Unit 3 - Management of Operations Flashcards
Consequences of holding too much stock
Increased Wastage:
- Perishable items can go out of date quickly, clothing and electronics can quickly go out of fashion
- This means that items have to be sold at a loss or destroyed, lowering profits
Higher storage costs: The cost of physical storage e.g. increased rent, electricity and heating
Increased risk of theft: Hard to monitor large amounts of stock
Consequences of holding to little stock
- Increased Administration & Delivery costs: Due to frequent orders of stock
- Unable to cope with unexpected increase in demand: Losing out on potential sales, customers will become fed up and shop elsewhere
- Production will come to a halt: If stock doesn’t arrive on time
- Workers and machines will still need to be paid although nothing is being produced
What is Just In Time (JIT)
- JIT is a method of stock control
- It aims to keep costs down to a minimum by cutting down on the level of inventory
- Stock arrives just in time for use in the production process
- Having a reliable supplier is critical
- Goods are manufactured only when customer orders are received
Costs and Benefits of JIT
Benefits:
- Less cash is tied up in stock (reducing potential cash flow problem)
- Less storage and warehouse space is required (lower costs)
- Wastage and or damaged products are reduced (cost saving leading to higher profits)
- Organisations can be more flexible and adapt to changes in taste and fashion (competitive edge)
Costs:
- A breakdown in deliveries or technology can have a negative impact on the organisation’s reputation (fall in sales and market share)
- Bulk buy discounts cannot be taken advantages of (higher costs of production leading to a higher selling price)
- Increased administrative and delivery costs due to repeated ordering
- Time consuming to constantly check each delivery for quality for allowing materials to be used in production (lower
productivity rates)
Different methods of production
Job production
Batch production
Flow production
Job production (Costs and Benefits)
- Job production is a labour intensive production method, where one product is produced at a time
- Products are custom made to the customers specification e.g. wedding cakes, tattoos
Benefits:
- Customer specifications can be exactly met
- High prices can be charged by the business
- Specifications can be changed by customers even after production has begun
Costs:
- Its expensive as highly skilled workers are needed
- A wide variety of tools are needed
- Lead time may be lengthy
Batch production (Costs and Benefits
- Batch production is the production of groups of similar products
- No item in a group goes to the next stage until all are ready e.g. newspapers, bread
Benefits:
- Batches can be changed to suit specific requirements
- Reduced need for costly, highly skilled staff
- Machinery can be standardised which reduces costs
Costs;
- Machinery can sit idle between each batch unless there is careful planning
- Stock levels may be high
- Staff maybe less motivated as they are doing the same thing over and over again
- If batches are small costs will be high
Flow production (Costs and Benefits)
- Flow production is when parts are added as the product moves along a conveyor belt
- Flow production is very capital intensive, each production line will have various stages of production e.g. car
manufacturers
Benefits:
- A large amount of identical products can be made
- Costs are spread over a large number of goods, therefore costs are reduced
- Machinery can work 24/7
- The process is usually automated meaning less labour costs
Costs:
- Very expensive to set up
- Individual customer requests cannot be met
- Break downs can stop production lines, very expensive
- Low staff morale
Advantages and Disadvantages of Labour intensive
Advantages:
- Employees can use their initiative when required
- There is always a supply of labour available
- Cheaper than purchasing and maintain equipment
Disadvantages:
- It costs money to recruit, select and train new employees
- The accuracy and the quality of work from person to person can vary
The importance of quality to organisations and customers
Poor and good Quality
- Poor quality goods can result in customers returning their purchases this will mean a loss in sales
- Extremely low quality can result in products not meeting safety standard which can lead to bad PR
- High quality goods can result in good reputation
- Being associated with quality production can attract high quality staff
- The highest quality goods can be sold for premium prices
The difference between quality control methods and quality assurance
- Quality control is when products are checked at the end of the production process to check they are of an acceptable
standard and quality - This can lead to high costs as any unacceptable products are thrown away or reworked
Whereas
- Quality assurance is when quality is checked at certain points/every stage in the production process instead of just at the
end
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Methods of ensuring quality
Benchmarking
Quality circles
Quality control
Quality assurance
Benchmarking (Advantages & Disadvantages)
Benchmarking involves finding the best practice in your industry and then copying your competitor but adding some extra value or USP to the product.
Advantages:
- Identifies best practice in the market improving performance if these methods are adopted by the organisation
- Can provide a goal for employees which will increase motivation
- Can make the organisation more competitive in the market
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Disadvantages:
- May be difficult to gather required information from competitors
- It can be time consuming to study techniques used by other companies
- Internal factors such as lack of finance may prevent the adoption of competitors practices
- The company/product will only be as good as the benchmark set
Quality circles (Advantages & Disadvantages)
Quality circles are small groups of workers of different levels in the firm who come together to discuss and solve problems in production.
Advantages:
- Allows workers doing the job to make the suggestion allowing them the opportunity to directly improve the work they are
doing
- They are more part of the decision-making process, giving employees a sense of empowerment
- If quality circles are successful they will motivate the workforce, improve efficiency and raise profitability
Disadvantages:
- Workers may feel pressured by having supervisors present
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Quality control (Advantages & Disadvantages)
Products are checked at the end of the production process to check they are of an acceptable standard and quality
Advantages:
- Ensures that faulty goods are not sent to customers
- Limits the potential for a bad reputation due to faulty products
Disadvantages:
- Creates a lot of waste as the quality of the goods are not checked until they are made and have to be thrown away if they
do not meet quality standards
- Products have to be reworked from scratch costing the business time an money
