Unit 4-Decision making to improve operational performance (4.3) Flashcards
What is efficiency all about?
Cutting out waste in all its forms
What are the 2 ‘intensives’ a business can be?
Labour intensive
Capital intensive
Name 1 thing which can be used to make a business more efficient.
Technology
Define capacity.
The maximum total level of output or production that a business can produce in a given time period.
Why is getting capacity right important?
Managers need to decide on the correct scale of production for the organisation
What will happen if a business gets capacity too low?
Will not be able to meet demand for their products
What will happen if a business gets capacity too high?
Will waste money with idle resources (machinery, people or stock etc.) .
What are the 4 things a business needs to do to increase capacity?
- Invest in capital machinery
- Invest in employees through training
- Hire more employees
- Change production practices to be more efficient
What is labour productivity?
the amount (volume) of output that is obtained from each employee
Formula for labour productivity.
output per period / number of employees in that period
Compare labour productivity and unit costs.
The more productive your staff, the lower the unit costs.
What will happen if a business has an increase in labour productivity?
Low labour cost per unit
Why will a business have a low labour cost per unit if it has an increased labour productivity?
The output will increase using the same number of employees.
What does having a low labour cost per unit allow a business to do?
Charge a lower price to gain competitive advantage or to get higher profit margins
Why is getting labour productivity right crucial for a business?
Labour costs are the highest proportion of total costs for most companies
Through what type of management is increasing labour productivity achieved?
Human resource management
What HR policies which could increase labour productivity?
Recruiting suitably skilled and trained employees
Training to improve skills and attitudes of existing employees
Using appropriate remuneration (financially) and non-financial benefits to improve motivation
Name 2 other ways in which labour productivity could be improved (not including HR policies).
- Improving working practices (the way they do things)
- Improved technology and capital equipment
To increase labour productivity, a business does not need to always increase efficiency of workforce, but it can also do what?
Increase output by investing into new equipment or changing the way the work is carried out
How does a firm know if their labour force is becoming more efficient not just producing more?
If, for example, by introducing new equipment employees obtain new skills this shows they are becoming more efficient.
4 difficulties of improving labour productivity.
- Existing staff training = long time to have effect
- Employing new staff with appropriate skills = costly and time-consuming
4 difficulties of improving labour productivity.
- Existing staff training = long time to have effect
- Employing new staff with appropriate skills = costly and time-consuming
- Financial methods lose impact in long term
- Non-financial methods lose impact in long term
Define lean production.
Aims to reduce all forms of waste in the production process
What can lean production include removing the waste of?
Materials
Time
Energy
Human effort
The Japanese have done much to bring the idea of lean production to the West. What are the 7 types of waste Taiichi Ohno from Toyota identified?
- Defects
- Overproduction of goods not demanded by customers
- Inventories awaiting further processing
- Unnecessary processing
- Unnecessary motion of employees
- Unnecessary transport and handling of goods
- Waiting for an earlier stage of the process to deliver
Why are defects waste?
They have to be corrected later
Why is overproduction of goods not demanded by customers waste?
They have to be sold cheaply or thrown away.
Why are inventories awaiting further processing waste?
This represents money waiting around.
Why is unnecessary processing waste?
Why add features or have extra work when it is not needed?
Why is unnecessary motion of employees waste?
Wastes time and energy
Why is unnecessary transport and handling of goods waste?
Wastes human effort and energy
Why is waiting for an earlier stage of the process to deliver waste?
This is idle time
What are the 5 ‘zeros’ lean production aims to achieve?
- Zero delay
- Zero stocks
- Zero mistakes
- Zero waiting
- Zero accidents
What do the 5 techniques involved in lean production include?
- Time-based management
- Cell production
- Benchmarking
- Kaizen
- Just-In-Time production
Why is time-based management important?
If a business is able to produce a product in a shorter time than its rivals, more sales could result.
What do businesses compete on when it comes to time-based management?
Time taken to deliver goods
Give some examples of time-based management.
Domino’s Pizza aims to get fast-food pizzas delivered within 30 minutes.
Opticians aim to get glasses completed within 24 hours.
Amazon delivers goods within 24 hours.
Define cell production.
Organising production around teams instead of a production line. Production divided into series of stages which are undertaken by teams or ‘cells’.
Advantages of cell production.
Motivating for employees = feel more in control over own work
Team/ ‘cell’ members can divide work and share skills & expertise
Each cell takes responsibility for its own work because a cell can refuse poor quality work of previous cell.
Disadvantages of cell production.
Output may be lower than a ‘flow’ production system
Different speeds of cells =conflict & tension between cells
Each cell may require the same capital items = need to invest heavily in new machinery and equipment
What does JIT stand for?
Just-In-Time production
Define JIT.
Producing products to order.
How does JIT make a business more efficient?
Involves reducing stock holding of a business
What are the 3 types of stock?
- Raw material and components
- Works in progress or unfinished goods
- Finished goods
What are finished goods?
Goods which are complete and awaiting delivery to customers
What are works in progress/unfinished goods?
Goods which are still on the production line.
What are raw material and components?
