Unit 3 - The Management of Operations Flashcards
What is meant by the term operations?
takes raw materials (inputs) and puts them through a variety of processes to turn them into the finished product/service (outputs).
Define stock
any item stored by a business for use in production or sales. Stock can be:
• raw materials and components waiting to be used in the manufacturing process, e.g. tyres stored by a car factory
• finished goods held in store so that a customer order can quickly be met from stock
What is stock control?
aims to hold sufficient items on site to enable production while minimising stock holding costs.
What are the factors to consider when choosing a supplier?
- cost – how much the suppliers are charging for their goods/materials
- time – how long it takes between them placing orders for the suppliers to deliver them to the business
- location – where the supplier is based in comparison to the business
- quality – the level of quality of the goods/materials being provided; better the quality of materials will produce better quality final products
- reliability – If they will supply the necessary goods that have been ordered when they say they will
- reputation – what people think of the business; if they have a poor reputation people will be less likely to use them
What are the consequences of having too much stock?
- high costs e.g. storage, security, insurance
- space could be used for something else
- money tied up in stock
- damage/deterioration with age
- changes in taste could make it obsolete
- high chance of theft
What are the consequences of having too little stock?
- difficult too cope with changes in demand
- late deliveries may result in an inability to meet orders or halt production
- may have to order more often therefore higher admin cost
- damage to reputation is orders are not met
- loss of sales as customers may go elsewhere when orders cannot be met
What are the features of an inventory management system?
Minimum stock level Maximum stock level Lead time Re-order level Re-order quantity Buffer stock
What is the maximum stock level in an inventory management system?
the highest level of stock that should be held at one time. This is the optimal level as costs are minimised and storage space and finance is utilised effectively.
What is the minimum stock level in an inventory management system?
the lowest level of stock held which should not fall below. This ensures shortages should not happen which can result in production halting.
What is the lead time in an inventory management system?
the time between when an order is placed and when the stock arrives. This needs to be taken into account so order times can be set to avoid disruption.
What is the re-order level in an inventory management system?
the level which stock should be re-ordered at. This takes inro account usage and lead time. This is ordered before stock hits minimum therefore ensuring effective production.
What is the re-order quantity in an inventory management system?
the amount that is ordered when the re-order level is reached. This will take stock back up to maximum level once it is delivered.
What is the buffer stock in an inventory management system?
the stock used to keep production going during lead time.
How can a business decide on stock levels?
- ensure production continues
- how much stock the business is currently holding
- time between orders
- amount of raw materials that will be used between orders
- storage space avaliable
- cost of storage
- spoilage time of product
- avaliable finance
What is just in time?
when a business holds no stock and instead relies upon deliveries of raw materials and components to arrive exactly when they are needed
What are the benefits of just in time inventory?
- No money is tied up in inventory meaning it can be used elsewhere in the business
- Less storage space/warehousing is required which will reduce costs
- Reduced wastage as less risk of stock going out of date or out of fashion
- Lower inventory levels are easier to monitor leading to less risk of theft
What are the costs of just in time inventory?
- Delay in receiving orders from suppliers will lead to production having to stop
- Lose out on economies of scale as fewer bulk orders will be required
- Stock being delivered frequently increases administration and delivery costs
- Difficulty coping with unexpected changes to demand leading to a loss of sales
- Frequent delivery of stock increases carbon footprint damaging the image of the business
What is centralised stock control?
this means keeping stock in one place.
What are the advantages of centralised stock control?
- Improved security as specialist staff can be used
- Reduced costs (bulk purchases = economies of scale)
- Lower transport and admin costs as fewer orders
- Less duplication of stock held
What are the disadvantages of centralised stock control?
- High costs incurred due to specialist equipment and large storage facilities
- May incur increased delivery times and delays in receiving stock to departments
- Increased wage costs as specialist staff are required to manage the storage and distribution of stock
- Harder to meet specific requirements of specialised departments within the company
- Storing large amounts of stock may increase the chance of wastage
What is de-centralised stock control?
this means keeping stock in more than one place e.g. each different shop/warehouse location
What are the benefits of decentralised stock control?
- Inventory is accessible so no delay in receiving required goods
- Small amounts of stock being held prevents wastage
- Departments are more responsive to local needs and changes in the market
What are the disadvantages of de-centralised stock control?
- Increased delivery costs due to low amounts of inventory being delivered to multiple locations
- Security may not be as effective leading to increased theft
- No specialist staff dealing with stock may lead to disorganisation and delays
What is job production?
A one off, unique product is made to meets customers specifications. Finished before another is started. E.g. a wedding cake, a piece of artwork.
What are the advantages of job production?
- Allows high prices to be charged
* Allows specifications to meet customers’ needs
What are the disadvantages of job production?
- Highly skilled workers are required
* Slower than other methods
What is batch production?
When a group of identical products are made at one time, then switched to a different variety. E.g. bread-whole-meal, wholegrain and white or different sized clothes.
What are some advantages of batch production?
- Specialist machinery can be used
* More variety than job
What are the disadvantages of batch production?
- Machinery and equipment must be changed/cleaned between batches
- Extra storage costs
What is flow production?
Mass production of identical products, usually highly automated. Production is continuous E.g. Cars, Washing machines, Tunnocks Tea-cakes
What are the advantages of flow production?
- Unit costs can be reduced– economies of scale
* Reduced labour costs
What are the disadvantages of flow production?
- High Investment in machinery
* If one part breaks production is stopped
What will the choice of production method depend on?
- Skills of the workforce
- Finance available
- Technology available
- Size of the business
- Product being made
- Size of the market (Number needed)
- Quality required
- Staff Available
Define labour intensive
when products are mainly produced by human workers. Machines and special tools may be used too, but overall, it requires human creativity and effort to produce the product.
