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Business > Unit 4 - Operations > Flashcards

Unit 4 - Operations Flashcards

1
Q

Inventory

A

The goods or stock a business holds

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2
Q

Inventory control

A

Management of levels of raw materials, work in progress and finished goods in order to reduce storage costs while still meeting customer demand

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3
Q

Advantages of high inventory

A
  • meet customer demand
  • sudden increases in demand can be dealt with quickly and efficiently
    -companies can benefit from bulk buying
  • Production lines won’t be halted due to raw material shortages
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4
Q

Advantages of low inventory levels

A
  • reduced costs
  • opportunity cost is low
  • perishable product waste and problems of products going out of date are minimised
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5
Q

Buffer inventory level

A

Minimum level of inventory held

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6
Q

Lead time

A

How long the supplier takes to supply

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7
Q

Inventory wastage

A

A measure of the loss of inventory within a business

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8
Q

Inventory wastage is caused by …. (5)

A
  • raw materials being wasted during storage and production
  • defects in production
  • theft
  • damage to inventories
  • absolescence (going out of date / fashion)
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9
Q

Inventory rotation

A

Using the old inventory before new inventory to make sure that inventory wastage is kept to a minimum

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10
Q

Influences on the choice of supplier (6)

A
  • prices
  • payment loans
  • quality
  • capacity
  • reliability
  • flexibility
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11
Q

Supply management

A

The organisation of activities to create value for the customer and profit for the businesses involved in supplying the products

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12
Q

Corporate aims (5)

A
  • low costs
  • speed of response
  • flexibility
  • environmental objective
  • added value
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13
Q

Piece rate

A

Payment based on number of items each worker produces

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14
Q

+ and - of piece rate

A

+ increases productivity
- expense of quality
- output may be influenced by workers needs rather than customer demand

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15
Q

Commission

A

A sum of money paid to an employee upon completion of a task, usually selling a certain amount of goods or services. Can be laid as a percentage of sales of as a flat rate based on sales volume

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16
Q

+ and - of commission

A

+ incentive to encourage employees to work hard and increase productivity
+ high performing sales people can earn large amounts in accordance with effort and ability
- no reliable income
- resentment
- Dishonesty

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17
Q

Salary schemes

A

A basic rate payment system where employees are paid on an annual salary

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18
Q

+ and - of salary schemes

A

+ simple and cheap to administer
+ security provided may motivate
- payment for input rather than output

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19
Q

Performance related pay

A

System that rewards individual employees based on an assessment of their individual performance and usually measured against pre agreed objectives

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20
Q

+ and - of performance related pay

A

+ higher employee motivation
+ more efficient use of company resources
+ clearer goals
- competitive atmosphere
- focus in short term goals and indivisible performance rather than teamwork
- goals may be unachievable

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21
Q

Operations management

A

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

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22
Q

Adding value

A

The process of increasing the worth of resources by modifying them

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23
Q

Adding value equation

A

SALES REVENUE - THE COST OF BOUGHT MATERIALS/COMPONENTS/SERVICES

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24
Q

Product flexibility

A

Being able to switch production from one product to another

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25
Q

Volume flexibility

A

Being able to change the level of output of a product in accordance with customer demand

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26
Q

Operational objectives (5)

A
  • costs
  • quality
  • speed of response
  • flexibility
  • environment
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27
Q

Unit costs equation

A

TOTAL COSTS / TOTAL OUTPUT

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28
Q

The more output you make, the BLANK the unit costs due to BLANK the fixed costs

A

lower, spreading

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29
Q

Labour productivity equation

A

TOTAL OUTPUT / NO. OF EMPLOYEES

30
Q

Efficiency

A

Output (production) is maximised from a given level of inputs

31
Q

Increasing labour productivity can be achieved by… (4)

A
  • improving motivation
  • training
  • better management
  • introducing better/ new technologies
32
Q

Difficulties in increasing labour productivity (3)

A
  • increased output may reduce quality due to staff stress on large work load
  • resistant staff
  • staff demanding higher pay
33
Q

Greater efficiency may allow a business to… (4)

A
  • pay higher wages to workers
  • offer low prices / improve quality for consumers
  • spend more money on the local environment
  • increase overall profits for shareholders
34
Q

Capacity utilisation

A

How much of our capacity we are utilising

35
Q

Benefits of reaching high capacity (90-95%) (7)

A
  • average unit costs will fall
  • benefits from economies of scale
  • profits increase
  • more competitive due to lower costs
  • opportunities for bonus payments for staff leading to increased labour productivity
  • shareholders dividends
  • stakeholder benefit
36
Q

Problems with reaching full capacity (3)

A
  • unable to accept new orders and produce them
  • little opportunity for maintenance of machinery
  • employees may feel under pressure and become demotivated so quality may decrease
37
Q

