Unit 4 Flashcards
Operations management
Process that uses the resources or an organisation to provide rje right goods or services
Quality objectives including
Customer satisfaction rating
Customer complaints
Level of product returns
Scrap rate
Punctuality
Internal influences onnoperation objectives and decisions
Corporate objectives
Finance
Hr
Resources available
External influences on operational objectives and decisions
Market factors
Competitors actions and performance
Technological change
Capacity
Maximum level of output or production thag a business case produce in a given time period
Factors that capacity depends on
Level of demand for a product
Flexibility of production lines
Seasonality of output and demand
Benefits of high labour productivity and effeciency
Efficient use of input allows businesses to maximise production and therefore satisfy the needs of more consumers
Efficient use of input means fewer inputs are needed to produce a given level of output
How to increase efficiency and labour productivity
Improving the fertility of land
Using renewable or recyable resources greater education and training od the workforce
Difficulties increasing labour productivity and efficiency
Unlikely that land fertility can be increased
Many resources are not renewable
Education and training can improve productivity
Diseconomies of scale
As organisations grow they may suffer disadvantages thag lead to lower efficiency and higher unit costs
Co ordination diseconomies
Loss of control by management
Individuals less likely to follow policies
Large firms often have more rigid and inflexible policies
Communication diseconomies
Too many levels of hierarchy in a business
Difficulties also occur as span of controls widen
Large firms tend to use standardised communications
Motivation diseconomies
More difficult to assess the needs of mamy individuals
Large firms there may be less time for recognition and reward
Large hierarchies create distance between decision makers and staff
Capital intensive production
Method of production thay use a high level of capital equipment in comparison to other inputs such as labour
Labour intensive production
Methods of production thag use high levels od labour in comparison to capital equipment
Factors including choice between capital or labour intensive production
Method of production
Size and financial position of a business
Customers
Relative costs of labour and capital
Importance of capacity
Enable it to meet the level of demand for a product
Efficiency capacity management can ensure that a form is not spending excessive amounts on equipment and is able to reduce its unit costs
Under utilisation of capacity
When a firms output is below the maximum possible
Capacity shortage
Whena. Firms capacity is not large enough to deal with thr level of demand for its products
This means that some customers will eb disappointed
Reasons why a firm may be operating below irs maximum output-spare capacity
New competitors enter the market
Fall in demand of the product
Unsuccessful marketing
Seasonal demand
Disadvantages of spare capacity
Leads to a higher fixed cost per unit
These higher units lead to low profit of unit
Spare capacity can portray a negative image of a firm
Advantages of spare capacity
More time for maintenance and repair, training and improving systems during a period of space capacity
There may be less pressure and stress for employees
Ways of reducing capacity
Selling ot all or part of its production area
Changing to a shorter working wrrek
Laying off workers
Ways of increasing capacity
Building or extending factories
Asking staff to work overtime or long hours
Hiring new staff
A flexible workforce
Lean production
Production based on the range of time saving and waste saving measures
Examples of techniques for lean production
Just in time management
Quality circles
Total quality management
Cell production
The main aim of just in time
Reduce waste by eliminating the need for high levels of inventory
This reduces costs by cutting warehouse space and staffing costs linked to the warehouse
Features of just in time productions
Links closely to people’s management’s
Individuals are given more responsibili6y
Also flexibility and multi skilling are also key feature of just in time
Benefits of just in time lean production
Increased productivity
More motivated workforce as a result of greater skills and more interesting jobs
Increased worker participation
Reduced wast end inventory
Difficulties ot just in time as a method of lean production
Fewer opportunities for bulk buying
Halting of production
Undetected product faults
Features of lean peoduction
Short lead times
Minimal stock levels
Right first time quality
Elimination of unnecessary processes
Features of mass production
Longer lead times
High stock levels
Quality inspection of finished product
No close scrutiny of unnecessary processes
Main applications of robots
Handling operations
Welding
Other production applications
Assembling
How does it assist communication
Allows a business to improve external and internal communications
Internal information can be processed and amended more quickly
Benefits of technology
Reducing costs
Improving quality
Reducing waste
I creasing productivity
Flexibility
Issues in introducing and updating technology
