Unit 4 (operations) Flashcards
What is added value?
The difference between what something costs and the price it is sold for.
What is labour intensive?
‘Man made’ - using humans to complete work.
What is capital intensive?
Using machinery to complete work.
What are the problems with too low capacity?
Unable to meet demand.
> miss out on sales
> customers go to competitors
What are the problems if capacity is too high?
Wasting money on idle resources e.g. people, machinery.
> unnecessarily reducing profits
How can you increase capacity?
Hire more employees.
Invest in capital machinery.
Buy a bigger premises.
How can a manager deal with low capacity utilisation?
Improve marketing to boost sales.
Downsize/sell machines.
> last resort as may not be able to meet spike in demand if lower capacity
How can a manager deal with full capacity utilisation?
Reduce demand by increasing price (dynamic pricing).
Outsource to other producers.
> businesses are wary of this option due to lack of control over quality and reputation
Why is dynamic pricing used?
Used to match supply to demand.
What is the point of lean production?
Aims to reduce all forms of waste (resources) in the production process.
What types of waste does lean production aim to reduce?
Materials.
Time.
Human effort.
What does lean production aim to achieve? (5)
Zero delay.
Zero stock (inventory).
Zero mistakes.
Zero waiting.
Zero accidents.
How does lean production reduce waste?
Improving quality - less items need to be reworked, thrown away or fixed.
Reduce amount of inventory held - less perishable items have to be discarded.
Reduce idle items - as not being sold or generating profits.
Reduce number of suppliers - less time wasted on communication.
Name the 3 methods of lean production.
Time based management.
Cell production.
Just in time production.
Explain time based management.
Aims to reduce wasted time by reducing production time.
Often used in fast changing markets.
Relies on flexible production to adapt to changes in demand.
Effective communication between staff is essential.
What are the advantages of time based management?
Reduces lead time.
Machinery often has multiple functions - greater variety of products to be made.
What are the disadvantages of time based management?
Places speed above quality.
Define lead time.
Time between the customer placing the order and the customer receiving the order.
Explain cell production.
Organising production around teams instead of a production line.
Production is divided into a series of stages undertaken by different teams (cells).
What are the advantages of cell production?
Motivating - employees feel they have control.
Influences quality (cell can refuse previous cells work if not quality) - each cell is responsible for own work.
What are the disadvantages of cell production?
Boring and repetitive - demotivating.
Repetitive - people stop focusing, can lead to accidents.
Different cells may work at different rates - leads to conflict or tension between cells.
Explain just in time production.
Producing products to order.
Involves reducing the stock holding of a business to make it more efficient.
What are the advantages of just in time production?
Reduce stock holding - smaller warehouses/less staff to manage - reduce costs.
Improved relationship with suppliers.
Less risk that stock will perish.
What are the disadvantages of just in time production?
Reliability of suppliers - may be issues with quality or delivery of items.
Reliability of raw materials - could be problems with quality or availability.
Define supplier.
A company that supplies raw materials.
Define procurement.
The process of sourcing and buying stock.
Name the factors to consider when choosing a supplier.
Price.
Quality.
Lead time.
Payment terms (length, discounts).
Reliability - particularly for JIT.
Define logistics.
The organisation/management of transport of stock.
Name some consequences of a bad supplier on a business.
Unable to provide full range of products.
Customers go to competitors.
Name 4 methods of matching supply to demand.
Employing a flexible workforce - flexible/temporary contracts.
Outsourcing to meet high demand.
Increase prices to decrease demand (dynamic pricing).
Just in time.
Define outsourcing.
When a business asks a
What are the advantages of outsourcing?
Can react to changes in demand quickly - if demand falls, have no assets to maintain.
Business can concentrate more on their core focus and have companies who specialise in parts make them.
What are the disadvantages of outsourcing?
Reliability problems - less control over quality.
Producers also have to make profit so profit margins may be affected.
What is producing to order?
Non standard orders.
Business has to decide whether to take these on or not.
What are the advantages of producing to order.
Responding to specific customer needs - competitive advantage.
Cuts costs - goods only manufactured once orders are placed.
An extension of lean production techniques.
Can reduce costs but increase sales revenue - higher profit margins.
What are the disadvantages of producing to order?
Workforces need time to adjust to new processes - hard to reach full productivity.
Suppliers may not be reliable enough.
What factors need to be considered when deciding if to produce to order?
If there is spare capacity available.
Impact on costs.
Potential for future (profitable) orders.
Effect on staff - pressure/motivation.
What are the two main types of technology businesses use?
Robotic engineering.
Computer engineering.
What is a capital intensive workforce?
When a business uses more machinery and relatively few workers.
What are rather advantages of capital intensive production?
Cheaper in the long term.
Machinery is often more precise than workers - more consistent quality.
Able to work 24/7 - no breaks or time off needed.
Easier to manage than people.
What are the disadvantages of capital intensive production?
High set up/initial costs.
Machines often only able to do one task - inflexible.
Break downs can lead to long delays.
Fear of being replaced by a machine can lead to employees motivation to decrease.
What are the advantages of technology to the business as a whole?
Increased productivity and quality - machines often quicker, more accurate and more consistent.
Reduced waste.
Better communication both internally and externally - increased speed of response.
