Unit 4: Operations Flashcards
1
Q
Give 2 reasons why businesses set operational objectives
A
- to act as a focus for decision making
- to improve co-ordination
- to improve efficiency
2
Q
Give 4 operational objectives
A
- cost
- quality
- speed of response
- environmental obj
- added value
- dependability
- flexibility
3
Q
How does lower cost make a business more competitive
A
Lower costs = lower prices = increase sales
4
Q
What does reducing unit cost result in
A
Lower prices or a higher profit margin
5
Q
How can you reduce the unit cost
A
Reducing the fixed cost or the variable cost
6
Q
How do you reduce variable costs
A
By cutting labour and raw material cost
7
Q
Is reducing fixed cost or reducing variable cost a more specific focus
A
Fixed cost - it’s a manageable target and a more specific focus
8
Q
What can be a problem with businesses trying to lower their costs
A
Quality might be sacrificed, especially if the competition comes down to cost
9
Q
“There is no single, agreed measure of quality”
TRUE or FALSE
A
TRUE
10
Q
What five measures of quality are used
A
- customer satisfaction
- customer complaints
- level of product returns
- scrap rate
- punctuality
11
Q
What is good about customer complaints
A
It shows if a business has problems that need rectifying
12
Q
What is bad about customer complaints
A
It can damage a business’ reputation
13
Q
What is a sign of customer dissatisfaction
A
If customers return a high percentage of goods they’ve purchased
14
Q
What is scrap rate
A
Where manufacturers track rejects through the manufacturing process
15
Q
What does the scrap rate show
A
It shows whether the production process is working effectively because scrap is wasted money which will increase the unit cost
16
Q
What does punctuality measure
A
How promptly a business delivers its goods
17
Q
What is the punctuality equation
A
(Deliveries on time ÷ total deliveries) x 100
18
Q
What does speed of response refer to
A
The speed at which a business can respond to change
19
Q
What is speed of response measured by
A
The difference in time between a customer requesting goods and the time they receive it
20
Q
What does a quick speed of response lead to
A
It leads to customer satisfaction which can lead to customer loyalty
21
Q
What are the 4 different types of flexibility
A
- volume flexibility
- product flexibility
- mix flexibility
- delivery flexibility
22
Q
What is volume flexibility
A
The ability to change level of output in response to customer demand
23
Q
What is product flexibility
A
The ability to switch production from one product to another
24
Q
What is mix flexibility
A
The ability to provide wide range of alternative versions of particular product/service
25
What is delivery flexibility
Being able to adapt quickly to changes in timings and volume of deliveries
26
What does dependability entail in terms of providing a service
a consistency of quality in the services
27
What does dependability entail in terms of providing a product
The durability of the product and how long it lasts
28
Why are environmental objectives important in the operations
It’s important they operational side doesn’t harm environment, especially for the CSR report
29
Give 4 environmental objectives
- reducing waste
- reducing carbon footprint
- self-sufficiency
- increase recycling
- reduce noise level/pollution
- reduce water pollution
30
What is added value
The process of increasing the worth of the resources by modifying them
31
Give 2 added value objectives
- increase spending on research and development
- achieving a certain number of patents
- developing particular innovation
32
Give 4 external influences on operational objectives
- market objectives
- competitors actions & performance
- technological change
- economic factors
- environmental factors
- politics/legislation
- suppliers
33
Give 3 internal influences on operational objectives
- corporate objectives
- finance
- Human Resources
- nature of the product
- resources available
34
What are the 4 measures of operational performance
- labour productivity
- unit costs
- capacity
- capacity utilisation
35
What is a labour intensive business
A business where labour costs outweigh capital costs of a business
36
What is labour productivity
The volume of output that is obtained from each employee - this is a measure of business efficiency
37
What is the equation for labour productivity
Output per period ÷ no. of employees
38
What does achieving high labour productivity depend on
the quality and extent of machinery, skills, motivation, method of production and reliability of raw materials and suppliers
39
Give 3 ways to achieve labour productivity
- better training/ new workers w/ better qualifications
- investment in equipment and tech
- improve workforce motivation
40
What is the cost of improving labour productivity
- it may conflict with other objectives
- training takes time
- it involves additional expenditure so a business should only implement them if it generates additional revenue to pay for the changes
41
What is equation for unit cost
total cost ÷ units of output (in volume)
42
At what point is it vital for a business to achieve lower unit costs
When competition is based on price
43
Give 2 influences on unit cost
- how many units a business can make with its resources
- how efficient a workforce is producing the goods
- how efficient the machinery is
- how easily variable cost can be controlled
44
What is capacity
The maximum goal level of output/production that a business can produce in a given time period
