Unit 15

Question 1

Importance of lean production:

Answer 1

It reduces the final price of product and allows the business to be more competitive without the business having to worry about a reduction in the quality of the products. This is because lean production aims to lower the cost of production by reducing waste to a minimum while maintaining the quality of the product.

Question 2

Benefits of using methods like lean production:

Answer 2

○ New products can be brought to market more quickly.
○ Quality is improved.
○ Waste of time and resources are limited.
○ Cost of holding inventory is reduced.
○ Unit cost is reduced.

Question 3

Benefit of “Just in time” inventory control:

Answer 3

No inventories are held by the business, products are delivered as quickly as produced. This removes the cost of holding inventories.

Question 4

Requirements of “Just in time” inventory control:

Answer 4

Excellent relationship and good communication with supplier is needed. The required quality and quantity of items must be delivered in time. Employees and machinery used must also be flexible.

Question 5

Methods of production

Answer 5

1) Job
2) Batch
3) Flow

Question 6

Benefit of method of production: job

Answer 6

§ Products are unique and high quality.
§ Employees are often more motivated.

Question 7

Benefit of method of production: batch

Answer 7

§ Unit costs lower.
§ Offers customer variety of choice.
§ Materials can be bought in bulk.

Question 8

Benefit of method of production: flow

Answer 8

§ Lower labor costs.
§ Cheaper materials due to bulk buying.
§ Large number of goods.

Question 9

Limitation of method of production: Job

Answer 9

§ Price is higher.
§ Production takes more time and is more expensive.
§ Economies of scale not possible, more expensive products.

Question 10

Limitation of method of production: Batch

Answer 10

§ Employees are less motivated.
§ Goods store until sold.

Question 11

Limitation of method of production: Flow

Answer 11

§ Requires large capital investment.
§ Employees are not motivated.
§ Not flexible.
§ If one part of production line breaks, entire production stops.
§ High level of inventories are held.

Question 12

Benefit of machinery for: business.

Answer 12

§ Saves money and time.
§ Increases productivity.
§ Reduces costs of production.
§ Improves quality and reduces waste.

Question 13

Benefit of machinery for: consumers.

Answer 13

§ Better quality products.
§ Lower prices.
§ Products with more features.

Question 14

Benefit of machinery for: employees.

Answer 14

§ Technology completes simple and repetitive tasks.
§ Work is easier with technology.
§ Provides job security.

Question 15

Limitation of machinery for: business

Answer 15

§ Expensive.
§ Business might need to change rapidly.
§ Employees might need training.

Question 16

Limitation of machinery for: consumers

Answer 16

§ Products may become out of date quickly.
§ Faults in products can be expensive to repair.

Question 17

Limitation of machinery for: employees

Answer 17

§ May reduce need for employees.
§ Could make work less interesting.
§ Reduces opportunities for promotion.
§ Provides more employment opportunities.

Question 18

Reasons for businesses to hold inventory:

Answer 18

1) Raw materials and components needed for production
2) Partly finished goods.
3) Finished goods ready to be sold.

Question 19

Costs of holding inventory.

Answer 19

1) Warehouse costs.
2) Handling costs.
3) Shrinkage costs.
4) Insurance costs.
5) Obsolescence.
6) Opportunity cost.

Question 20

Explain cost of holding inventory: warehouse costs.

Answer 20

Businesses will need to rent or purchase a warehouse to store inventories.

Question 21

Explain cost of holding inventory: Handling costs.

Answer 21

Inventories need to be moved into and out of warehouse.

Question 22

Explain cost of holding inventory: Shrinkage costs.

Answer 22

Damaged, lost or stolen inventory needs to be replaced.

Question 23

Explain cost of holding inventory: Insurance costs.

Answer 23

Cover the cost of losses from shrinkage.

Question 24

Explain cost of holding inventory: Obsolescence.

Answer 24

Business may not be able to sell out-of-date goods.

Question 25

Explain cost of holding inventory: Opportunity cost.

Answer 25

Working capital is kept in inventories which could be more profitable.

Question 26

Business's intention to hold inventory despite the cost.

