Unit 4- Operations

Question 1

What is operations management?

Answer 1

The process that uses the resources of an organisation to provide the right goods or services for the customer

Question 2

What are operations objectives?

Answer 2

Specific, focussed targets of the operations management function within an organisation

Question 3

What are the main measures of efficiency?

Answer 3

Costs- reduce unit costs, to lower price and increase profit margin
Quality- customer satisfaction ratings, customer complaints, level of product returns, punctuality
Speed of response- difference between a customers request of a product and their receipt of it
Flexibility- product flexibility, volume flexibility, mix flexibility, delivery flexibility and allows a business to adapt to customer requirements
Dependability- consistency of service or punctuality and durability or quality
Environmental objectives- aims set by a business that indicates its commitment to the environment; decrease carbon footprint, minimise waste, ect.
Added value- the process of increasing the worth of resources by modifying them

Question 4

What is labour productivity?

Answer 4

Measure of the output per worker in a given time period
Labour productivity= output per person/ no. of employees
Increasing labour productivity helps a business to increase output without additional costs

Question 5

What is capacity and capacity utilisation?

Answer 5

Capacity- the maximum level of output or production that a business can provide in a given time period
Capacity utilisation- the % level of a firms total possible production level that is being reached
Capacity utilisation= actual output/ max. possible output x 100
essentially, how effectively a business is using its materials
100% is not optimal- approx. 90% is

Question 6

What are the causes of spare capacity?

Answer 6

New competitors or products entering the market
Failing demand due to changes in taste and fashion
Unsuccessful marketing
Seasonal demand
Over-investment in fixed costs

Question 7

What are the advantages and disadvantages of spare capacity?

Answer 7

Advantages- more time for maintenance and repairs, less pressure and stress for employees, allows for effective response to increase in demand, more time for training and improvements
Disadvantages- increased proportion of fixed costs, lower profit or increasing price + decreasing sales, produce a negative brand image, employees become de-motivated

Question 8

How to respond to spare capacity?

Answer 8

Seek to influence demand through promotion, marketing and pricing stratergies
Change in supply through rationalism which is a process by which a firm improve its efficiency by cutting the scale of its operations
Reducing capacity through selling off all or part of its production area , introduce shorter working periods and lay off workers

Question 9

What is capacity shortage?

Answer 9

A firms capacity is not large enough to deal with the level of demand for its products
Certain customers will be disappointed
Good or bad PR

Question 10

How to increase capacity?

Answer 10

Building or extending factories or spaces
Asking staff to work overtime
Hiring staff
Flexible workforce 
Outsourcing 
Transferring resources from another area

Question 11

What are economies of scale?

Answer 11

The advantages that an organisation gains due to an increase in size
Increase in efficiency and decrease in unit costs

Question 12

What are diseconomies of scale?

Answer 12

The disadvantages that an organisation experiences due to an increase in size
Decrease in efficiency and increase in unit costs

Question 13

What are the causes of diseconomies of scale?

Answer 13

Co-ordination- loss of control 
Communication- miscommunication 
Motivation- less time for recognition
Technical- mistakes 
Excessive bureaucracy- decision making

Question 14

What is labour intensive production?

Answer 14

Methods of production that use high levels of labour in comparison to capital equipment

Question 15

What is capital intensive production?

Answer 15

Methods of production that use a high level of capital equipment in comparison to other inputs such as labour

Question 16

What factors influence the mix of production?

Answer 16

The method of production- mass production tends to be capital intensive
The skills and efficiency of the factors of production- business depends on skills on workers
Relative costs of labour and capital- where labour is relatively expensive, production will become capital intensive
Size and financial position of the business
The product or service- a more standardised production lends itself to capital intensive production
The customer- may value personal contact

Question 17

What are the 8 different economies of scale?

Answer 17

Purchasing- achieved via buying in bulk and so receive a discount on raw materials
Technical- from mechanical machinery, container ships or supermarket stock control
Specialisation- a company or individual decide to limit their focus to one specific activity
Marketing- spreading fixed costs of marketing over larger units and larger firms have access to more effective marketing
Financial- large firms benefit from lower interest rates when borrowing as risk to lender is lower
R+D- investment into new technologies and innovation and helps them gain higher revenues
Social and welfare- attract and retain employees, improve work environment and larger companies can afford better facilities for staff
Managerial and administrative- can employ less management staff and a single better manager can be hired so they can be more efficient and competitive

Question 18

What is time based management?