45
Give 2 things the ideal capacity depends on
- the level of demand for a product
- seasonality of output
- flexibility of production line
- seasonality of demand
46
What is capacity utilisation
The extent to which the company’s maximum possible output is being reached
47
Why is capacity utilisation being at 100% bad
There’s no scope for maintenance and repair because all resources are being used to produce at max capacity
48
What is the equation for capacity utilisation
(actual output per annum ÷ max possible output per annum) x 100
49
Give 3 advantages of spare capacity
- more time for maintenance, repairs and training
- less pressure and stress for staff
- allows business to cope w/ sudden increase in demand
- firms may use calculations of spare capacity to see max possible sales that it could achieve before it needs expands its capacity
50
What does every point below 100% in capacity show
Resources not being used and a higher fixed cost per unit
51
Give 3 causes of spare capacity
- new competitors or new products = fall in demand for existing products
- changes in taste/fashion = fall in demand
- unsuccessful marketing
- seasonal demand
52
Give 2 disadvantages of spare capacity
- higher proportion of fixed cost per unit
- negative image of being unsuccessful
- less work = employees bored/ demoralised
- lower profits
53
Give 3 reasons why capacity is important
- can enable a business to meet level of demand for a product
- efficient capacity management ensures firm isnt excessive amounts on capital equipment
- ideally, firms capacity group allow some flexibility between production lines
- industries w/ seasonal demand = needs to ensure they have capacity to cope w/ peak demand periods
- in competitive industries, a lack of capacity can have serious consequences
54
What is rationalisation
A process by which a firm improves its efficiency by cutting the scale of its operations
55
When is a business likely to use rationalisation
When a business has spare capacity. It will use rationalisation to reduce capacity and save unnecessary expenditure
56
What 3 ways can you reduce capacity
- selling part of production area = cuts fixed costs
- changing to a shorter working week/ day
- laying off workers
57
What is the main cause of capacity shortage
An increase in demand which outpaces the firms ability to increase production levels
58
Give 3 ways to increase capacity
- building/ extending factory plants
- ask staff to work overtime/ longer times
- transferring resources from another area
- hire new staff
- outsourcing/ subcontracting
59
What are the dangers of operating at low capacity utilisation
- higher unit costs which impacts competitiveness
- less likely to reach breakeven output
- capacity tied up in under - utilised assets
60
Give 3 problems working at high capacity
- can have negative effect on quality
- employees suffer
- loss of sales if you cant meet unexpected increases in demand
61
What is the importance of labour productivity
- an increase in labour productivity will decrease labour costs per unit
- lower unit cost = lower prices = competitive advantage
62
What 4 factors influence labour productivity
- extent and quality of fixed assets
- skills, ability and motivation of staff
- methods of production
- external factors e.g., reliability of suppliers
63
What 3 things can a business do a as result of greater efficiency
- pay higher wages to workers
- offer lower prices / increase quality
- spend more money on local environment
64
How can a business increase efficiency and labour productivity
- improves fertility of land
- using recyclable resources
- greater employee education/ training
- increasing level of investment in capital equipment
65
What is economies of scale
When unit costs fall as output increases
66
What’s the difference between an internal and external economies of scale
Internal economies of scale arrears from increased output of the business itself and external economies of scale occurs within an industry and therefor all competitors benefit
67
Give 5 economies of scale
Technical
Purchasing
Marketing
Finance
Social and welfare
Specialisation
Research and development
Managerial and administrative
68
What are some difficulties trying to improve labour productivity
- Unlikely fertility of land can be increased indefinitely
- education and training consumes resources
- potential trade off with quality
- potential for employee resistance
- financial methods of motivation are more effective short term
- increasing level of investment in capital equip = too much emphasis on capital goods = consumers have fewer products available short term
69
What are diseconomies of scale
Disadvantages an org experiences due to increase in size. These cause a decrease in efficiency/ increase in unit costs
70
What are the 3 main diseconomies of scale
Coordination
Communication
Motivation
71
Give two diseconomies of scale (less important)
Technical
Excessive bureaucracy
Staff problems
Less flexibility
72
What is lean production
Production based on a range of time-saving and waste-saving qualities whilst ensuring quality
73
Give 4 types of waste
- Over production
- defects
- transport (moving resources around unnecessarily)
- motion (workers appear busy but not adding any value)
- waiting time
74
Name the 5 lean production methods
- Just in time management
- Cell production
- Time based management
- Kaizen
- Simultaneous engineering
75
What are the 5 aims of lean production
- zero delay
- zero stocks
- zero mistakes
- zero waiting
- zero accidents
