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Business > Topic 4 - Operations > Flashcards

Topic 4 - Operations Flashcards

1
Q

Capacity

A

the capacity of a business is a measure of how much output it can achieve in a given period

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2
Q

Capacity Utilisation

A

the proportion (percentage) of a business’ capacity that is actually being used over a specific period

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3
Q

Capacity Utilisation Formula

A

actual level of output/ maximum possible output x 100

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4
Q

Why is capacity utilisation important?

A
  • it is a useful measure of productive efficiency
  • higher utilisation can reduce unit costs
  • a business aims to produce as close to full capacity as possible in order to minimise unit costs
  • a high level of capacity utilisation is required if a business has a high break-even output due to significant fixed costs of production
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5
Q

Dangers of operating at low capacity utilisation

A
  • higher unit costs
  • less likely to reach breakeven output
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6
Q

Dangers of operating at high capacity utilisation

A
  • negative effect on quality, production is rushed, less time for quality control
  • employees suffer
  • loss of sales, less able to meet sudden increases in demand
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7
Q

Why Labour Productivity is important?

A
  • labour costs are usually a significant part of total costs
  • in order to remain competitive, a business needs to keep its unit costs down
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8
Q

Factors influencing Labour productivity

A
  • extent and quality of fixed assets (e.g. equipment, IT systems)
  • skills, ability and motivation of the workforce
  • extent to which the workforce is trained and supported
  • external factors (e.g. reliability of suppliers)
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9
Q

Labour Productivity Formula

A

output per period (units)/ number of employees at work

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10
Q

How to improve Labour Productivity

A
  • measure performance and set targets
  • streamline production processes
  • invest in employee training
  • improve working conditions
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11
Q

Potential problems when trying to increase Labour Productivity

A
  • potential for employee resistance depending on the methods used (e.g. introduction of new technology)
  • employees may demand higher pay for their improved productivity
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12
Q

Lean Production

A

an approach to management that focuses on cutting out waste, whilst ensuring quality. this approach can be applied to all aspect of a business, from design, through production to distribution

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13
Q

Examples of Waste in Business

A
  • over production
  • waiting time
  • stocks
  • defects
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14
Q

Effective lean production requires…

A
  • good relations with suppliers
  • committed, skilled and motivated employees
  • a culture of quality assurance, continuous improvement and willingness to embrace change
  • trust between management and employees
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15
Q

Time Based Management

A

a general approach that recognises the importance of time and seeks to reduce the level wasted time in the production processes of a business

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16
Q

Requirements for time-based management

A
  • flexible product methods, able to change products quickly, can change production volumes
  • trained employees
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17
Q

Simultaneous Engineering

A

an approach to project management that helps firms develop and launch new products more quickly. all parts of the project are planned together. everything is considered simultaneously rather than separately

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18
Q

Benefits of simultaneous engineering

A
  • new product is brought to the marker much more quickly
  • business may be able to charge a premium price that will give a better profit margin
  • competitive advantage
  • greater sense of involvement across business functions
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19
Q

Cell Production

A

a form of team working where production processes are split into cells. each cell is responsible for a complete unit of work

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20
Q

Benefits of cell production

A
  • improve communication
  • workers become multi-skilled and more adaptable
  • greater employee motivation
  • quality improvement as each cell has ‘ownership’ for quality on its area
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21
Q

Drawbacks of cell production

A
  • culture has to embrace trust and participation
  • allocation of work to cells has to be efficient so that employees have enough work, but not so much that they are unable to cope
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22
Q

Just-in-Time

A

JIT aims to ensure that inputs into the production only arrive when they are needed

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23
Q

JIT Advantages

A
  • lower stock means a reduction in storage space which reduces costs
  • less likelihood of stock perishing, becoming obsolete or out of date
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24
Q

JIT Disadvantages

A
  • there is little room for mistakes as minimal stock is kept for re-working faulty product
  • highly reliant on suppliers
  • there is no spare finished product available to meet unexpected orders
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25
Q

Inventory

A

these are the raw materials, work-in-progress and finished goods held by a firm to enable production and meet customer demand

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26
Q

Three Main Types of Inventory

A

raw materials and components
work in progress
finished goods

27
Q

Raw Materials and Components

A
  • bought from suppliers
  • used in production process
  • e.g. parts for assembly or ingredients
28
Q

Work in Progress

A
  • semi or part finished production
  • e.g. construction projects
29
Q

Finished Goods

A
  • completed products ready for sale or distribution
  • e.g. products on supermarket shelves
30
Q

