question 16

How can a business improve labour productivity?

Answer 16

• Labour productivity can be improved by improving worker motivation.
• Training can make workers more productive.
• New technology can increase the speed at which workers can do their job.

Question 17

What are the drawbacks of increasing productivity?

Answer 17

• Training workers to be more productive could lead to more redundancies and job losses.
• New technology can be expensive.

Question 18

What is lean productive?

Answer 18

An efficient form of production that keeps waste of time and resources to a minimum. Lean production methods include just-in-time, time based management and kaizen.

Question 19

What is Just in Time production (JIT)?

Answer 19

JIT aims to reduce waste of materials and products by keeping as little stock as possible. All raw materials come through one, are made into goods and go straight out of another door.

Question 20

What are the advantages of JIT?

Answer 20

• Storage costs are reduced
• Cash flow is improved as money isn’t tied up in stock
• No out of date or damaged stock.