76
What does effective lean production require
- excellent communication and good relations
- reliable, committed, flexible and motivated employees
- suitable equipment
- culture of quality assurance
77
What is time based management
A general approach the recognises the importance of time and seeks to reduce level of wasted time in production process
78
What are the benefits of a effective time management
- quicker response time to meet changing market and customer needs
- faster new product development
- reduction in waste = greater efficiency
79
What is cell production
A form of team-working where production processes are split into ‘cells’ (teams). Each cell is responsible for a complete unit of work
80
What are the advantages of cell production
- employee motivation - feel like they have more motivation over their work
- cell members can divide the work along themselves and share skills and expertise
- quality improvements
- improves communication
81
What are the disadvantages of cell production
- output m at be lower than ‘flow’ production system
- different ‘cells’ may work at different speeds = may lead to conflict and tension
- may need to invest heavily in machinery multiple cells require same equip
- allocation of work to cells has to be efficient so employees have enough work but not so much they’re unable to cope
82
What is just in time production
Producing products to order
83
What is the aim of just in time production
To ensure inputs/ stock into the production process only arrive when needed and reduce waste by eliminating the need for high levels of inventory
84
Give 3 benefits of JIT
- reduced stock holding = reduction in storage space = reduced costs
- increased labour productivity and efficiency
- more motivated workforce = reduced labour turnover and increased workers output
-reduced waste and inventory holding costs
- less risk - stock won’t perish/ go out of date
- less staff needed to manage and control stock
85
Give 3 difficulties/ drawbacks of JIT
- little room for mistakes as minimal stock is kept for reworking faulty products
- fewer opportunities for bulk buying
- halting of production if suppliers fail to deliver something
- no spare finished products to meet unexpected orders
86
What is simultaneous engineering
An approach to project management that helps firms develop and launch new products quickly. All parts of pricey planned together- everything is considered simultaneously (in parallel) rather than separately (in series)
87
Give two benefits of simultaneous engineering
- new product brought to market quickly
- improves staff commitment to project and greater sense of involvement
- can be source of competitive advantage (first move advantage) and can build brand loyalty before rivals
88
What are the 4 factors of production
- enterprise
- land
- capital
- labour
89
What does operation management include
- deciding the best way of producing goods
- deciding the best resources to use and the combo of resources needed
- deciding where to get the resource from
- deciding how many resources to hold in stock
90
What is a labour intensive business
A business that has specialised tiles for employees- methods of production that used high levels of labour in comparison to capital equipment e.g. Restaurants
91
What is a capital intensive business
A business where high investment is needed in capital machinery e.g. nuclear power station
92
Name 4 factors that influence the resource mix
- method of production
- skills and efficiency of factors of production
- relative prices of resources
- reliability of labour and capital
- size and financial position
- nature of product/service
- availability of resources
93
What 3 things do you have to do to become more capital intensive
- raise finanace
- changeover: introduce new equip/ways of producing goods
- innovation: improve productivity through new equip
94
What 3 things do you have to do to maintain/ improve being labour intensive
- attract the right people
- keep the right people
- managing ppls knowledge: knowledge need to be stored so it can be shared efficiently
95
Why is technology good for some businesses
It helps businesses become more capital intensive, more efficient and can change the nature of the production process
96
What is the main application of robotics
Can be programmed to carry out routine and increasingly complex activities
97
What is automation
The use of machinery to replace HR
98
what is computer aided manufacturing (CAM)
The use of computers to undertake activities such as planning, operating and controlling production
99
What does the EPOS (electronic point of sale) system do
When an item is sold, the EPOS system adjusts sycon levels and can order new stock from suppliers automatically
100
Give 3 advantages of IT in helping communication
- helps a business improve internal and external communication
- increases the speed of communication
- due to the growing use of loyalty cards, orgs can accumulate info in buying habits of customers
101
What is CAD
A computer software to design new products in 3D. It also includes programs to stimulate testing which can save money by eliminating production as testing of expensive prototypes
102
Give 2 disadvantages of technology
- expensive to introduce
- needs for regular updating and servicing
- for some businesses, the cost of tech can make them uncompetitive which can threaten their survival
- staff have to undergo frequent training which is an added cost that threatens efficiency
103
Name 4 tangible measures of quality