What are the advantages of labour intensive?
- Customised products are easier to make
- Less expensive machinery costs
- Humans can use their own initiative and problem solve
- Workers are often more motivated
What are the disadvantages of labour intensive?
- Quality of products can vary due to expertise of the worker and there is increased risk of human error Skilled workers take time to train
- Skilled workers will be paid more than unskilled workers
- Workers require breaks and holidays which may lead to loss of production
Define capital intensive
when products are mainly produced by machines and robots, meaning the initial outlay and maintenance, will be very high.
What are the advantages of capital intensive?
- Machinery doesn’t need breaks can work 24/7
- The products being made are of standardised quality
- Fewer employees are required – reducing costs of wages
- Employees require fewer skills compared to labour intensive – reduces costs
What are the disadvantages of capital intensive?
- Expensive to buy machines and equipment
- Individual customer requirements can not be met
- Breakdowns can be expensive to fix and cause production to stop
What are the two types of production that capital intensive businesses may be?
Automated or mechanised
What is automated production?
when the production process is mainly carried out by machinery/robots and is mostly controlled by computers. Human input is limited in automated production
What is mechanised production?
when the production process requires both machinery and humans. Machines are required to carry out most of the work although they are operated and controlled by humans.
What does ensuring quality mean?
making sure that products are made to a minimum standard or better.
Define quality control
meeting the minimum standard required to satisfy customers needs.
What are the advantages of providing a good quality good/service?
- Good reputation
- Retailers will be happy
- Remains competitive
- Can charge a higher price
- Fewer customer complaints
- Market share can be increased
- Easier to recruit staff
- Fewer returns
What are the benefits of having well training staff?
- Increase competence
- Improves flexibility of staff
- Increase motivation
- Increase production levels
- Easier to introduce change
- Image of organisation improves
What are the costs of having well trained staff?
- Financial costs of courses
- Working time is lost
- Quality of work may be slower/poorer quality when staff are training
- Resistance to the benefits of training
What are the benefits of buying quality raw materials?
- Produce better quality goods
- Increase profitability – people will buy more if they think its good quality
- Products will gain a better reputation
What is the only disadvantages of buying quality raw materials?
it costs more to buy better materials.
What are the methods of quality management?
Quality circles Benchmarking Mystery shoppers Quality control Quality assurance Quality improvement Kaizen philosophy
What are quality circles?
small groups of workers of different levels in the firm who come together to discuss and solve problems in production.
What is benchmarking?
It involves comparing their products to leaders in the industry but adding some extra value or USP (unique selling point) to the product.
What are the benefits of benchmarking?
- Identifies best practice in the market which will improve 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
What are the costs of benchmarking?
- 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
- May be difficult to gather required information from competitors
What are mystery shoppers?
employed by the company to act as customers. They will then report back to the company on their experience. This feedback is used by the company to help improve its service or product. Mystery shoppers do not identify themselves
What is quality control (inspection)?
where raw materials and finished products are checked by inspectors to see if they meet the set standard then they accept or reject the final product.
What is quality assurance?
where quality is built into the production process. All staff check all items at all stages of the production process for faults. Successful quality assurance results in zero defect production.
What is the kaizen philosophy?
involves always looking for ways to improve the quality of a product. Kaizen is a philosophy that everyone and every process should be continuously improving.
What do quality standards and symbols do?
proves that a product has an agreed industry standard
What are the benefits of being awarded quality standards or symbols?
- Improves image/reputation of the product
- Proof it meets specific quality standards
- Competitive advantage over products that do not have a quality standard, which can be used in marketing and promotional material
- Charge higher prices
- Receive fewer complains
What technology is used in operations?
Electronic point of sale Computer aided design (CAD) Computer aided manufacturer (CAM) robotics IT
What is computer aided design (CAD)?
This system is used to design a product before it is manufactured, this used to be done by hand in a technical drawing but now is done by computers.
What are the advantages of computer aided design?
- the accuracy of the drawing has increased, human error in drawing measurements has been reduced
- ideas can be saved modified printed and shared which saves time and allows clients to see a 3D visual concept of their design it’s also easier at this stage to see where changes need to be made therefore saving valuable time
- standard layouts or templates can be created and saved to reduce time spent on these drawings
What are the disadvantages of computer aided design?
- the initial expense of purchasing the necessary equipment and software is high
- staff must be trained in how to use the software and hardware which can take time
- less people are now required to create CAD drawings so it can have an impact on unemployment
What is computer aided manufacture (CAM)?
this system uses machinery that is controlled by computers.
What are the advantages of computer aided manufacture (CAM)?
- it produces consistent results
- it can produce highly accurate results
- it can run effectively 24/7
- difficult shapes can be created because CAM is so precise
What are the disadvantages advantages of computer aided manufacture (CAM)?
- the expense of the machinery is high
- it can take time to programme machinery with the operating code
- staff need to be trained in how to use the system
What are robotics?
this is when production is completely automatic and conducted by machinery/robotics. This allows for a consistent approach within production and a standardised product to be created meaning no quality differences
What is IT used for in operations?
(laptops, tablets, smart phones and email) Used for purchasing materials online
What are the benefits of using technology in operations?
- Increased rate of productivity – output per hour
- Computers/robots do repetitive/dangerous tasks.
- Greater consistency/quality – better reputation
- Wider range of products to its customers.
- Improved efficiency
What are the costs of using technology in operations?
- Training: staff need trained to use machines/computers
- Motivation: staff get bored using same machine all day
- Maintenance: repairing technology –hardware/software
- Depreciation fall in value of equipment
- Capital: robots and software are expensive to buy e.g. a loan + interest must be repaid
