Unit 4 Flashcards
What is the operation management
1) function responsible for managing resources to produce good and services efficiently
Roles of OM
1) Decide the most suitable production method
2) maintain high efficiency and productivity
3) Quality management
4) inventory
Production definition
Converting input to output
Efficiency and productivity definitions
1) Efficiency: How well a business uses its resources to maximise output-to-input ratio
2) Productivity: output-to-input ratio
Why is it important to calculate labour productivity
1) Compare performance over time
2) Compare performance with different businesses
3) decide actions against each worker
List the ways to increase productivity and efficiency
1) training of employees
2) Motivation for employees by financial or non financial means
3) Introduce more technology
4) Introduce lean production
What are the benefits of having high efficiency and productivity
1) increases output
2) lower cost per unit
3) fewer workers needed
4) higher wages, so more motivated workers
5) competitive advantage
Capital intensive vs labour intensive
1) advantages of capital intensive:
a- higher productivity, so more output
b- economies of scale
c- consistent quality and efficiency
d- lower labour costs
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2) advantages of labour intensive:
a- customised product
b- low initial cost
c- flexible production
d- higher labour motivation due to less boredom
What is inventory management
Items that are held in the business for production and trading purposes
Benefits of high level and low level inventory management
1) High:
A- Easier to meet market demands
B- Avoid production shortages
C- discount for buying in bulk
D- gaurd against inflation
E- avoid the need for special orders
2) Low:
A- low storage cost
B- more liquidity
C- saving products from being outdated
D- products won’t perish
E- lower used space
Lean production meaning and methods
1) methods to eliminate waste and maintain high quality
2) Methods:
A- JIT (same as low inventory)
B- Cell production
C- kaizen
D- machinery layout
Explain JIT and its benefits
1) the same as low-level inventory
Explain cell production and its advantages
1) A group of workers are given responsibility for making either part of the product or the whole
2) Advantages:
A- increases flexibility
B- job rotation
C- Workers will care about total output more than individual performance
D- more productivity in workers
Explain kaizen methods and their advantages
1) A Japanese term that means continuous improvement by many small changes
2) Advantages:
A- higher motivation
B- innovative ideas given by the workers
Explain the machinary layout and its advantages
1) Improves the use of space in a factory, which reduces the chance of mistakes
What are the overall benefits of lean production methods?
1) reduces warehouse space as less inventory is stored
2) Less operational space is needed. This reduces rent costs
3) fewer resources are used, so lower unit cost
4) Less risk of obsolescence
5) greater worker motivation
6) greater productivity
State and explain the production methods
1) Job production: producing a single unit at a time specifically designed for the customer
2) batch production: producing a limited number of identical products in groups
3) Flow production: producing large quantities of identical products in a continuous process
Advantages and disadvantages of job production
1) Advantages:
A- higher customer satisfaction as products are designed to meet customer needs
B- higher employee motivation due to varied workers
C- flexible production that can be easily changed
2) Disadvantages:
A- production is slow
B- low scale production
C- High labour cost
D- high cost per unit
Advantages and disadvantages of batch production?
1) advantages:
A- Flexible
B- Some economy of scale
C- less impact if machine breaks down
D- spread risk
E- some variety of work can improve motivation
2) Disadvantages:
A- 1 fault could damage the whole batch
B- High storage costs
C- Time-consuming
Advantages and disadvantages of flow production
1) advantages:
A- low unit costs
B- low skilled labour
C- consistency
2) Disadvantages:
A- expensive to set up
B- production line will stop completely if the machine breaks down
C- inflexable
D- low labour motivation
Features of flow production
1) continuous process
2) usage of assembly lines
3) Standard products are produced
4) Capital intensive
Factors effecting the production method
1) The product
2) Size of market demands
3) Size of business
4) Cost of labour
5) impact on unit cost
How did technology change production methods
- Automation: where equipment used in the factory is controlled by a computer
- Mechanization: production done by machines but operated by people
- CAD
- CAM
State advantages and disadvantages of new technologies
1) advantages:
A- greater productivity, efficiency, job satisfaction, and product quality
B- more accurate in meeting customer requirements
C- quicker communication
D- intorduce products faster
2) Disadvantages:
A- It is highly expensive to invest in
B- redundancy costs
C- High cost of training
D- high maintainces costs
E- employee dissatisfaction due to loss of job security
List and explain different types of costs
1) Fixed: Don’t change with the output
2) variable: Change with output
Uses of cost data
- Setting prices
- Stop or continue a product
- Location
- How many units to produce
- Change supplier
Economy of scale definition
Decrease in cost per unit by increasing the scale of production
State and explain the different types of economies of scale
- Purchasing: trade discount by buying in bulk
- Financial: Less interest rates for larger loans
- Technical: large businesses can afford advanced tech that increases efficiency
- Managerial: large businesses can afford to hire specialists who are very efficient
- Marketing: cost of advertising over large # of units
What is break even point?
The number of units that, when sold, the total revenue will equal total costs => no profit
What is the margin of safety?
=> number of units that exceed break even point
=> If business could not sell these units, loss can be avoided
Advantages of break-even analysis
1.Shows the expected level of profit / loss
2. Helps in deciding to change the price & location
3. See the impact of a change in costs
disadvantages of break even analysis
- Assumes that all output produced will be sold and that cost & revenue lines are straight
- can only be done for only one product
- If cost information is inaccurate the
whole analysis will be wrong
define quality
means to produce a product or service that meets customer expectations
state the reasons why quality is important
- helps in establishing a brand image
- increases customer loyalty
- maintains a good reputation
- attracts new customers
- increases sales
define quality control
checking for quality at the end of the process
why is quality control used
to make sure products meet minimum quality standard. if not, this could increase repair costs and damage reputation
how do businesses implement quality control
trained inspectors that check a sample from every batch
define quality assurance
checking for quality standards throughout the process
benefits of quality assurance
- Eliminate errors
- Fewer customer complaints
- Reduced costs because it doesn’t have to be reworked
- Greater worker motivation
disadvantages of quality assurance
- Expensive training
- Time consuming
- Relies on the employees following the instructions of standards
Ways to achieve quality production
- Total quality management: creates a culture of quality.
- Quality circles: groups to discuss how to improve quality
Main factors for location
- Cost of location
- Closeness to customers
- Availability of labor
- Transport links
- Location of competitors
- Government influence
- Access to raw materials
- Power and water supply
- Personal preference of owners
benefits of being far from competition
- Fill in a market gap
- Easier to increase market share
- May not need to spend a lot on promotion
- charge higher prices
how do governments influence location decisions
- Grants and subsidies
- Planning restrictions
Why many businesses operate in different countries?
- spreads risks
- Cheaper or new raw materials
- Cheaper and/or skilled workers
- Rent/ taxes are lower
- Availability of government grants and other incentives
- Avoid trade barriers and tariffs
disadvantages of international
location
- Language and communication
barriers - Cultural differences
- Level of services concern
- Rules and regulations differences
- Competition
- Different economic situation
