Unit 4 Operations Flashcards
What is labour/capital intensive
Labour: a process or industry that requires a large amount of labor to produce its goods or services.
Capital: a process or industry that requires a large amount of capital to produce its goods or services.
Pros of Added value
ad against competitors- stand outs- potential increase in market share
pros: customers may repeat product- brand loyalty; inelastic, increase profit margin from increase price
Common operation obj
Cost
Flexibility
Dependability
Speed
Quality
Internal influence on operation DM and obj
Marketing: may determine what actually has to be produced, how it is produced ex) free range eggs for organic food.
Finance: the finance available may affect the level of investment in technology.
Human Resource: may determine what is possible, the number of skill or staff.
External influence on operational obj and decision
Social factors:consumer preference, what product is produced, how its produced, how easy it is to recycle
Economic factors: if in fast growing economy, many product is likely to increase requiring more production.
Tech Factors: may enable new operations to exist.
Competitive factors: if competitive, need to consider how to keep the cost down.
Political/legal factors: some countries, gambling are banned
Formula for labour productivity
Formula for unit average cost
Formula for capacity utilization
Total output/number of employees:
Total cost/total output:
influence the price business can change
Current output/maximum output x
what is shows if capacity utilization is low
Demand is low
Cost per unit is high
FC not spread over
Low labour productivity
What should manager think
Whether it is necessary to invest in training review reward system or Change the way they work
If high unit cost may mean..
Low capacity utilization
Low labour productivity
High defects
If capacity utilization is too high…
Managers may want to think if they should expand
Less flexible cant meet additional demand
depends on cost and risk
If capacity utilization is too low
May think the way to increase demand using marketing mix
Or close down
Importance of efficiency
Low unit cost- higher profit margin
Way to improve efficiency
-Introduce lean production
-Increase labour producitivty
(-Increase capacity utilization to spread FC
-Choose optimal mix of resources
-Use tech)
What biz should do If they have Low Capacity efficiency
May boost sales improve marketing( reduce price, widen distribution and change product)
Reduce capacity
(Rationalizing ) takes time
What biz should do If they have too High capacity efficiency
Outsource other products
(Takes time to negotiate and expensive) quality problem could occur
Find a way to reduce demand in ST
- increase price(dynamic pricing) in demand
Increase efficiency by increase labour productivity
High labour productivity low labour cost per unit
How to increase labour productivity
Invest in tech
Improve training
Motivate workers
Difficulties in increasing labour productivity
Quality may fall
Employees may ask for higher wages
What is optimal mix of resource
Combination of resources used by biz FoP
How to decide whether use capital/labour intensive
-if affordable and achievable
Enough space or finance
-are they creative task or repetitive task
What is kaizen
One of lean production to increase efficiency
Continuous improvement of every aspects of production. Workers are likely to know how to do the work more efficiently.
What is Lean productions aim
Reduce waste
What are the techniques involved in lean production
JIT
Kaizen
TQM
Cell production
Pros and cons of (JIT) lean production
Pros
: slower risk of stock becoming wastage
Such as not being sold- becoming
obsolete
: Reduce inventory- less storage cost- labour overheads
: may have greater productivity for employees.
Time pressure from order increase which leads to higher responsibility to worker which could make employees motivated.
Cons:
-very reliant on suppliers
If they failed to deliver on time, biz may not be able to operate
-very reliant on employees
If they went on strike there may not be enough workers to produce
-may fail from additional demand
What is JIT
Production when biz tries to hand as close as zero stock as possible
What is cell production and what is AD and DIS
Cell production is when production is divided into series of diff stages.
Pros: employees may feel motivated since they feel they have more control over their own work
They can doodle the work: can also share skills and expertise
Cons: employees may ask for extra wages for extra responsibility
May cause a complicit between each cells due to having a diff speed of production
What is TQM
TQM is an attitude to quality; their aims are zero defects and total customer satisfaction
Continuous improvement of product quality to satisfy customers
What is the difference between Kaizen and TQM
Kaizen: process oriented concept;
Focuses on the improvement of the process to get improved results in every sphere of ice
TQM: product oriented; customer focus concept
Focus on the quality of the product to satisfy the customer
Pros and Cons of TQM
Pros: eliminates cost of inspection: quality assurance technique
: employees may feel motivated since they are more involved and making decisions.
Cons: substantial investment in training & support
But return on investment is not immediate
May become bureaucratic( involving complicated rules and procedures which can cause long delays)
What is quality circle and pros and cons
Groups specifically brought tgt to identify potential improvements
Pros: increase motivation of staff- job enrichment
Focuses on improving quality
Cons: Cost and time of meeting and training
Not empowered to make decisions
What is difference between productivity and efficiency
Productivity:refers to the amount of work you can get done in a certain amount of time
Efficiency: measures how well you use your resources( such as time) to get a task done.
Pros of using tech to increase efficiency - and what is depends on.
pros: be more flexible to customer needs; tech could track their customer behavior more effectively
Reduce cost by having more efficiency from less errors.
