Unit 4- Decision making to improve operational performance Flashcards
What is the importance of operations?
-Meet the demand for its products and services
-Add value to its product
-Control costs of production
-Guarantee the right level of quality and service
-adapt to the needs of its customers
-enables a business to meet its ethical and environmental objective
What does operations management do?
convert resources and labour (inputs) into goods and services (outputs) = added value
What are some common key operational objectives?
-Ethical/environmental objectives
-speed of response and flexibility
-reduced unit cost
-quality targets
-dependability
-added value
What are some internal influences on operational objectives and decisions?
-Corporate objectives
-Finance
-HR
-Marketing issues
What are some external influences on operational objectives and decisions?
-Competitors efficiency and flexibility
-Economic environment
-Legal and environmental changes
-Technological changes -
What is the formula for labour productivity?
Output over a time period / Number of employees
How do you calculate unit cost?
Total costs / Number of units of output
How do you calculate capacity utilisation?
Actual output / Maximum possible output × 100
How do you achieve economise of scale?
-Bulk-buying
-Technical economise of scale (invest in specialist and capital machinery)
-Managerial economies of scale (split complex production processes into separate tasks to boost productivity)
-Marketing economise of scale (Spread advertising and marketing budget over a large output and purchase inputs in bulk at a discounted price)
-Specialisation of the workforce
What are economise of scale?
Economise of scale are savings resulting from an increase in output. These savings lead to a fall in unit costs
How to increase labour productivity?
-Introduce new reward systems
-Improve recruitment process
-Invest in technology
-Job redesign
-Improvements in training
-Task specialisation
-Introduce better managers
What is the result of over-utilisation?
Lower unit costs
What does over-production mean?
Producing too many goods
What is lean production?
Getting more from less. Cutting waste in terms of time, space and inventory
What are the types of waste?
-Waiting time
-Over-production
-Motion
-Transport
-Defects
-Inventory
-Extra-processing
What is motion waste?
Unnecessary movement of people
What is transport waste?
Unnecessary movement of the product or materials
What is inventory waste?
Holding too much stock
What is defects waste?
Producing faulty products
What is waiting time?
Waiting for processes to finish before other can begin
What is extra processing waste?
Adding features that do not add value
What is over-production waste?
Producing products that cant be sold easily
What is JIT?
Just in time is a inventory strategy used to increase efficiency and decrease waste by receiving goods only when they are needed in the production process
What are the advantages of JIT?
Lower stock holding (saves rent and insurance cost)
Stock is only obtained when it is need (less working capital tied up in stocks)
Less time spent on checking and reworking production as emphasis is on getting work right first time
Less likelihood of stock perishing getting damaged
What are the limitations of JIT?
There is no spare finished product available to meet unexpected orders.
May lack bulk buying as you are only ordering when you need items
-Little room for mistakes as minimal stock is kept
What is cell production?
Cell production is a form of team working where production processes are split into cells or teams
What is Kaizen?
A Japanese concept of continuous improvement to increase efficiency
Ways of reducing waste?
Cell Production
Kaizen
JIT
TQM
What is capital intensive ?
Mass production, standardisation and efficient production that is more focused on machinery rathe than people (labour)
What is labour intensive?
Highly specialist, personal, high level of skills required, uses mainly people rather than machinery
Advantages of capital intensive
-Less employee wages and costs
-Quality can be standardised
-Machines can work continuously
What are the disadvantages of capital intensive
-More difficult to customise orders
-Breakdowns in production can be costly
What are the advantages of labour intensive?
-Customised products are easier to make
-Reduced machinery costs
-Human can use their own initiative to problem solve
What are the disadvantages of labour intensive?
-Skilled workers take time to train
-Skilled workers are paid more than unskilled workers
What are the advantages to CAD/CAM?
Helps digitally design products
What are the advantages to Stock or inventory management?
-Helps keep track of stock and make sure no excess comes, orders the specific amount needed
What are the advantages of capital production?
-Increases the efficiency of your business systems
-Streamline your relationship with suppliers and customers
-Increase speed, efficiency and flexibility
What are the key disadvantages of introducing technology
-Finance
-Resistance
-Labour replaced capital
Why is quality important?
-Can provide a USP
-Allow a business to charge a premium price and increase profit margins
-Enable a business to increase sales and market share
-Enhance reputation and brand loyalty and repeat purchases?