Answer 18

An approach that recognises the importance of time
Seeks to decrease the level of unproductive time within an organisation leading to quicker response times, faster new product development and reductions in waste meaning a greater efficiency

Question 19

What are the 2 main time based objectives?

Answer 19

Reduced lead time- reducing the time taken between an order being placed and final product being delivered to the customer
Shorter product development times- competitive advantage

Question 20

What is lean production?

Answer 20

Production based on a range of time saving and waste saving measures inspired by Japanese manufacturing companies

Question 21

What is Just in Time stock control and what are the requirements for it?

Answer 21

A Japanese philosophy that organises operations so that items of stock arrive just at the time they are needed for production or sale
Ultimate aim to eliminate need for stock
Requirements- good communications, high levels of cooperation/ flexibility from suppliers, reliable employees that can respond to changes and suitable equipment

Question 22

What are the advantages and disadvantages of just in time stock control?

Answer 22

Advantages- increased productivity, increased production flexibility, decreased waste and stock holding positions and continuous product improvement
Disadvantages- fewer opportunities for bulk buying, halting production if suppliers fail to deliver vital parts and undetected faults from suppliers may jeopardise production

Question 23

What are the 5 different types of technologies?

Answer 23

1. Robotics- used to carry out more complex tasks such as handling and welding
2. Automation- use of machinery to replace human resources in planning, operating, controlling and stock control
3. Communication- information and communication Technology(ICT) assists internal and external communications and ecommerce eliminates high street pricing as well as decreasing number of staff needed
4. Design- comparison and testing of new ideas (CAD + CADCAM) and creation of new products

Question 24

What are the benefits of technology?

Answer 24

Reducing costs- decreased waste, eliminating workers and internet enables business location away from expensive sites
Improving quality- QA systems decrease human error and enables businesses to fully understand customers requirements
Reducing waste- stock control systems reduce excess stock, time savings and helps transfer access stock between branches
Increased productivity- machines work faster and reduces cost per unit
Flexibility
Financial monitoring

Question 25

What are the issues with technology?

Answer 25

Resistance to change- stress and anxiety
Lower morale
Cost- purchasing, maintaining and updating
Keeping up with change- costs and requires training
Lower barriers to entry- helps open markets and allows consumers to compare and force down prices

Question 26

What are the measures of quality?

Answer 26

Appearance
Reliability
Function
After sales service
Brand image
Reputation
Exclusiveness

Question 27

What is the importance of quality to a business?

Answer 27

Impact on sales- meeting needs increases demand and income increases demand for high qulaity goods
Creates a USP
Impact on selling price- charge more
Pricing flexbility- allows firms to offer discounts
Cost reductions- quality products fail less and save costs
Brand loyalty- can prevent reputation damage

Question 28

What are the costs of quality systems?

Answer 28

Expensive to set up
Training is essential but costly
Disruption to the production when workers are being trained and begin to use new system

Question 29

What are quality systems?

Answer 29

The approach used by an organisation to achieve quality

Question 30

What is a quality control system?

Answer 30

Uses inspection as a way of finding any faults in the final good or service being produced
Inspectors are employed to do this

Question 31

What is quality assurance?

Answer 31

Aims to achieve or improve quality by organising every process to get the product right first time and prevent mistakes

Question 32

What is Total Quality Management?

Answer 32

A culture of quality that involves all employees of a firm

Ensures every part of a business and every employee accepts responsibility for quality

Question 33

What is Kaizen?

Answer 33

A policy for implementing small incremental changes in order to achieve better quality and greater efficiency
Staff are encouraged to identify ways of improving operations

Question 34

What are the challenges of improving quality?

Answer 34

Reluctance of employees to adapt to change or take on additional responibility
Requires extra finance to invest in extra training
Reliant on good relationships with suppliers
Must be monitored and reviewed regularly