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#2 Business Studies 2021 > Unit 4: Operations > Flashcards

Unit 4: Operations Flashcards

1
Q

What is the definition of operations planning?

A

Preparing input resources to supply products to meet expected demand

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2
Q

What is the definition of computer aided design (CAD)?

A

The use of computer programs to create 2D or 3D graphical representations of physical objects

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3
Q

What is the definition of computer aided manufacturing (CAM)?

A

The use of computer software to control machine tools and related machinery in the manufacturing of components or complete products

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4
Q

What is the definition of operational flexibility?

A

The ability of a business to vary both the level of production and the range of products following changes in customer demand

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5
Q

What is the definition of process innovation?

A

The use of a new or much improved production method or service delivery method

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6
Q

What is the definition of job production?

A

Producing a one-off item specially designed for the customer

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7
Q

What is the definition of batch production?

A

Producing a limited number of identical products - each item in the batch passes through one stage of production before passing onto the next stage

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8
Q

What is the definition of flow production?

A

Producing items in a continually moving process

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9
Q

What is the definition of mass customisation?

A

The use of flexible computer-aided production systems to produce items to meet individual customers’ requirements at mass production cost levels

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10
Q

What is the definition of optimal location?

A

A business location that gives the best combination of quantitative and qualitative factors

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11
Q

What is the definition of quantitative factors?

A

These are measurable in financial terms and will have a direct impact on either the costs of a site or the revenues from it and its profitability

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12
Q

What is the definition of qualitative factors?

A

Non-measurable factors that may influence business decisions

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13
Q

What is the definition of a multi-site location?

A

A business that operates from more than one location

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14
Q

What is the definition of offshoring?

A

The relocation of a business process from one country to another country - typically an operation process (e.g. manufacturing) or a support process (e.g. accounting).

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15
Q

What is the definition of a multinational?

A

A business with operations or production bases in more than one country

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16
Q

What is the definition of trade barriers?

A

Taxes (tariffs) or other limitations on the free international movement of goods and services

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17
Q

What is the definition of scale of operations?

A

The maximum output that can be achieved using the available inputs (resources) - this scale can only be increased in the long term by employing more of all inputs

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18
Q

What is the definition of economies of scale?

A

Reductions in a firm’s unit (average) costs of production that result from an increase in the scale of operations

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19
Q

What is the definition of diseconomies of scale?

A

Factors that cause average costs of production to rise when the scale of operation is increased

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20
Q

What are the benefits of CAD?

A
  • Lower product development costs
  • Increased productivity
  • Improved product quality
  • Faster time-to-market
  • Good visualisation of the final product and its components
  • Improved accuracy - reduction of errors
  • Easy re-use of design data for other product applications
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21
Q

What are the limitations of CAD?

A
  • Complexity of the products
  • Need for extensive employee training
  • Large amounts of computer processing power required - this can be expensive
22
Q

What are the benefits of CAM?

A
  • Precise manufacturing and reduced quality problems compared to production methods controlled by people
  • Faster production and increased labour productivity
  • More flexible production allowing quick changeover from one product to another
  • Integration with CAD allows more variants of a mass produced product to be in production - increased customisation
23
Q

What are the limitations of CAM?

A
  • Cost of hardware, programs and employee training - large costs mean businesses may not be able to access CAM, although technology is becoming more accessible and cheaper
  • Hardware failure - breakdowns can be complex and time consuming to solve
  • Quality assurance is still needed - errors in programs can produce faults that have to be spotted and fixed before being passed down to the next stage of production
24
Q

What are the advantages of job production?

A
  • Products meet the precise requirements of their customers
  • Business can include a premium in the price they charge their customers to reflect increased quality
  • Workers have varied jobs and can make a finished product from start to finish. This can create motivation and a sense of pride and quality control
25
Q

What are the disadvantages of job production?

A
  • Labour intensive and often takes a long time
  • Wage costs can be high
  • As products are produced to order, any mistakes can be expensive
26
Q

What are the advantages of batch productions?

A
  • Offers the customer some variety of choice e.g. producing a car with different colours
  • Workers’ tasks are more varied than flow production, reducing risk of boredom and demotivation
27
Q

What are the disadvantages of batch production?

A
  • Needs careful planning to minimise the amount of unproductive time between different batches
  • Costs will be higher than for production on a mass scale
28
Q

What are the advantages of flow production?

A
  • More capital intensive (production process uses a high quantity of capital equipment compared with labour input) which lowers labour cost and thus total cost
  • Materials can be purchased in large quantities, so they are often cheaper due to bulk-buying. Which means economies of scale can be achieved. This reduces average costs per unit.
  • Automated production can be continuous for 24 hours each day - many goods can be produced with a high level of output
29
Q

What are the disadvantages of flow production?

A
  • Requires very large capital investment in production line
  • Workers are not very motivated, since their work is very repetitive
  • It is not a very flexible method as production lines are difficult to change
  • If one part of the production line breaks down, the whole production process will have to stop until it is repaired
  • High levels of raw material, work in progress and finished goods inventories are held. This increases costs to the business
30
Q

What is the main advantage of mass customisation?

A

It combines low unit costs with flexibility to meet customers’ individual requirements

31
Q

What are the disadvantages of mass customisation?

A
  • Expensive product redesign may be needed to allow key components to be switched to allow variety
  • Expensive flexible capital equipment needed
32
Q

What are quantitative factors which influence location decisions?

A
  • Site and other capital e.g. building or shop fitting costs (to create a new building on land or to buy/rent an existing one?)
  • Labour costs (is the business capital or labour intensive?)
  • Transport costs (proximity to suppliers as transportation can be expensive)
  • Sales revenue potential (e.g. food traffic)
  • Government grants (e.g. operating in an area of high unemployment)
33
Q

What are qualitative factors which influence location decisions?