Ways to improve quality
-Quality control
-Quality management
-Quality assurance
-Total quality management (TQM)
-Kaizen
What is quality control?
Quality is checked at the end of the process
What is quality assurance?
Quality is checked throughout the production process
What is total quality management?
Employees have an individual and collective responsibility or maintaining high quality standards
Advantages to quality control?
-Avoids selling goods without defects
-QC checks after product is produced so there is no impact of the production
What are the disadvantages of quality control?
Costs of QC go up with inspections
Checks occur after product is produced so doesn’t help prevent defects
What is TQM?
It believes in getting things right the first time and having zero defects. All staff check all items at all stages of production process or faults
Pros of TQM
-Lower costs
-Improved reputation
-Higher productivity
Cons of TQM
-Resistant to change
-High cost of time
-Required deep commitment
Difficulties at improving quality
-Cost of training and equipment
-Employees may be resistant to change
-Customer perception of quality is constantly changing
-Measuring quality can be difficult and expensive
What are the consequences of poor quality?
-Products may need to be scrapped or reworked increasing costs
-Further costs if goods are returned for repair or under warranty
-Poor quality can damage brand reputation
-There may be legal costs if customers sue company
-Correcting poor quality can be very expensive
Pros of using mass customisation
-Increase operational flexibility
-Eliminate intermediaries need closer communication with end customer
-Less waste
-Stimulating work environment
Cons of mass customisation
-Requires CAM
-Less scope for economies of scale
-More waste
-Slower response speed
-High capacity utilastion
Ways of improving speed of response?
-Have spare capacity available
-Sub contract out production to another business
-Use technology such as online interactive product configurators
Ways of improving dependability?
Train staff
Being able to offer varied order sizes
Use quality assurance systems
Ways of improving flexibility?
-Employ flexible workforce
-Offer mass customisation
-Offer flexible lead times
-Produce to order JIT not Just in case
-Use tech to provide flexible production systems
-Use technology to organise and monitor distribution
Ways of managing supplies
- Increase or decrease capacity
- Sub-contract out
-Produce to order (JIT rather than just in case)
Ways of managing demand
-Increase or reduce prices
-Increase or reduce promotion including sales promotions and advertising
-Employ flexible workforce (temporary or zero hour contracts)
Advantages of JUT
-Get economies of scale
-If suppliers fail to deliver
-React to unexpected change in demand
Disadvantages of JUT
-Storage costs
-Risk of waste
Advantages of JIT
-No storage costs
-Less risk of stock
-Less waste
-Cashflow
Disadvantages of JIT
-no economies of scale
-communication risk
What is outsourcing?
Contracting a business process to another business
Advantages of outsourcing?
Quality rises especially if it isnt a core competency
Less costs
allows business to focus on core competency
Disadvantages of outsourcing?
-Ethical issues- reputation
-Quality issues- Bare minimum
-Improvements and innovation
-Supplier power is increased and in the long term this can increase price and costs
What is the buffer level of inventory?
The minimum amount of inventory a business wants to hold to cover for emergencies such as late arrival of new stock or increased orders
What is the reorder level?
The level at which a new order is placed. This will depend on the buffer stock level and the lead time
What is the maximum stock level?
The highest amount of inventory a business is able to hold
What is the reorder quantity?
The amount ordered
Issues of inventory control charts
-Unexpected changes in demand
-Long lead times which make inventory planning more difficult
Suppliers who fail to deliver on time
-Choosing the right buffer stock level can affect efficiency and cash flow
-Human or computer error when re-ordering stock
What is interest cost?
More inventories require large storage space and possible extra employees and equipment to control and handle them.
What is cost of storage?
Holding inventories means tying up capital on which the business might be paying interest.
What is an obsolescence risk?
The longer inventory is held the greater risk that they will become obsolete
What is stock out of costs?
Happens if a business runs out of inventory and this can result in loss of sales and customer goodwill cost of production stoppages and extra, urgent replacement orders
Advantages of holding low inventory?
Less cash tied up in stocks
Consistent with the lean production approach
Lower risk of stock become obsolete
Lower stock holding costs
Advantages of holding a high inventory?
Less likelihood of experiencing stock-outs
Better able to hand unexpected increase in demand
Potential for lower unit costs from ordering in bulk and benefiting from economies of scale
What are the influences of choosing a supplier?
-Price
-Quality
-Reliability
-Flexibility
-Capacity
-Payment terms
-Ethics
-Location
-Return policy
