Unit 4

Question 1

Define Added Value

Answer 1

The amount added to the value of a product or service, made up of the difference between the cost of producing it and the amount received when it is sold.

Question 2

What is operations management

Answer 2

Is converting materials and labour into goods and services in the most efficient manner possible.

Question 3

Name five examples of operational objectives

Answer 3

Costs — relates to efficiency and includes productivity, unit cost of production and capacity utilisation.

Quality — relates to the whole process of producing and selling in terms of wastage, defect rates, reliability and customer complaints.

Speed of response and flexibility — relates to how quickly a business can respond to changes in demand, e.g. in terms of order lead times .

Dependability — this is the reliability of the business.

Environmental objectives — relating to the amount of packaging used, energy efficiency, waste disposal and the use of sustainable resources.

Question 4

Why are Operational objectives important for a business

Answer 4

They promote efficiency and can make savings in terms of time, money and less waste.

Unit costs may be reduced as a result of the efficiencies gained.

Profitability is therefore likely to improve.

Those responsible for achieving the objectives may benefit from increased motivation.

Evaluation of the objectives set may be used as a measure of achievement.

Question 5

Define lead time

Answer 5

The time it takes from ordering stock to when the order is received by the customer.

Question 6

Name four External and internal influences on operational objectives and decisions

Answer 6

Political or legal influences

Economic influences

Technological influences

Competitive influences

Question 7

Define Globalisation

Answer 7

The tendency of businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of markets and businesses.

Question 8

Define Corporate objectives

Answer 8

The overall business objectives that influence strategic decision making and towards which each functional area (operations management, finance, marketing and human resources) will work.

Question 9

Name four Internal influences on operational objectives

in terms of other functional areas

Answer 9

Finance — as any operational decision is likely to involve considerable investment, the availability of finance is a key influence.

Marketing — it may be that the marketing activities of a business determine the quantities produced and the type of good manufactured.

Human resources — it is likely that the skills of the workforce determine the quality and numbers produced. This emphasises the importance of the workforce.

The overall corporate objectives are also likely to influence operational objectives.

Question 10

four main ways of interpreting operations data

Answer 10

labour productivity

capacity

unit cost (average cost)

Capacity utilisation

Question 11

What is the importance of capacity evaluate the possible impacts of having excess or full capacity

Answer 11

If a business has too much spare or excess capacity, this represents wasted resources as it will be paying for space it is not using which will have an impact on unit cost. If, however, it is operating at full capacity, the business will be unable to take on new orders and could miss out on valuable sales and may even damage its reputation.

Question 12

What is the recommended capacity utilisation and why.

Answer 12

having some spare capacity is advisable as this gives the business the flexibility to be able to take on new orders. For some businesses, demand may be seasonal, resulting in working flat-out at certain times of year while having spare capacity at other times.

Question 13

Name four ways in which efficiency and labour productivity can be increased

Answer 13

Reduce the labour force . If the labour force can be reduced while maintaining the same level of production, productivity will improve.

Invest in technology . Many operations in manufacturing are undertaken by machines and robots.

Improve training and motivation . Increasing the skill set of workers may make them more efficient and, if this is linked to motivation and reward, productivity may be improved.

Job redesign . This can also have an impact on productivity as changing the way things are done can make the whole process more efficient.

Question 14

Name three Difficulties of increasing efficiency and labour productivity

Answer 14

Quality . Increasing the output per worker may compromise other factors such as the quality of a product or service.

Resistance of employees . Productivity increases may be resisted by employees who fear they may result in redundancies.

Costs . It is also possible that workers may demand pay increases in recognition of their improved performance or to reward new skills developed through training.

Question 15

Define Lean production

Answer 15

Means getting more from less by cutting out waste in terms of labour, materials, space and time.

Question 16

Define Just-in-time (JIT)

Answer 16

A strategy that some companies employ in order to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

Question 17

Name four aspects of lean production:

Answer 17

Just-in-time (JIT) production , where materials are received just as they are needed for production, eliminating the need for large levels of stock.

Time-based management , which aims to reduce the time wasted in operations, through faster product development and shorter lead times.

Total quality management (TQM) , which is a quality assurance ideal where all workers have responsibility for getting it right first time.

Continuous improvement(Kaizen), which is a culture where all workers are involved in making improvements in production and quality.

Question 18

two benefits of using just-in-time

Answer 18

Reduced costs . Less space is needed for storage, fewer workers are required for looking after stock and there is less wastage due to damaged stock. Less money is tied up in holding stock, so the business’s cash flow position is likely to be improved.