Resistance to change
Lower morale
Cost
Keeping up with change
Measures of quality
Appearance
Reliability
Durability
Functions
Importance of quality
Gaining a competitive advantage
Impact on sales volume
Creating a unique selling point
Impact on selling price
Pricing flexibility
Benefits of insepction
Prevent a defective product
It is a more secure system than an individual to itself
May detect common problems
Drawbacks of inspection
Expense that can be viewed as unnecessary
Does little to encourage individuals to improve quality as there is an inspector
Benefits of quality assurance
A sense of ownership of product rests with workers rather than inspector
Costs are reduces as there is less waste and less need for reworking of faulty products
Benefits of improving quality
Gaining a competitive advantage
Increasing sales volume
Creating a unique selling point
More scope to increase selling price
Difficulties of improving quality
May be difficult to convince people there is a problem
May be difficulties in agreeing best solution to a problem
Consequences of poor quality
Reputation
Lower sales volume
Lower price
Lower profits
Mass customisation
Offering individually tailored goods or service to customers on a large scale
Collaborative customisation
Where businesses work closely with individual customers to develop a product that suits the customers precise needs
Adaptive customisation
Business produces a product which can then be customised or a suited bu the consumer
Transparent customisation
Type of customisation that occurs when unique products are pro ided to each customer but are not identified as customised products
Cosmetic customisation
When standardised products are produced but marketed to different customers in different ways
Factors required for mass customisation
A Market in which customers value variety and individuality
Quick responsiveness to market changes
Ability to provide customisation
Scope for mass effeciency
Benefits of mass customisation
Cost reductions
Higher revenue
Greater customer loyalty
Improved understanding of customers wants
Greater protection from market changes
Difficulties of mass customisation
Problems with rejected products
Unsuitable supply chains
Requirement for sophisticated info systems
Producing to order
A strategy in which a business only manufacturers a product once an order for that product has been received from a customer
Advantages of producing to order
Reduces cost of holding inventory
Production planning is easier
Ability to supply a product that meets customers exact specification
Disadvantages of producing to otder
Considerable fluctuations of production levels over time
Higher costs
Can be difficult to plan
Factors to consider when deciding produce to order
Value to customer of customised product
Willingness of customers to wait for product
Nature of product
Cost of holding inventory
Advantages of employing temporary and part time workers in order to meet changes in demand
Efficient way to lower costs when full time cover is not necessary
Availability of apartments time work may create a wider pool of candidates
Outsourcing
Transfer of activities which were previously conducted in house to a third party outside of the business
Advantages of oursourcing
Business able to reach to changes in demand more quickly if they have access to a number of other firms
Let’s a firm focus on its core business and help avoid becoming involved with activities
Disadvantages of outsourcing
Quality of the product is no longer directed under the firms own control
Excessive outsourcing erodes a company’s operation
Cost of outsourcing should be evaluated
Factors influencing decisions to outsource
Available capacity
Expertise
Quality considerations
Nature of demand
Inventories
Items that firms need to produce for or supply to customers
Examples are raw materials. Work in progress which is part finished products and finished products
Inventory control
Is method to ensure that production matches demand
Management of inventory
Advantages of hugg inventory levels
Customers demands are met promptly
There is no loss of goodwill caused by running out of inventory
Sudden increases in demand can be delt with effeciently
Advantages of low inventory levels
Reduced warehousing costs are possible
Opportunity cost is low
Perishable products are less likely to deteriate
Buffer inventory levels
The minimum level if inventory targeted by a business
Re order level
The inventory level which an order is placed for new inventory
Re order quantity
The actual number of products purchased from the supplier in a particular order
What three factors do re order level and quantity depend on
Suppliers lead time
Demand for the product
Consequences of running out of inventory
Causes of inventory wastage
Defects in production
Theft
Raw materials being wasted
Damage to inventories during storage and production
Choosing effective suppliers
Price
Payment terms
Quality
Capacity
Reliability
Flexability
Non current assets
Long term investments that the business has for a long time
Current assets
Assets that are likely to be sold this year
Current liabilities
Companies short term financial commitments that must be paid within a year
Non current liabilities
Debts a business owes but isn’t due to pay for at least 3 months
