Unit 4-decision making to improve operational performance Flashcards
what are the operations function of a business responsible for?
the actual production of a good or service
what are some operational objectives?
-reduced unit costs
-quality targets
-environmental objectives
-dependability
-speed of response and flexibility
(must be SMART)
what are some external influences on operational objectives?
-political or legal influences
-economic influences
-technological influences
-competitive influences
what is the economic cycle?
it is the natural fluctuation of the economy between periods of expansion (growth) and contraction (recession)
what are some internal influences on operational objectives?
-finance
-marketing
-HR
what are the 4 main areas or operations?
-capacity
-capacity utilisation
-labour productivity
-unit costs
what is capacity?
the total or max amount that a business can produce in a given time period if it is working flat out
what is capacity utilisation?
the actual production of a business in a given time period as a percentage of the maximum capacity
formula for capacity utilisation
actual output in time period/ max possible output per period x100
what its labour productivity?
the efficiency of individual workers and of its interest to Human Resources as well as operational managers
formula for labour productivity
output per time period/ number of employees
what are unit costs?
‘the average cost of production’ and it is the cost of producing one unit of output
formula of unit cost
total cost/ units of output
what happens to productivity and unit costs if capacity utilisation increases with no change in numbers employed?
-productivity rises
-unit costs fall
what happens to productivity and unit costs if capacity utilisation decreases with no change in numbers employed?
-productivity falls
-unit costs rise
what is excess capacity?
occurs when actual production falls bellow max potential production
why are efficiency and labour productivity important?
an increase in labour productivity will lead to a reduction in unit costs and therefore will lead to the business being more competitive in terms of price
how can you increase efficiency and labour productivity
-investment in technology
-improvements in training and motivation
-job redesign
-reduction in the labour force
what is JIT¿? (just in time management)
it is an inventory strategy that companies employ to increase efficiency and decrease waste by receiving goods only when they are needed in the production process
adv of JIT
-reduced waste in terms of damaged stock
-reduced space and staff due to less warehousing
-lower costs
-improved motivation due to involvement
-greater responsiveness to changes
dis of JIT
-running out of stock
-opportunities for bulk purchase
-trust with supplier
what are some difficulties of increasing efficiency and labour productivity?
-cost
-quality
-resistance of employees
what are the resources that are factors of production?
-land: physical land and natural resources eg: oil and iron ore
-labour: the workers employed
-capital: machines and equipment
-enterprise: the skill of combining the other factors of production
what does capital intensive mean?
describes those businesses requiring a large amount of capital relative to labour
what does labour intensive mean?
describes those businesses requiring a large proportion of labour relative to capital
how might a business overcome situations of excess or spare capacity?
-increase sales: undertaking a new marketing campaign or extension strategies
-reduce capacity: rationalise production and sell off some capacity
-alternative uses: introduction of new products or leasing it to other businesses
how might a business deal with a lack of capacity?
-outsourcing: transferring portions of work to outside suppliers
-investment: investing into the permanent establishment of new capacity, only if demand is expected to be high in the future
-reducing demand: increasing price, use of dynamic pricing
what are the types of technology used in operations that may affect production?
-more advanced computer systems: automated stock control systems and electronic data interchange
-internet: promote and sell products and communicate with customers
-computer-aided manufacture (CAM): robots as an integral part of the production process
-computer-aided design (CAD): can be linked to CAM systems
what are the benefits of a new and updated technology?
-reduces unit costs of production, enhancing competitiveness
-can offer a premium price until the competition catches up
-consistent standard of quality can be guaranteed using CAM
-allow access to new markets
-reduce waste
-employees can work more efficiently
what are the costs of a new and updated technology?
-it can drain on an organisation’s capital, difficult to raise funds
-inevitably requires training of the workforce, recruitment?
-may face opposition from employees, especially if job security is threatened
why is quality important?
-it can provide a USP and give customers a reason to buy the products
-can charge higher prices, increasing profit margins
-increased sales
-enhance reputation and brand loyalty
what is quality assurance?
a system for ensuring the desired level of quality, production and delivery of products and services
-employees have to make sure that the quality is met at each stage of the production process
what is total quality management (TQM)?
where there is a culture of quality throughout the organisation
-checks throughout the process
characteristics of TQM
-a focus on customer needs
-continuous improvement
-employee involvement and empowerment
-managing suppliers
what was Kaizen’s philosophy?
-continuous improvement -all -employees are encouraged to identify and suggest possible improvements in the production process
-culture of participation and involvement
benefits of improving quality
-enhanced reputation and brand loyalty
-competitive advantage (might give a USP)
-increased revenue= higher sales and perhaps higher selling price
-greater flexibility in terms of price
difficulties of improving quality
-costs: training, administration of the system, equipment
-employees may be resistant to change or might demand higher pay
what is a supply chain and what is it composed of?
the whole process of getting a good or service to the consumer, composed of:
-the supply of materials to the manufacturer
-the manufacturing process
-the distribution of the finished goods to the customer
what is flexibility?
-the ability of a business to meet a customer requirements.
-it can involve variations in specification (mass customisation)-> tailoring goods to specific customer requirements
what is speed of response and dependability
-speed of response is how quickly a business fulfils an order
-dependability is the punctuality or whether it fulfils an order on time
how might a business be able to manage demand?
using the marketing mix
-increasing or reducing prices
-increasing or reducing advertising
-sales promotions
how can supply be managed?
-flexible workforce: multi-skilled workforce, part-time or zero hour contracts
-increase capacity: invest in more capacity for a growth in demand
-produce to order: used a lot by tailors, restaurants and aircrafts
-outsourcing: another business is contracted to produce the extra goods required in order to satisfy demand
what are some influences on the amount of inventory held?
-nature of the product: no holding stock of perishable goods
-nature of production: JIT production = less stock held
-nature of demand: seasonal products may need a higher level of stock than those that have regular demand
-opportunity cost: an money tied up in stock can present an opportunity cost and can be used somewhere else
what might you find in an inventory control chart?
-buffer level of inventory: minimum amount of inventory held, foe emergencies
-reorder level: the level of inventory at which a new order is placed
-lead time: the time between an order being made and its arrival in the business
-max stock level: highest amount of inventory a business is able to hold
-reorder quantity: amount ordered
what are the influences on the choice of suppliers?
-dependability: reliable and able to order on time?
-flexibility: able to respond efficiently to changes in demand?
-quality: consistent and reliable quality?
-price and payment terms: prices charged and payment terms (such as credit) competitive?
-ethics: operates in a socially responsible manner?
adv of outsourcing
-enabling of a quicker response to increase in demand
-greater dependability for customers during periods of increased demand
-lower cost, particularly in cases of temporary increase in demand
dis of outsourcing
-quality may suffer
-reliability of suppliers may not be guaranteed
-likely to be more costly than producing in house