Answer 26

○ If raw materials and components are not available nearby when needed, it may cause loss of output. ○ If finished goods are not in stock, this results in loss of current and future sales. ○ Business may get discount on purchase for purchasing more at a time.

Question 27

Benefit of using Kaizen method:

Answer 27

Kaizen means continuous improvement. This means small improvements from employees can result in a big improvement in efficiency.

Question 28

Main methods of production.

Answer 28

1) Job production. 2) Batch production. 3) Flow prodiuction,

Question 29

Explain production method: job production.

Answer 29

Individual item created before another one is started. Used for the production of single unique items. This requires highly skilled employees and special equipment.

Question 30

Explain production method: Batch production

Answer 30

Group of items produced in a single stage of production.

Question 31

Explain production method: Flow production

Answer 31

Products moving continuously along the production line as additional features are added to the product until it is finished. A large amount of identical standardized products are made to meet customer demand.

Question 32

Main features of production.

Answer 32

® Produced in large quantities. ® Standardized products. ® Employees are relatively skilled. ® High degree of automation. ® Large inventories of raw materials and work in progress.

Question 33

Factors to choose method of production

Answer 33

○ Amounts they are likely to sell. ○ Product being made. ○ Cost of production. ○ Variety of goods expected by customers. ○ Size of market.

Question 34

How does Technology in change production methods

Answer 34

Allows development of products more quickly. Products and designs can be tested using computer technology, saving resources, time and money. Computer controlled robots are also available which can work better than employees. Use of debit and credit cards have also revolutionized methods of payment, making it much faster.

Question 35

Duties of the operation management:

Answer 35

○ Use resources in most cost-effective way. ○ Produce required output to meet demand. ○ Meet quality standard.

Question 36

Methods of labor productivity:

Answer 36

○ Increasing output with same employees. ○ Keeping output same with less employees. ○ Improving skill level of employees. ○ Improving motivation of employees. ○ Introducing more automation and better technology. ○ Improving quality of manager decisions.

Question 37

Define: production.

Answer 37

Process of converting inputs into saleable goods.

Question 38

Define: Productivity.

Answer 38

Measure of efficiency of inputs used in production.

Question 39

Define: inventories

Answer 39

Stock of raw materials, work in progress and finished goods held by a business.

Question 40

Define: Lean production

Answer 40

Production of goods and services with minimum waste of resources.

Question 41

Define: Job production

Answer 41

Production of items one at a time.

Question 42

Define: Batch production

Answer 42

Making products in batches and stages.

Question 43

Define: Flow production

Answer 43

production of identical goods in a continuous manner.

Question 44

Define: Capital intensive.

Answer 44

Production using high quantity of capital compared to labor.

Question 45

Define: Output.

Answer 45

Finished goods and services.

Question 46

Define: Inputs.

Answer 46

The resources the business possess.

Question 47

Define: Kaizen.

Answer 47

A method of business that allows employees to make suggestions about how to improve quality and productivity.

Question 48

Q.48 How is technology an advantage for businesses?

Answer 48

A.48 1) Saves money and time. 2) Increases productivity. 3) Reduces costs of production. 4) Improves quality and reduces waste.

Question 49

Q.49 How is technology an advantage for consumers?

Answer 49

A.49 1) Better quality products. 2) Lower prices. 3) Products with more features.

Question 50

Q.50 How is technology an advantage for employees?

Answer 50

A.50 1) Technology completes simple and repetitive tasks. 2) Work is easier with technology. 3) Provides job security.

Question 51

Q.51 How is technology an disadvantage for businesses?

Answer 51

A.51 1) Expensive. 2) Business might need to change rapidly. 3) Employees might need training.

Question 52

Q.52 How is technology an disadvantage for consumers?

Answer 52

A.52 1) Products may become out of date quickly. 2) Faults in products can be expensive to repair.

Question 53

Q.53 How is technology an disadvantage for Employees?

Answer 53

A.53 1) May reduce need for employees. 2) Could make work less interesting. 3) Reduces opportunities for promotion. 4) Provides more employment opportunities.