Unit 4 Flashcards
Decision making to improve operating performance
Types of operational objectives
-reduced unit costs
-quality targets
-speed of response and flexibility
-dependability
-environmental objectives
What is the economic cycle?
The natural fluctuation of the economy between periods of expansion (growth) and contraction (recession)
External influences on operational objectives
-political or legal influences
-economic influences
-technological influences
-competitive influences
Internal influences on operational objectives
-finance
-marketing
-human resources
Four main operations data
-capacity
-capacity utilisation
-labour productivity
-unit costs
What is capacity?
The total or maximum output a business can produce in a given time period if it is working flat out
Capacity utilisation calculation
Actual output in given time period
____________________________________ X 100
maximum possible output per period
Labour productivity calculation
output per time period
____________________________________ X 100
Number of employees
Unit cost calculation
total cost
_________________________
units of output
What is excess capacity?
Occurs where actual production falls below maximum potential production
How to increase efficiency and labour productivity?
-investment in technology
-improvements in training and motivation
-job redesign
-reduction in labour force
What is just in time production?
An inventory strategy that companies employ to increase efficiency and decrease waste by receiving goods only when they are needed in the production process.
Benefits of JIT
-reduced waste in terms of damaged stock
-reduced space and staff due to less warehousing
-greater flexibility in terms of responsiveness to changes in taste or fashion
-improved motivation due to greater involvement of the workforce in the process
-lower costs as a consequence of the above
Drawbacks of JIT
-running out of stock
-opportunities for bulk buy purchases
-trust in the supplier to provide the necessary quality required as components of straight to the production line
Difficulties of increasing efficiency and labour productivity
-cost
-quality
-resistance of employees
How to utilise capacity efficiently
-increase sales
-reduce capacity
-alternative uses for capacity
What if there isn’t enough capacity?
-outsourcing
-investment
-reducing pricing
How to use technology to improve operational efficiency?
-more advanced computer systems
-the internet
-computer-aided manufacture (CAM)
-computer-aided design (CAD)
Benefits of new updated technology
-reduces unit cost of production
-opportunity to charge premium price
-consistent quality can be guaranteed by CAM
-using technology efficiently may enable employees to work more efficiently
-may allow access to new markets
-can reduce waste
Cost of using new technology
-can be a drain on an organisation’s capital
-requires training of the existing workforce and potentially recruitment of new employees
-could threaten job security of employees
Importance of quality
-provide a USP
-allow a business to charge higher prices
-enable a business to increase its sales
-enhance reputation and brand loyalty
What is quality assurance?
A system for ensuring the desired level of quality in the development, production and delivery of products and services
What is total quality management?
There is a culture of quality throughout the organisation.
Characteristics of TQM
-focus on customer needs
-continuous improvement
-employee involvement and empowerment
-managing suppliers
What is kaizen?
The Japanese business philosophy of continuous improvement
Benefits of improving quality
-enhanced reputation and increased brand loyalty
-competitive advantage in quality may give USP
-increased revenue due to higher sales at potentially higher price
-greater flexibility in terms of price
Difficulties of improving quality
-business has to bear the cost of training staff, administration of the system and equipment
-employees can be resistant to change
Consequence of poor quality
-cost of scrapping or reworking products
-the additional costs if goods are returned for repair or replacement under warranty
-the costs resulting from damage to the business’s reputation
Three areas of the supply chain
-the supply of materials to the manufacturer
-the manufacturing process
-the distribution of the finished goods to the consumer
Too little supply
a business will miss out on lucrative orders but will also lose future orders due to lack of dependability
Too much supply
will incur the costs of holding the excess and a business may be faced with selling the goods at a reduced price
How is supply managed?
-flexible workforce
-increased capacity
-produce to order
-outsourcing
Influences on amount of inventory held
-nature of product
-nature of production
-nature of demand
-opportunity cost
Features of an inventory control chart
-buffer level inventory - minimum amount of inventory held
-reorder level- level of inventory at which a new order is placed
-lead time- time between an order being made and its arrival in the business
-maximum stock level- the highest amount of inventory a business is able to hold
-reorder quantity- the amount ordered
Influences on choice of suppliers
-dependability
-flexibility
-quality
-price and payment terms
-ethics
Outsourcing
the subcontracting of non-core activities of an organisation in order to free up cash, time, personnel and facilities, thereby concentrating on other areas in which it has a competitive advantage.
Benefits of outsourcing
-enabling of quicker response to increases in demand
-greater dependability for customers during periods of increased demand
-lower cost, particularly in cases of temporary increases in demand
Drawbacks of outsourcing
-quality may suffer
-reliability of supplies may not be guaranteed
-it is likely to be more costly than producing in house
