Topic 4: Operational Management Flashcards
What are the key operational objectives
- flexibility
- Quality
- Speed of response
- Environmental
- Cost
What is productivity
- labour productivity is a measure of efficiency
- measures output in relation to labour inputs
What is efficiency concerned with
- producing as quickly as possible
- wasting the least amount of materials
- using lowest amount of energy
- causing lowest possible pollution
Why is the labour productivity important?
- Labour costs are significant part of total costs
- To remain competitive, a business needs to keep its unit costs down
Why is a valuable to set clear operational objectives?
- Help coordination between functional areas
- Performance can be reviewed and assessed
What are the calculations in operational performance?
- Labour productivity
- Unit costs
- capacity and capacity utilisation
What influences labour productivity?
- extent and equality of fixed assets
- skills and motivation of the workforce
Methods of improving labour productivity
- Measuring performance
- Streamlining production processes
- Invest in capital equipment and training employees
Problems with improving their productivity
- potential trade-off with the quality of the goods
- Potential for employee resistance
- Employees may demand higher wages
What is the importance of unit costs in operations?
The lower it is the more competitive advantage you have
Formula for unit costs
Total production costs/ total output
What is capacity utilisation?
The extent to which the productive capacity of a business is being used
What is the formula for capacity utilisation?
Actual level output/ maximum level of output x 100
What does the maximum level of capacity depend on?
Quantity of buildings, machinery and labour
What is the importance of capacity utilisation?
- useful measure of productive efficiency
- Higher utilisation can reduce unit costs
What is bad about operating with 100% capacity?
- If the man buys further, you’ll have to turn customers away
- Struggle to service machinery
Why do businesses operate below 100% capacity utilisation?
- loss of market share
- Lower than expected market demand e.g change in tastes
What is better operating at low capacity utilisation?
- Higher unit costs
- Less likely to reach breakeven
How can a business get toward full capacity utilisation?
- increase the demand
- Cut down on their capacity
What is rationalism?
Reorganising a business to increase efficiency
- e.g cutting down capacity to increase the percentage of utilisation
What is capacity?
A measure of how much output it can achieve in a given period
What is the lean production?
A philosophy that aims to produce more by using less
- Eliminating all forms of waste and ensuring quality
What does lean production involve?
- good relations with suppliers
- Culture of quality assurance
- Motivated employees
What are the benefits of lean production?
- Increase productivity
- Reduce waste
- Less inventory held
Overall reduces costs