Stocks waiting to be turned into goods.
Being able to reduce stock helps a business do what?
Significantly reduce their cost per unit.
Benefits of JIT.
Reduced stock holding
Smaller warehouses
Less staff to manage/control stock
Stock won’t perish/go out of date = less risk
Business likely stick to same supplier = improved relationship
Drawbacks of JIT.
Reduced options for responding to customer demands
Production line could stop completely leaving staff and machinery idle
Reliability of suppliers – could be problems with quality or delivery of items
Reliability of raw material – could be problems with quality or availability
List the 5 steps of JIT.
- Customers place orders
- Supplies are ordered
- Arrive and go straight to production line
- Used in production line
- Products delivered to customers
Give an example of a business using JIT.
In Jaguar Land Rover replacement stock arrives within 30 minutes of it being used on the production line.
What type of manufacturers mostly produce cars to order/use JIT?
Car manufacturers
What is operations management all about?
Managing the resources of the business
What types of things does operations management need to decide?
The best way of producing goods (e.g., lean production etc)
The best resources to use/combination of resources needed (resource mix)
Where to get the resources from (working w/suppliers)
How many resources to hold in stock (JIT etc)
Operations process can be either…?
Labour intensive OR Capital intensive
What happens in a labour intensive business?
There is specialised roles for employees within the production system
Give examples of labour intensive business/roles.
Builders
Bakers
What is needed in a capital intensive business?
High investment in capital machinery
What type of manufacturers are capital intensive?
Car manufacturers
Technology manufacturers
What is resource mix?
The combination of capital and human resources utilised within a business to achieve the required output.
6 factors influencing resource mix.
- Type of operations process and strategy
- Relative price of the resources
- Availability of resources
- Nature of product or process
- State of the technology
- Ethics
How does the type of operations process and the operations strategy influence the resource mix?
Could go for volume (highly capital intensive); could go for specialist low volume (highly labour intensive)
How does the relative price of the resources influence the resource mix?
If cheap labour is available then the processes may be very labour intensive.
In the UK labour is relatively expensive so it may be a more automated process which would be capital intensive.
How does the availability of resources influence the resource mix?
In some sectors there is a shortage of land (for example, in London land is very expensive which can reduce the size of production facilities).
Give examples of how the nature of the product or process influence the resource mix.
Morgan cars are handmade so very labour intensive.
Ford cars are mass produced and so are very capital intensive.
How does the state of technology influence the resource mix?
Cheap effective technology has turned farming from labour intensive to capital intensive.
How do ethics influence the resource mix?
Businesses may decide not to produce in low-wage economies, for example, Primark attempts to work with suppliers who pay better wages.
Ways businesses can become more capital intensive.
Raising finance
Changeover
Innovation
How does raising finance help a business become more capital intensive?
Funds need to be available to invest in machinery.
How does changeover help a business become more capital intensive?
Can introduce new equipment or ways of producing goods
Changeover could lead to a business becoming more capital intensive but could lead to a temporary what?
Dip in efficiency
How could innovation lead to a business becoming more capital intensive?
Could improve productivity through new equipment
Ways to maintain or improve a labour intensive business.
Attracting the right people
Keeping the right people
Managing people’s knowledge
Why does a business need to attract the right people to maintain or improve their labour intensive business?
Being labour intensive frequently means using specialisation.
Businesses therefore need to attract the right people.
Why does keeping the right people help a business maintain or improve a their labour intensive nature?
You need to keep the people you have got
Why does a business need to manage people’s knowledge to maintain or improve their labour intensive business?
Knowledge needs to be stored so that it can be shared effectively – team working helps knowledge management.
What does using technology help a business do?
Become more capital intensive
Become more efficient
Change the nature of the production process
What processes include using technology?
Robotics
Automation
Communication
Design
Stock control
Controlling
How are robotics used in a business?
Can be used to do routine and complex activities
How is automation used in a business?
Can be used to help with planning the operations management; and operating (i.e. using CAM)
How is controlling used in a business using technology?
Used to control the quality of goods produced
What does stock control used in a business?
Ensuring all stock levels are maintained
How is technology used for communication?
Used to improve communication internally and externally
How is technology used in design?
To help create new products or test new ideas
8 benefits of using technology.
- Reducing costs
- Improving quality
- Reducing waste
- Increasing productivity
- Flexibility
- Financial monitoring
- New and better products and services
- Better working conditions
What can technology really help with in regards to lean production?
Planning
Introduction
Maintaining of the aspects of lean production
How does technology improve quality?
Improves the consistency of goods’ quality
How does using technology help reduce waste?
Can reduce waste of energy, human energy and defects.
How can using technology increase productivity?
Machines are faster and more consistent in producing goods.
How is flexibility a benefit of using technology?
Can allow businesses to respond to consumers’ demands
How using technology help with financial monitoring?
ICT can improve the ability of managers to monitor their business’s budgets and plan more accurately.
How does technology help to create new and better products and services?
New designs can be created or quality improved to give competitive advantage.
How does using technology create better working conditions?
IT can improve noise reduction; control temperatures, etc.