What can a business do if capacity is not used highly ( e.g. 60%) (4)

A
  • increase sales
  • improve marketing
  • produce different products with same resources
  • reduce capacity ( redundancies, shorter working week, downsizing)
38
Q

Capacity shortage

A

When a firms capacity isn’t large enough to deal with the level of demand for its product

39
Q

Ways of increasing capacity (4)

A
  • building or extending factories or plants
  • ask staff to work overtime or longer hours
  • recruit more staff
  • outsource or subcontract
40
Q

Capacity

A

Measure the maximum it can produce given its existing resources

41
Q

Economies of scale

A

Cost advantages reaped by companies when production becomes efficient as costs are spread over a larger number of goods. As the scales of production increases, the unit costs decreases

42
Q

Managerial economies of scale

A

Employ the best managers with specialist skills

43
Q

Purchasing economies of scale

A

Buying in bulk

44
Q

Technical economies of scales

A

Afford to buy better and advanced machinery

45
Q

Marketing economies of scales

A

Large firms can afford expensive media that reach more customer and can complete more market research

46
Q

Financial economies of scale

A

Large firms can borrow at lower rate as they are considered safer

47
Q

How do economies of scale create barriers to entry

A

If a market has significant economies of scales that haven been exploited by the existing firms to a large extent, new entrants are deterred

48
Q

Lean production

A

The aim to reduce waste throughout the organisation

49
Q

Just in Time production

A

Ordering supplies only when we need them and holding as close to zero stock as possible

50
Q

Benefits of JiT

A
  • motivated workforce
  • multi skilling and flexibility
  • reduced waste
  • greater variety of goods
51
Q

Difficulties of JiT

A
  • fewer opportunities for bulk buying
  • halting of production if the supplier fails to deliver
  • difficulties meeting spikes in demand
52
Q

JiT success depends on… (3)

A
  • excellent communication
  • flexibility from suppliers and employees
  • infrastructure
53
Q

Automation

A

The use of machinery to replace Human Resources

54
Q

Capital intensive production

A

Businesses requiring a larger amount of capital (machinery) relative to labour

55
Q

Advantages of capital intensive (3)

A
  • machines can work continuously 24/7
  • quality can be standardised
  • more cost effective if larger quantities are produced
56
Q

Disadvantages of capital intensive

A
  • Initial set up costs of machinery are high
  • breakdowns in production can be costly and cause delays
  • inflexible
57
Q

Kaizen

A

Continuous improvement

58
Q

Quality

A

Measured by the extent to which an operation meets its customer requirements

59
Q

Quality assurance

A

Any systematic process of determining whether a product of service meets specified requirements (quality checked by staff for defects down production line )

60
Q

+ and - of quality assurance

A

+ ensures product isn’t faulty
+ stops customer complaints
+ gives better customer satisfaction
- time consuming
- costs a lot to train staff

61
Q

Quality control

A

How a company measures product quality and improves if it needs be (checked by inspectors at the end of the line)

62
Q

+ and - of quality control

A

+ reduces chance of poor quality products reaching end users
+ inspectors (qualified) looks for faults so less employees need to be trained
- faults only found at the end of line
- high wastage costs
- reworking faults costs time and money
- waste resources, time and raw materials

63
Q

Benefits of quality

A
  • customer satisfaction
  • higher productivity
  • reputation improved
  • increased innovation
64
Q

Difficulties of improving quality

A
  • costly
  • difficult to agree
65
Q

Producing to order

A

A strategy in which a business only manufactures a product once an order has been received from a customer

66
Q

Advantages of producing to order

A
  • ability to supple a product that meets a customers exact specification
  • reduces costs in holding inventory
  • potential for higher prices
  • production planning is easier
  • targeting markets
67
Q

Disadvantages of producing to order

A
  • fluctuations in production levels overtime
  • Higher costs due to inefficient capacity utilisation
  • inability to take advantage of sudden interest in a product
  • difficult to plan
68
Q

Quality circles

A

An approach to quality management whereby groups of employees meet regularity to identify potential improvements and resolve quality issues

69
Q

Labour intensive production

A

When products are mainly produced by human workers

70
Q

+ and - of labour intensive

A

+ customised and personally made products are easier to make
+ less expensive machinery costs
+ humans can use initiative to solve problems
- quality of products can vary
- skilled workers take time and money to train
- unbalanced pay

71
Q

Outsourcing

A

The transfer of activities, which were previously conducted in house, to a third party outside the business

72
Q

+ and - of outsourcing

A

+ react to changes in demand more quickly
+ outsourcing providers may be more specialised and therefore more efficient
+ lets the firm concentrate on their core business
- quality of product is no longer under the firms control
- outsource provider may want profits so therefore may be more expensive

Business (9 decks)

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