Greater motivation . There is greater worker participation in decision making and jobs are likely to be more interesting and carry more responsibility as a result.

Question 19

Name three Drawbacks in adopting a lean production approach:

Answer 19

Loss of production . If there is any interruption in the supply chain, materials may not arrive on time.

Reliability and flexibility . Tremendous trust is put in suppliers by such a system. This is not just based on their ability to supply reliably and be flexible, but also their ability to produce goods of a consistently high quality.

Bulk purchase savings . These may not be available as each order will be for a small quantity.

Question 20

What are the four factors of production.

Answer 20

land — the physical land and the natural resources of the planet

labour — the staff who work in a business

capital — the machines and equipment used in a business

enterprise — the skill of combining the other factors of production

Question 21

Describe the difference between capital and labour intensive processes

Answer 21

A labour intensive operations process means a relatively high proportion of labour in the production is used compared to capital equipment, for example, hairdressing.

A capital intensive process uses a relatively high proportion of capital equipment relative to labour, for example, a bottling process.

Question 22

Provide an example and one benefit and drawback of a capital intensive industry

Answer 22

The car industry is a capital-intensive industry in which money has been invested in technology and robots for mass production. This brings higher productivity and efficiency in terms of reducing human error and wastage but comes with a high initial cost and, unlike labour, lacks flexibility and creativity.

Question 23

Provide an example and one benefit and drawback of a labour intensive industry

Answer 23

A labour-intensive organisation like a restaurant or hotel that is heavily reliant on customer service. Its staff can be used flexibly according to demand (they can tailor-make products, add personal touches and give feedback on production). Along with labour, however, comes the potential for labour-relation problems: workers’ efforts can be inconsistent, in the long term they can be more expensive and there may be problems acquiring workers with the correct skills.

Question 24

Name three factors the optimal mix of resources depends upon

Answer 24

The type of product being made . Mass-produced products are likely to be more capital intensive, whereas those aimed at a niche market may be more labour intensive.

The size of the business and finance available . Smaller businesses may not be able to justify investment in large items of capital equipment.

The nature of the industry . A service industry such as the hotel trade is more likely to be labour intensive as customer service is paramount.

Question 25

What are the benefits in terms of efficiency from technology.

Answer 25

Cost reduction — this can be achieved in manufacturing due to less waste, speedier production and reduced labour. It can be achieved in the service sector in terms of online sales, reducing the need for high street shops and sales assistants.

Flexibility — this might be in production, for example car manufacturers can build cars specifically to meet customer requirements for colour and extras. (Tesla)

Innovation — this may speed up processes, resulting in new products becoming available sooner.

Question 26

Define competitive advantage

Answer 26

is a superiority that a business possesses over its rivals that may allow it to achieve objectives, such as increased market share or profitability or a high quality product

Question 27

What is the importance to quality to a business

Answer 27

Having a high quality product or service is one way of achieving a competitive advantage.
The importance of quality is in creating a happy consumer who, having purchased a product or service once, will have no hesitation in purchasing it again or recommending it to friends and family.

Question 28

Define Quality assurance

Answer 28

A system that aims to achieve or improve quality by organising every process to get the product or service right first time and prevent mistakes happening.

Question 29

Provide 3 examples for how to measure quality in a manufacturing business

Answer 29

amount of wastage
number of returns
number of complaints

Question 30

Provide 2 examples for how to measure quality in a service sector business

Answer 30

punctuality
time taken to serve a customer

Question 31

Define Kaizen

Answer 31

A Japanese term meaning continuous improvement and an approach to work that seeks to achieve small incremental changes in processes in order to improve efficiency and quality.

Kaizen can be seen as part of a TQM process.

Question 32

Define Total quality management (TQM)

Answer 32

A comprehensive and structured approach to organisational management that seeks to improve the quality of products and services through ongoing refinements in response to continuous feedback.

Kaizen can be seen as part of a TQM process.

Question 33

Name two ways of achieving quality assurance

Answer 33

Kaizen
TQM

Question 34

What is quality control and is it better than quality asssurance

Answer 34

Quality control involves physical inspection by a quality controller to check both materials received and completed work.

Quality assurance hopes to achieve ZERO defects. With all staff responsible for this system, quality will be more consistent with less wastage and greater involvement and motivation of the workforce, than quality control.
Quality assurance > Quality control

Question 35

Name four Benefits to improving quality

Answer 35

Increased sales due to an enhanced reputation.

Lower costs as a result of less wastage and fewer returns.

A unique selling point (USP) may be established as a result of high quality.