- appearance
- reliability
- durability
- functions and features
- cost of ownership e.g. repairs
- after sale service (cost, effectiveness)
104
Name 2 intangible measures of quality
- brand image
- reputation
- exclusiveness
105
Give 3 reasons why high quality is important to a business
- competitive advantage
- can have a good impact on sales volume and therefore profit
- can create a USP
- allows businesses to increase their selling price
- can reduce costs bc therese less waste from low quality products that need to be scrapped
- brand loyalty
-bad quality can damage reputation
106
Give 2 business that use quality as their competitive advantage
- marks and Spencer’s
- apple
- Waitrose
- BMW
107
Give two businesses that use both low price and quality while competing
- Aldi
- IKEA
- Nando’s
- Aldi
108
What is quality control
The process of inspecting products to ensure they meet quality standard. You detect defective output rather than prevent it
109
Give two benefits of quality control
- can prevent defective products reaching customers = less bad reviews
- a more secure system than one that trusts every worker to do their job properly
- may detect common problems throughout an org = mistakes can be put right more efficiently
110
Give 2 drawbacks of quality control
- costly
- placing responsibility for quality failure on inspectors = does little to encourage individuals to improve
- inconsistent inspections
- an expense that could be viewed as unnecessary of products produced ‘right first time’
111
What is quality assurance
A system that aims to achieve/ improve quality by organising every process to get product ‘right first time’ and prevent mistakes happening. It builds quality in.
112
Give two benefits of quality assurance
- sense of ownership rests with workers - herzberg argues this has a positive effect on motivation
- costs reduced - less waste and less need to rework products
- staff responsible for quality = higher consistent level of quality
113
What are the two systems of quality assurance
- total quality management
- kaizen
114
What is the aim of total quality management
Aims to develop quality culture throughout a firm. Everyone is concerned with quality at every stage of production process
115
What is kaizen
A process that is based on continuous improvement. This emerges from a corporate culture that encourages employees to identify possible way of improving the operation of the org
116
Give 3 difficulties of improving quality
- May be difficult to convince ppl there’s a problem
- may be difficult agreeing on best solution
- may be resistance to change
- introducing new methods and retraining staff may be time consuming
- keeping pace with change of customer cries on quality may be difficult
117
Give 3 costs of improving quality
- new training of staff
- installing equipment for quality testing
- employing inspection staff
- introducing/ updating system
- organising these of quality of inputs/ resources
118
Give 3 examples of poor quality
- product delivered late
- product fails e.g. expected tear
- product doesn’t perform as promised
- poor instructions/ directions of use
119
How might poor quality be measured
- warranty claims
- market surveys
- product returns
- profit margins
- customer service rating
120
To increase demand, you need to improve marketing mix
TRUE or FALSE
TRUE
121
What should a business do if they have a capacity shortage and high demand
Charge higher prices in order to reduce demand and therefore maximise sales revenue
122
When demand is low, is machinery a worthy or unnecessary expense
Unnecessary expense
123
What are the main 3 approaches to increasing supply
- producing to order
- use of temporary & part time workers
- outsourcing
124
Is producing to order a ‘pull’ or ‘push’ method of production
Pull method
125
What type of products does producing to order cover
Small-scale, tailor made products and large-scale one off planes whereby the basic model is determined but layout and fittings modified according to wishes of customer
126
Give 3 advantages of producing to order
- ability to supply product that meets customers exact specification = increased customer satisfaction and brand loyalty
- reducing costs of holding inventory
- potential for higher prices
- production planning easier - org doesn’t need to employ staff to forecast demand and less need for staff to persuade ppl to buy products
- it’s an extension of lean production methods
- able to modify basic basic products to target mass markets and niche markets
127
Give 3 disadvantages of producing to order
- fluctuations in production levels overtime
- higher costs due to inefficient capacity utilisation
- customer has unexpected demand in product = impossible to meet demand quickly = sale lost
- pressure of suppliers and employees bc of level of flexibility required
- culture of continuous improvement needs to be in place BEFORE
128
Name 3 factors that have to be considered when producing to order
- effect on staff
- impact on cost
- flexibility of capacity
- value to customer of customised product in comparison to standardised product
- cost of stockouts bc it can lead to loss of sales and loss of goodwill
- willingness if customer to wait for product to be completed
129
Why is it inefficient to employ temporary workers full time when additional staff are needed
For most of the year they would have little to do
130
Give two advantages of temporary and part-time employees
- efficient way to keep costs down in areas where full time staff not necessary