Depends on if managers:
- have the finance to invest
- have the training to use it effectively
- are able to judge if the tech will be useful in LT rather than ST
What is the importance/benefit of quality
: vital to remain competitive - able to differentiate products- USP against competitors - high sales- creates sustainable competitive ad in long term
: able to increase prices - consumers willing to pay for increase quality - repeat customers - increase brand loyalty - inelastic - increase profit margin
What is Quality Assurance
Maintaining the target quality by paying attention at every stage of the process
Pros and cons of QA
Pros :
1. Low defects- low waste - low production costs
Ability to decrease price - increase competitive ness
In long run with low defects- increase reputation- potential increase in brand loyalty
Cons:
1. QA may slow down production process - lower productivity
2. Workers may demotivate from the increase responsibility beyond their level- over whelmed
What is Quality Control
System to ensure final good/service meet certain level of quality. Identifying the defects and reject.
Pros and Cons of QC
Pros:
1. avoid selling goods with low defects- low refund
LT reputation may increase - LT sale may increase
- Less impact to production process because they check pods after.
Cons
1. Increase cost due to inspection, customer surveys.
2. Checks AFTER the product is produced, which doesn’t help waste.
Difficulties employees may feel in terms of increasing quality
Employees might:
See improving quality as an extra work and not bothering unless they get paid more
-believe biz is doing well enough as they feel to not see the need of setting higher targets overtime
What are the consequence of having poor quality
1: ruin reputation
2: Increase cost from recalls - reduce cash flow due to refunds - increase waste
3: opportunity cost due to an increase cost
Such as research and development - which could increase profit - potential increase in shareprice
What are the other factors that improve operational performance other than quality and efficiency
Dependability
Flexibility
Speed of response
Pros and cons of speed of response and way to improve
Pros: 1. Provide competitive advantage
Cons: 1. Increase cost of training, and tech
2. May have a quality issues.
How to improve: by reviewing the process to find time saving
Pros and cons of high flexibility
Pros: 1. Higher customer satisfaction
Cons: may be expensive to produce and difficult and longer process to manage
What managers have to decide to the key operational objectives
Have to think if the industries that they are in requires and value speed as a key concept or not.
Hey holding inventory is important?
- Ensure the production can take place immediately
- Ensure that customer orders can be fulfilled quickly
Why managing the amount of inventory held is important
- Holding inventory use up resources.
- Inventory may go out of days and become worthless if held for too long
- Opportunity cost: money used to inventory may have been used for something else
Pros and cons of buffer stock level (JIC)
Pros:
1.manage uncertainty such as unexpected demand and suppliers fails to deliver (reduces uncertainty)
2. Negotiate a better deal with suppliers
Cons
1. Higher storage cost (security cost)
Always holding a level stock will be be bad cash flow
- May go wastage/out of date
What are the pros and cons of muss customization
pros:
individuals customer preferences to be met.
1. Lower unit cost and meeting individual customers combined with personalized product = higher added value with low cost
Brand loyalty.
Cons:
1. Slower response of speed
Only start from customer order - less stock
2. Cost of maintaining variety of machinery that can produce diff product color shape,,,,etc
Ways to match supply to demand
- Employing a flexible working hours relations with unexpected demand
-increase productivity
2.increase price to reduce demand - Producing to order. When biz only produce when actual order is placed. :requires flexible working process. Reduces risk of being unsold stocks
- Using queuing system
- Sell their fixed assets to reduce supply
what are some decision to manage supply chain
Take decision about:
1. What to produce yourself and what to buy from others
2. Which other biz to work with
Value effective management of the supply ensure
- The right suppliers arrive on time
- A fair price is paid for the items
3.the products are produced in a way which is acceptable to the biz
Some issue that could involve in managing supply chain
- Ethical issue: biz may supplying from suppliers that pay low wages with bad conditions
- LT reputation negatively - They may face some quality issues
What is vertical integration
When biz joins tgt with another biz to have a direct control on supply chain instaed of relying on external contractors or suppliers
Influences on choice of suppliers
1:price
- is the price too high or too low-
2:Quality they provide
High quality cause high price
4: dependability
- on how trust worthy they are- may have high cost
-do they always bring product on time?
5. Ethical
Biz is held responsible for the behavior of their suppliers
How much responsibility they need accept. What is their standards are.
What is outsourcing
When biz uses another biz for some of its goods or services
Pros and cons of outsourcing
Pros:
1. able biz to make use of specialist skills and services; this may mean they get better quality of work provided more efficiently.
- Can increase the capacity of the business by getting some aspects of its provision provided by others.
Cons:
1. biz will be affected by the work in undertaken by other biz in terms of the costs and quality of their suppliers. If poor quality suppliers may effect reputation of the biz negatively.
- Biz will have to pay enough for the products for the suppliers to make a profit. May be more expensive than doing the work in house
what do managers need to think with ethical elements when making operational decisions
-how to treat n reward workers:
higher labour productivity could be stressful for workers as workload increases
-where to locate the business
should biz place on the low wage location?-may be exploiting the resources
-environment:
should the biz worry about the environmental costs of suppliers?
