Unit 4

Question 1

Operations Management

Labour Intensive operations process - means a relatively high proportion of labour in the production is used compared to capital equipment, e.g. hairdressing

Capital Intensive process - uses a relatively high proportion of capital equipment relative to labour, for example a bottling process

The Supply Chain - the series of activites involved in taking the initial resources to providing the final product

Answer 1

Describes the activities, decisions and responsibilities of the managing production and delivery of products and services

Involves Decisions Such as:

• Level of output needed to produce
• Range of products business wants to offer
• How best to produce the good or service (mainly labour or invest more in equipment
• How best to provide the good (online / via high streets)
• How much of process managers want to provide themselves and how much they want to use suppliers

Question 2

Added Value

Answer 2

The difference between the cost of purchasing raw materials and the price the finished goods are sold for

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Question 3

Nature of Operations Management

Answer 3

• Gathering, analysing and distributing information (google)
• Storing and transporting products (FedEx)
• Transforming People (plastic surgeons)
• Producing goods (car manufacturers)
• Bringing products and customers together (IKEA)

Question 4

Operations decision making process

Answer 4

Identify and set the operations objectives
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Analysing the existing position in relation to operations
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Choosing what actions need be taken to achieve objectives
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Implementing these decisions
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Reviewing to see if they are on targte and taking actions if not

Question 6

Operations Objective

• Product
• Target Market
• Competitive Strategy
• Competitors

Answer 6

Target set for the operations function such as to improve the proportion of deliveries on time by 5 per cent within two years
Like all objectives these should be
SMARTER
S- Specific
M- Measurable
A- Agreed
R - Realistic
T - Time related
E - Evaluated
R - Reviewed

Question 7

Internal Influences on Operational Objectives and Decisions

Answer 7

Marketing Activities
- Determine what needs to be produced and in what quantity

Human Resources
- Determine what is possible based on the amount of staff and their skills

Finance
- Affect level of investment (in technology affects what can be produced)

Question 8

External Influences on Operational Objectives and Decisions

Answer 8

Political and Legal Factors
- Greater legal regulation over health and safety.
Leads to restrictions on production (what, where how) (gambling banned in countries)

Economic Factors
- Change affects demand and cost of production. In fast growing economy demands is likely to increase requiring more production
- As well as increase in wage or input prices will increase costs and may require operations to focus on way of offsetting this by becoming more lean

Social Factors
- Greater demand from customers for choice and variety
- Also includes what customers expect from operations

Technological Factors
- Technology advances makes it easier quicker to develop, test and launch new products
- Enables new operations to exist (games, apps and online courses)
- Technological Change can completely disrupt an operation

Competition
- Greater demand for better customer service as customers realise their power to demand more and can easily access alternatives
- Means business are trying to offer more while keeping costs down - difficult balance

Question 9

Calculations of Operations data

Answer 9

UNIT (AVERAGE) COSTS

Unit Costs = Total Costs / Total Output

• Measured in £
• Measures cost per unit
• Control is important as it influences price a business can charge while still making a profit

LABOUR PRODUCTIVITY

Labour Productivity = Total Output / Number of Employees

• Measures output per employee in a given period
• Help influence how staff are rewarded

CAPACITY UTILISATION

Capacity Utilisation = Existing Output / Maximum Possible Output x 100

• Higher = More resources being fully utilised
• Lower may suggest
  - Low demand
  - Cost per unit likely to be high because fixed costs are not spread over many units. Meaning there is a high fixed costs per unit, may result in low profit margins or even a loss on each unit. This is why businesses are eager to achieve high capacity utilisation. Allows them to spread fixed costs over more units and bring down the unit costs enabling them to be profitable

Question 10

Capacity

Answer 10

Measures the maximum a business can produce
(Capacity of restaurant depends on staffing, kitchin space and number of tables)
(Capacity of airline determined by number of pilots and cabin crew, number of planes and types as well as landing spots)

Capacity may change over time as more resources become available.
- More staff employed
- More acquirred land
- More equipment
However, will take time as the company will have to scale up also depends on the type of change as a nuclear power plant will take years to build. Increasing capacity is an investment and managers will want to consider the cost, the likely returns and the risk

Question 11

Potential Benefits Of High Capacity Utilization

Capacity Utilisation - measures the existing output over a given period as a percentage of maximum possible output

Answer 11

Unit Costs (Average Costs)

Price

Sales

Volume of Production

Question 12

The Use of Data in Operational Decision Making

• Helps identify problems or opportunities. This enables them to analyse different courses of action and decide what to do next

Answer 12

If Labor Productivity is low managers can identify the cause. They can then consider whether it is necessary to invest in training, review reward systems or change the way work is undertaken

If Unit Costs (average) are higher than expected managers will analyse the cause. Due to supplier costs? Low Labour Productivity? High levels of defects? This will lead to actions being taken to improve the situation, such as negotiating with suppliers

If capacity is too low, managers may want to consider whether it is worth investing to expand
This would depend on factors such as the costs, the likely returns and the risk involved

Question 13

Efficiency

• Measures how well inputs are used to generate output. If a process becomes more efficient it uses fewer inputs to produce a given output and the unit cost should fall

Answer 13

Ways to Improve Efficiency
- Increasing capacity utilisation to spread fixed costs
- Choosing the optimal mix of resources
- Increasing labour productivity
- Introducing lean production
- Using technology