Reasons to hold inventory

A
  • enable production to take place
  • satisfy customer needs
  • precaution against delays from suppliers
  • allow for efficient production
  • allow for seasonal changes
  • provide a buffer between production processes
31
Q

The costs of holding inventory

A
  • cost of storage
  • interest cost
  • obsolescent risk
  • stock out costs
32
Q

Inventory Control Chart

A

the overall objective of inventory control is to maintain inventory levels that the total costs of holding inventories is minimised

33
Q

Example of Inventory Control Chart

A

(Look at book)

34
Q

Key Parts of an Inventory Chart

A

Maximum Level
Reorder Level
Lead Time
Minimum Inventory Level
Buffer Stock

35
Q

Maximum Level

A

max level of inventory a business can or wants to hold

36
Q

Reorder Level

A

acts as a trigger point, so that when inventory falls to this level, the next supplier order should be placed

37
Q

Lead Time

A

amount of time between placing the order and receiving the inventory

38
Q

Minimum Inventory Level

A

minimum amount of product the business would want to hold in stock

39
Q

Buffer Stock

A

an amount of inventory held as a contingency in case of unexpected orders so that orders can be met and in case of any delays from suppliers

40
Q

Advantages of Low Inventory Levels

A
  • lower inventory holding costs (e.g. storage)
  • lower risk of inventory obsolescence
41
Q

Advantages of High Inventory Levels

A
  • no delays
  • potential for lower init costs by ordering in bulk
  • better able to handle unexpected changes in demand or need of higher output
42
Q

Unit Costs Formula

A

total production costs in period (£)/ total output in period (units)

43
Q

Economies of Scale

A

these arise when unit costs fall as output increases

44
Q

Internal Economies of Scale

A

buying economies - buying in greater economies usually results in a lower price
technical - use of specialist equipment to boost productivity
marketing
network
financial

45
Q

External Economies of Scale

A
  • arise from the industry as a whole
  • often associated with particular geographic areas
46
Q

Capital Intensive

A

production relies on using capital resources
e.g. car manufacturing

47
Q

Benefits of Capital Intensity

A
  • greater opportunities for economies of scale
  • potential for significantly better productivity
  • better quality and speed
  • low labour costs
48
Q

Drawbacks of Capital Intensity

A
  • significant investment
  • potential for loss competitiveness due to obsolescence
  • may generate resistance to change from labour force
49
Q

Labour Intensive

A

production relies on using labour resources
e.g. hairdressing, hotels and restaurants

50
Q

Benefits of Labour Intensity

A
  • unit costs may stil be low in low-wage locations
  • labour is flexible resource
  • labour at the heart of the production process can help continuous improvement
51
Q

Drawbacks of Labour Intensity

A
  • greater risk of problems with employee/ employer relationship
  • potentially high costs of labour turnover
52
Q

Measures of Quality

A
  • reliability
  • cost of ownership
  • brand image
  • market reputation
53
Q

Why is quality important in business?

A
  • markets are highly competitive customers are more demanding and knowledgeable
  • if a business can develop a reputation for high quality, then it may be able to create an advantage over its competitors
54
Q

Quality Control

A

the process of inspecting products to ensure that they meet the required quality standards

55
Q

Problems with Quality Inspection

A
  • costly
  • often at the end of the production process
  • inconsistent inspections
56
Q

Quality Assurance

A

the process that ensure production quality meets the requirements of customers
focus on processes

57
Q

Total Quality Management

A

a management philosophy committed to a focus on continuous improvements of product and services with the involvement of the entire workforce

58
Q

Advantages of TQM

A
  • puts customer at heart of production process
  • motivational since the workers feel more involved and are making decisions
  • less wasteful than throwing out defective finished products
  • eliminates cost of inspection
59
Q

Disadvantages of TQM

A
  • requires strong leadership - often missing in business
  • disruption and costs may outweigh benefits
60
Q

Kaizen

A
  • another kind of quality assurance
  • based on culture of continuous improvement
  • encourages employees to engage fully with finding ways to improve quality processes
61
Q

Supplier

A

a business or individual that provides goods and services to another business

62
Q

Importance of Suppliers

A
  • for a business to meet the needs and wants of customers it needs an effective supply chain
  • suppliers are closely linked to product quality
  • suppliers determine many of the costs of a business
  • for businesses to use lean production techniques, effective relationships with key suppliers are essential
63
Q

What makes an effective supplier?

A
  • price
  • quality
  • reliability
  • communication
  • capacity
  • financially secure

Business (8 decks)

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