What are the disadvantages of technology to a business as a whole?
Initial costs may be high.
Requires maintenance and updating - can be expensive.
Increased need for staff training - with new IT systems.
Staff become demotivated.
Define labour intensive.
People heavy.
Firm uses more workers than machinery.
What are the advantages of labour intensive work?
People are flexible - can be retrained/learn new methods.
Cheaper for small scale production or countries with low labour cost.
Can solve problems that arise during production and suggest new ideas.
What are the disadvantages of labour intensive production?
Harder to manage people.
People can be unreliable- can get sick, need time off etc.
Can’t work without breaks.
Wage increases means that cost of labour can increase over time.
Name some uses of technology in business.
Computer aided design.
Computer aided manufacturing.
3D printing.
Improvement of stock control.
Spreadsheets - marketing and finance.
Email and communications.
Define quality.
A measure of excellence which is free from defects or significant variations and satisfies customers.
Why is quality important?
Customer satisfaction.
Affects perception of the business - can affect present and future sales.
How can a business ensure they have good/consistent quality?
Quality control systems.
Quality assurance systems.
What are quality assurance systems?
Arranging every process to get products right first time through guidelines policies etc.
What are quality control systems?
Checking the quality of work at every stage of production of the manufacturing process.
What does the ability to meet customer needs with quality depends on?
How well the needs are defined (through market research).
How well the product/manufacturing process is designed.
What are the benefits of good quality?
Increased sales - demands are met.
Creates a USP.
Can increase selling price (due to USP).
Improved reputation - gain customers.
What are the benefits of a quality control system?
Prevents faulty goods reaching customers.
Inspectors can identify common issues and correct them - can stop before too much loss is made.
What are the limitations of quality control systems?
Expensive to operate - have to pay inspectors.
Responsibility lies with inspector so staff take no responsibility - can reduce motivation.
May also demotivate if staffs items are consistently disapproved.
What are the benefits of a quality assurance system?
Workers take responsibility - motivating.
Less waste created - reduced unit costs.
What are the limitations of a quality assurance system?
Needs a change in the culture of the organisation - can time time to embed the system.
Could increase short term costs - decreased productivity.
What are the issues with implementing any sort of quality system?
Costs.
Training is the whole workforce.
Disruptions to production whilst system is implemented.
What are the consequences of poor quality?
Reduces profitability.
Less customer satisfaction - customers happy to complain which can impact reputation.
May decrease costs initially but in long term can be more expensive due to costs of waste.
Define inventory.
Any stock held by a business either to be sold or used during the manufacturing process.
Define perishable goods.
Can go out of date (expiry date) e.g. food, chemicals.
Define obsolete.
When technology is out of date.
What does an inventory control chart show?
Buffer inventory.
Lead time.
Re-order level.
Re-order quantity.
Why is it important to manage inventory in order to achieve speed of response?
So the customer receives the product/service asap.
Why is it important to manage inventory in order to achieve dependability?
Ensure the process starts and finishes on deadlines.
Why is it important to manage inventory in order to achieve flexibility.
Allows a business to offer a wide range of products/services including customisation.
What are the associated costs of holding inventory?
Opportunity cost as money is tied up in stock.
Security costs - for high value items e.g. cctv, alarms etc.
Storage costs e.g. rent.
Cost of it losing value - if items perish, lose value or become obsolete.
Define buffer inventory.
The minimum amount of spare inventory held to meet spikes in demand.
Define re-order level.
The point at which a new order is placed/triggered.
Define re-order quantity.
Amount of stock re-ordered.
Why may problems with inventory arise?
Supplies are delayed - dip into buffer stock.
Usage is faster than usual - due to increase in demand.
Failure to re-order inventory - due to human/system error.
Why is responsibility/control motivating for employees?
Feel that employer trusts them.
Work harder to prove themselves.
Motivating.
Higher productivity.
What are operational objectives?
Targets set for production.
Define quality objectives.
Improving or maintaining quality levels.
Define cost objectives.
Cutting costs.
Define flexibility objectives.
Able to react to customer demand
How may a business react to flexibility objectives?
Varying amount of goods to meet demand e.g. amount produced, seasonal employees.
Define efficiency objectives.
Better use of resources to reduce costs and increase profits.
Define innovation objectives.
Research and development.
Define speed of response objectives.
Speed at which a business can operate.
How may a business adapt to achieve speed of response objectives?
Reduce production time.
Decreasing customer waiting time.
Define dependability.
Customers need to be able to rely on a business and a business should be able to rely on their suppliers.
What are common operational objectives?
Costs.
Quality.
Speed of response/efficiency.
Flexibility.
Added value.
Formula for added value.
Revenue - costs.
What is adding value?
Increasing the difference between costs and price.
How could a business add value?
Convenience.
USP e.g. environmentally friendly.
Producing to order.
How would you calculate capacity utilisation?
Output/capacity x100
Formula for labour productivity.
Output per period/no. Employees
Define productivity.
Output per worker.
What is efficiency about?
Getting the most output out of inputs.
How are labour productivity and labour costs related?
As productivity increases, costs fall.
How can you increase labour productivity?
Improving motivation - incentives.
Training.
New technology.
What are the disadvantages of increasing labour productivity?
Quality may suffer.
May lead to more waste.
