unit 4 Flashcards
Operational objectives
- Reduced units
- Quality targets
- Environmental objectives
- Speed of response and flexibility
External influences on operation objectives
- Political or legal influence
- Economic influences- Operations need to be prepared for an economic cycle that may affect their business.
- Competitive influences
- Technological influences
Internal influences
- -Finance- The availabity will determine the situation of how operations are carried out.
- Marketing- Will dictate what needs to be produced and the quantity needed.
- Human resources- The skill of workforce will determine the operations internally.
Labour productivity
Formula= output in a time period/number of employees.
Unit costs
Formula= total costs/ units of output.
Could be seen as the average cost of production.
Economies of scale
-Occurs when unit cost falls as output increases.
Internal: occurs from the business itself. e.g. bulk-buying, marketing, technology etc.
External: Occurs within an industry. E.g. location
Diseconomies of scale
- Occurs when a business grows large that unit cost increase. Usually a difficulty of managing a workforce.
For example:
> Poor communication- Wider span of control and less clear structures in a tall structure.
Lack of motivation- Workers may feel more isolated and less appreciated in a business.
> Loss of direction and co-ordination- A manager may have to be forced to delegate roles. Due to difficulty to manage all employees.
Capacity and capital utilisation
The formula= Actual output in a time period/maximum potential output x 100.
Lean production- JIT
Just in time management- A method of being highly efficient due to only ordering resources only when its required with no buffer stock which may go wasted.
Pros:
> Reduce wastage
> Greater flexibility to changes in industry
> Improved motivation with more staff engagement.
Cons:
> Running out of stock. Demand could spike at any time leading to businesses being unprepared. Can be effected by suppliers too.
> Limits the chances of having bulk purchasing discount.
> Trust- A huge trust would need to be required between the supplier and the business.
Lean production- Kaizen
- The idea of continuous improvement. Where employees will try to find ways to help improve the business. This requires a strong culture.
Lean production- TQM
This where culture of the business will check the quality consistently throughout the organisation.
Characterics include:
- Focus on customer needs
- Continuous improvement
- Managing suppliers
Pros: Enhances brand reputation
> Increases their USP
> Increased revenue in their sales
Cons:
> The cost of reworking failed products
> Costs if goods are returned for warranty.
Optimal resource mix
-Land: Physical land and natural resources.
-Labour: The workers employed by a business
-Capital: The machines and equipment used in the process
-Enterprise: The skill of combining the other factors of production.
Capital intensive
Where this is a high amount of capital equipment being used compared to labour.
Types of technology used in operations.
-More advanced computer systems
-The internet
-Computer aided
manufacture: Where manufactuers use robots as an intergral part of their production process
- Computer-aided design
Pros of updated technology
- Can reduce unit cost of production.
- A consistent use CAM can guarantee quality.
-Can allow access to new markets/globalisation - Can allow employees to work more efficiently
Cons of new technology
- Can be a huge drain on the businesses capital in the short-term.
- Would require staff to be trained being another cost.
- Job secruity may be a threat leading to possible industrial action
Flexible operations
Refers to the ablity of a business to meet the need of a customer.
Flexiblity may include mass customisation which tailors goods to a specific customer requirement.
Greater flexiblity is more likely to achieve a greater customer satisfaction and better competitve advantage.
Outsourcing
- The idea of sub-contracting activites which may take up resources and and time. This may also allow a business to focus on areas they have a competitive advantage in.
Inventory management
Inventories include: Are raw materials, work-in progress and finished goods held by a business.
Why do they hold inventory:
> To allow efficient production
> To allow meeting seasonal demand
> Avoid the precaution of delays
The main influences why this is done:
> The need to meet the customer demand
The need to manage the working capital
Risk of inventory losing value
Cons of holding inventory
- Cost of storage
- Interest costs
- Absolescence risk- products in time may be incapable to be sold.
- Stock out costs
Influences on the choice of supplier
- Dependablity
- Quality
- Location
- Ethics
- Price and payment terms
How to manage a supply chain effectively
- Requires good communication and relation to the supplier
- Requires an understanding of the external environment and how it impacts.
Pros of outsourcing
- Enables quicker response to demand
- Lower cost
- Useful in seasonal demand
Cons of outsourcing
- Quality may suffer
- Relaiblity of suppliers may not be guranteed
- More costly to produce then in-house