A firm may gain a competitive advantage leading to consumer brand loyalty.

Question 36

Improving quality may be difficult to implement. What two main obstacles need to be overcome:

Answer 36

The attitude of employees is important as they can be resistant to change. They may not believe there is a problem and may see any change as a threat to job security. If their responsibilities are increased, they may seek a higher reward.

There may be problems with finance because improving quality does not come without some financial cost. The cost of training and the technology required can be high.

Question 37

What are the concequences of poor quality

Answer 37

Sales — poor quality is likely to have an impact on sales as consumers might purchase a product once but they would be unlikely to make repeat purchases.

Costs — these are in terms of waste, returned products and extra time spent on administration and repair. As a result, unit costs may begin to increase.

Reputation — a good reputation can be destroyed overnight.Due to social media

Waste — in terms of materials and poor quality products but also time and space. As sales decline, so will capacity utilisation. Assets are not used efficiently and labour may become idle, resulting in layoffs and potential labour-relation problems.

Question 38

Define Supply chain

Answer 38

The network of businesses involved in getting a product or service to the consumer. In manufacturing, for example, the supply chain includes sellers of raw materials, manufacturers, wholesalers and retailers.

Question 39

Define Mass customisation

Answer 39

A marketing and manufacturing technique that combines the flexibility of personalisation that comes with custom-made goods with the low unit costs associated with mass production.

Question 40

When buying a product, consumers (whether B2B or B2C) what characteristics do they look for.

Answer 40

Flexibility - in terms of order size and mass customisation improvements in communnication and tech

Dependability/Reliability - delivers on time consistently avoiding the customer delays increased communication can improve this

speed of response - fast delivery, custiomer service ect..
improvements in communication and tech

Question 41

Why must a business match supply to demand

Answer 41

If it runs out of stock and cannot satisfy demand, sales revenue and potential profit are lost. If it produces too much, there will be costs associated with storage and wastage, reducing potential profit.

Question 42

What are four ways to help match supply to demand for an Operations manager

Answer 42

Flexible workforce - This might be achieved by employing part-time or temporary staff. This way, employment can be increased easily to cope with sudden increases in demand.

Increase capacity - This might be a long-term solution if any increase in demand is seen to be permanent rather than a temporary or seasonal variation.

Produce to order - This is where a business produces a product only when an order has been received. But requires a skilled and flexible workforce.

Outsource production - this is where another business is tasked with producing products. Outsourcing enables a business to satisfy demand quickly

Question 43

Define Inventory

Answer 43

Inventory Also known as stock, this is the goods or materials that a business holds for the purpose of resale or repair.

Question 44

What are three influences on the amount of inventory held

Answer 44

nature of the product

nature of demand

opportunity cost

Question 45

What chart is used to manage inventory

Answer 45

inventory control chart

Question 46

What is buffer inventory

Answer 46

the minimum amount of inventory that a business wants to hold. This is to cover for emergencies such as supplies not arriving on time or a sudden and unexpected increase in demand.

Question 47

Define Re-order level

Answer 47

the level at which a new order for stock is made. It depends on the lead time and buffer inventory.

Question 48

Define Reorder quantity

Answer 48

the amount that is reordered at any particular time.

Question 49

Five influences on choice of suppliers

Answer 49

Quality — good quality, reliable materials and components.

Cost — having the right quality at the right price and with attractive payment terms. potential credit?

Dependability — reliable suppliers who deliver on time.

Flexibility — if demand is variable, the supplier will need to be flexible.

Ethics — Greater CONSUMER AWARENESS means ethical issues have become increasingly important.

Question 50

Three internal influences on the supply chain

Answer 50

– forecasts produced by the marketing department
– financial procedures, policies and finance available
– the corporate and associated functional objectives set

Question 51

External influences on the supply chain

Answer 51

The Quality,Dependability and the Ethics
of the supplier

Question 52

Three advantages to Outsourcing to an outside supplier

Answer 52

Speed of response - may enable a business to respond quickly to changes in demand, especially if it has established good relations with an outsourcing firm.

Saving costs - Where capacity is limited but demand insufficient to warrant the investment in more, it can be the ideal solution, saving on investment costs while generating additional revenue and profit.

Core activities - A business may see itself as being innovative and creative and wish to focus on this aspect rather than the actual production process.

Question 53

Drawbacks of outsourcing to an outside supplier

Answer 53

Quality - firm may not have the same high standards, which could lead to a damaged reputation.

Costs - Outsourcing may be costly

Trade secrets - The business may have to allow the outsourcing company access to confidential information regarding a product or service.