UNIT 4. Chapter 21: Operations planning Flashcards
Def. Operation planning
Preparing input resources to supply products to meet expected demand.
What is the importance of the marketing mix?
• The future production levels needs to be estimated by the forecasted market demand in order to match the supply to the potential demand.
Def. Operational Flexibility
The ability of the business to vary both the level of production and the range of products following changes in customer demand.
How can operational flexibility be achieved? (4)
- Increase capacity by extending buildings and machinery - however it is expensive
- Hold high stocks - however can be damaged
- Have flexible labour force - using temporary or part time contracts
- Have mass customisation
Def. Process Innovation
The use of a new or much improved production method or service delivery method. e.g. Robots in manufacturing
What are the production methods?
- Job production
- Batch production
- Flow production
- Mass customisation
Def. Job production
Benefits and Limitations (3)
• Producing a one off item specially designed for the customer.
E.g Designed wedding rings
• Can be motivating for workers, because it allows job enrichment
• Is a very expensive method because takes a very long time to complete and is usually labour intensive. Requires highly skilled workforce.
Def. Batch production (3)
Benefits and Limitations
•Producing a limited number of identical products - each item in the batch passes through one stage of production before passing on to the next stage.
E.g making batches of bread. The stages may involve mixing and kneading the dough, then separating, then baking.
•May allow some gains of economies of scale. Allows each individual batch to be specifically matched to the demand (some flexibility).
•However, high levels of work in progress inventories. The work may be demotivating for employees. If batches are small, unit cost may be high.
Def. Flow production (3)
•Providing standardised items in a continually moving process
e.g soft drinks like coca-cola.
•Labour costs are low. JIT may be applicable. Quality can be consistent. Low unit costs. High productivity. Economies of scale.
• However, high initial set up cost because of capital intensive methods - machinery is expensive. Demotivating, repetitive work for employees.
Recent innovations in production methods?
• CAD (Computer aided design) and CAM(Computer aided manufacturing) have aided the developments of new products, can do the repetitive and demotivating tasks etc.
Def. Mass customisation (3)
• The use of flexible computer aided production systems to produce items to meet individual customer’ requirements at mass production cost levels.
E.g Dell computers that allow customisation
•Combines low unit cost with flexibility to meet customer’ individual requirements
•Expensive product redesign may require key components to be switched. Expensive flexible capital equipment needed.
Factors influencing which production method to adopt? (4)
- Size of the market: Small markets would be more suitable with job production, large markets would be more suitable with flow production.
- The amount of capital available: Flow production line is difficult and expensive.
- Availability of other resources: Flow production requires land. Job production requires skilled workers.
- Market demand exists for products adapted to specific customer requirements: If firms want high volumes of production but some customisation, mass customisation is the most suitable.
What are the problems of changing production methods? (3)
Job to batch:
• Cost of equipment
• Additional working capital needed to finance stock
• Staff demotivation - less emphasis on their skills
Def. Optimal location
A business location that gives the best combination of quantitative and qualitative factors
Disadvantages to a business of non-otpimal location decisions? (4)
- High fixed site costs -> high break even level of production
- High variable costs e.g labour -> low contribution per unit produced or sold
- High unemployment rate -> problems with recruiting suitable staff and staff turnover may be high.
- Poor transport infrastructure -> high transport costs, hard to operate JIT