A
  • Safety
  • Room for further expansion
  • Managers’ preferences
  • Ethical considerations
  • Environmental concerns
  • Infrastructure (transport and communication networks)
34
Q

What are the advantages of multi-site locations?

A
  • Greater convenience for consumers
  • Production based companies reduce the risk of supply disruption if there are technical or industrial-related problems in one factory
  • Opportunities for delegation of authority to regional managers from head office - helps to develop staff skills and improves motivation
35
Q

What are the disadvantages of multi-site locations?

A
  • Coordination problems between locations
  • Potential lack of control and direction from senior management (especially if multi-site locations are in different countries)
  • Different cultural standards and legal systems (for international sites)
  • If sites are too close to each other, one site might be stealing the sales of the other
36
Q

What are reasons for international location decisions?

A
  • To reduce costs (lower labour costs)
  • To access global markets
  • To avoid protectionist trade barriers
37
Q

What are problems with international location decisions?

A
  • Language and other communication barriers
  • Cultural differences
  • Level-of-service concerns
  • Supply chain concerns
  • Ethical considerations
38
Q

What are some types of economies of scale?

A
  • Purchasing economies (price discounts for buying in bulk due to large scale of production - easier for the supplier to make one large delivery than several small ones)
  • Marketing economies (fixed costs of advertising are spread over a much larger output)
  • Risk bearing economies (large companies can sell to national and international markets, reducing risk)
  • Technical economies (large businesses have the resources to invest in specialised machinery and highly skilled labour for R&D)
  • Managerial economies (the ability to hire specialist functional managers who can operate more efficiently and have more specialist knowledge)
39
Q

What are some diseconomies of scale?

A
  • Communication problems (long chains of communication)
  • Alienation of workforce/lack of motivation (workers feel more unimportant in a larger organisation)
  • Loss of direction and co-ordination (business has to ensure that all divisions/departments are maintaining the same ethical standards and methods of quality control and production etc.)
40
Q

What are some ways of avoiding/mitigating diseconomies of scale?

A
  • Management by objectives (helps to motivate the workforce)
  • Decentralisation (allowing decisions to be made by each division where they are a lot more affected by the problem while still maintaining communication with other departments to ensure coordination and direction)
  • Reduce diversification (allows businesses to focus on ‘core’ activities and reduce any other problems that may arise, as a result of having more time)
41
Q

What is the definition of inventory (stock)?

A

Materials and goods required to allow for the production and supply of products to the customer

42
Q

What is the definition of economic order quantity (EOQ)?

A

The optimum or least-cost quantity of stock to re-order taking into account delivery costs and costs of storing inventory

43
Q

What is the definition of buffer inventories?

A

The minimum inventory level that should be held to ensure that production could still take place should a delay in delivery occur or should production rates increase

44
Q

What is the definition of re-order quantity?

A

The number of units ordered each time

45
Q

What is the definition of lead time?

A

The normal time taken between ordering new stocks and their delivery

46
Q

What is the definition of just-in-time (JIT)?

A

This inventory-control method aims to avoid holding inventories by requiring supplies to arrive just as they are needed in production and completed products are produced to order

47
Q

What are problems associated with a lack of effective inventory management?

A
  • Insufficient inventories to meet unforeseen changes in demand
  • Obsolescent inventory i.e. inventory that is now out-of-date because it was held in storage for too long e.g. perishable food, technology
  • Inventory wastage due to mishandling or incorrect storage conditions
  • Excessive storage costs due to ordering too much inventory, or having too much finished goods and thus excessive capital is tied up in it
  • Failure to purchase raw materials/components on time can lead to late deliveries
48
Q

What are some inventory holding costs?

A
  • Storage costs (rent on warehouse)
  • Inventory handling costs (movement of goods around the premises using a forklift or people)
  • Loss and damage
  • Obsolescence (out of date inventory that can no longer be sold at the full price)
  • Opportunity cost of capital tied up in inventories
49
Q

What are the costs of not holding enough inventory?

A
  • Lost sales and possibly lost customers if deliveries are not made on time. Also possible penalty payments for being late if businesses are supplying goods to other businesses instead of customers
  • Idle production resources (if inventories of raw materials and components run out, then production involving either human labour or expensive machinery will have to stop
  • Special orders could be expensive (urgent orders could result in extra costs)
  • Small order quantities (small order quantities in order to keep inventory levels low will result in loss of being able to redeem bulk discounts and an increase in transport costs)
50
Q

What are the advantages of JIT inventory?

A
  • Capital invested in inventory is reduced
  • The opportunity cost of inventory holding is reduced and the money and space can be used for other purposes
  • Reduced storage cost and inventory holding costs
  • Less obsolescent and damaged inventory
  • Quicker response times to changes in consumer demand and tastes
  • The need to be multi-skilled and adaptable as an employee may increase motivation
51
Q

What are the disadvantages of JIT inventory?

A
  • Disruptions could severely affect the receiving of raw materials (and as a result, operations and sales) e.g. strike, transport problems, IT failure
  • Delivery costs will increase due to small, multiple deliveries having to be made
  • Reduction in bulk discounts offered
  • Reputation of business is reliant on the ability of suppliers to deliver components on time
  • Any failure by employees (loss of quality production) or suppliers (delays or wrong order quantities delivered) to meet targets will lead to production stopping
52
Q

What is the definition of lean production?

A

This is an approach to management that focuses on cutting out waste whilst ensuring quality. It aims to cut costs by making the business more efficient and responsive to market needs

#2 Business Studies 2021 (5 decks)

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