- flexibility- business able to respond to changes in demand more easily
- if part-time work suits employees = more motivated and absenteeism reduced
131
Give two disadvantages of temporary/part-time employees
- May involve higher staffing costs as a result of paying fees to agencies and extra training and administrative costs
- staff may be less loyal and committed to business
132
What is outsourcing
The transfer of activities which were previously conducted in-house to a third party (outside of business)
133
What is subcontracting
When another business takes an assigned task/part of a task from another business under contract
134
Why do businesses use outsourcing
To reduce capacity utilisation problems
135
Give two advantages of subcontracting/outsourcing
- can react to changes in demand quickly
- specialisation can be bought in more efficiently than doing it themselves
-easier it achieve non standard orders w/out disruption to production line
136
Give two disadvantages of subcontracting/outsourcing
- no direct control over quality of products
- profit margins may be affected
- parents and methods of production may have to be shared w/ subcontractor
- too much subcontracting can damage businesses operation bases
137
What are the three main influences on the amounts of inventory held
- need to satisfy demand
- need to manage working capital
- risk of inventory losing value
138
Give 4 key reason to hold inventory
- precaution against delays from supplier
- provide buffer between production process
- to enable production to take place
- it allows efficient production
- allows for seasonal changes
- satisfying customer demand
139
What are the 4 costs of holding inventory
- cost of storage
- interest stock
- obsolescence cost
- ‘stock out’ costs
140
Give 3 advantages of high inventory control
- customer demand met quick
- no loss of goodwill caused by running out of inventory
- benefit from bulk buying = lower unit costs
- production lines not halted
- sudden increase in demand dealt w/ quickly
141
Give 3 advantages of low inventory levels
- reduced warehouse costs
- products becoming out of date minimised
- security and pilferage (theft) costs lower
- cash flow problems due to cash being tied up in inventory less probable
142
What is an inventory control chart
A diagram showing that’s used to register levels of stock/inventory over a period of time
143
Name all the key parts of an inventory control chart
- maximum level
- reorder level
- lead time
- minimum inventory level
- buffer stock
144
What is lead time
The amount of time between placing the order and receiving the inventory
145
What is the buffer stock
An amount of inventory held as extras in case of unexpected orders so that they can be met and in care of any delays from suppliers
146
What is the reorder level
The reorder level acts as a trigger point (when inventory falls to this level, next order should be placed)
147
What 3 factors does the reorder level depend on
- supplier lead time (how long it takes for suppliers to deliver order)
- demand for product (high demand = high reorder level)
- consequences of running out of inventory
148
What is inventory rotation
Warehouses are designed so new inventory doesn’t block access to older inventory = avoids chance of product perishing
149
Give 3 reasons why suppliers are important
- to meet needs and wants of customers, business needs effective ‘supply chain’
- supports determine many costs of business
- suppliers closely linked with product quality
- business that uses lean production - effective relationship = essential
150
Give 4 factors that determine what makes an effective supplier
- prices
- payment terms
- quality
- capacity
- reliability
- flexibility
151
What is vertical integration
Business strategy in which a company takes ownership of two or more key stages of its supply chain
152
Why is vertical integration good for suppliers
Guarantees reliability, quality and flexibility of suppliers
153
What is a strategic supplier
Suppliers which businesses can not succeed without maintaining an effective supplier relationship. Their goods and services are crucial to business success
154
What is a commodity supplier
suppliers that provides good and services that can easily be bought elsewhere and which are not hugely important to business
155
Why is effective management of supply chain important
It leads to greater customer satisfaction and business can achieve corporate aims e.g. making profit
156
What is a supply chain
A network of sellers of raw materials, manufacturers that transform those materials into products and wholesalers and retailers who get those products to customers
157
How can effectiveness and efficiency of a supply chain be measured
By its contribution towards achievement of firms operational objectives
158
What is the traditional approach to supply chain management
A policy of buying huge quantities in order to get the lowest possible price. Businesses would try to ensure supplies were sourced as cheaply as possible and have sufficient quality
159
What is the modern approach to supply chain management
Buying smaller quantities from a number of different suppliers which increases flexibility
160
What two ways does Michael Porter say a business can gain a competitive advantage
- cost advantage
- differentiation
161
Give 5 factors that influence a business’ decision to outsource
- available capacity
- expertise
- quality considerations
- nature of demand
- cost
- level of risk
- impact on profit
162
3D printing
163
3D printing
