Unit 4: Operations management

Question 1

What are the factors of production?

Answer 1

• Land - natural resources (raw materials, land for factories).
• Labour - human effort.
• Capital - Machinery, tools and money used in production.
• Enterprise - entrepreneurial ability to combine resources effectively.

Question 2

Define intellectual capital

Answer 2

The intangible capital of a business that includes human capital (well-trained & skilled employees), structural capital (databases & information systems) and relational capital (good links with suppliers and customers).

Question 3

Define transformational process

Answer 3

An activity or group of activities that transforms one or more inputs, adds value to them, and produces output for customers.

Question 4

How can operations managers increase added value?

Answer 4

By managing:
- Efficiency of production - keeping costs low.
- Quality - the goods or services must be suitable for the purpose intended.
- Flexibility & innovation - the need to develop and adapt to new processes and products.

Question 5

What are the factors affecting the amount of Value Added?

Answer 5

• Design of the product (does it have quality features that allow for a higher price to be charged?)
• The efficiency of operations - by reducing waste, the operations department will increase the value added by the production process.
• Branding to encourage consumers to pay more for the product than the cost of the inputs.

Question 6

What are the contributions of operations of adding value?

Answer 6

• Reducing production costs through increased efficiency.
• Producing quality goods that meet customer expectations.
• Ensuring production is flexible so that changing consumer tastes can be satisfied.

Question 7

Define productivity

Answer 7

The ratio of outputs to inputs during production (e.g. output per worker per time per sec).

Question 8

Define level of production

Answer 8

The number of units produced during a time period.

Question 9

Define production

Answer 9

The process that transforms inputs into outputs.

Question 10

How to measure Labour Productivity?

Answer 10

Labour productivity (no. of units per worker) =
Total output in a given time period / Total workers employed

Question 11

How to raise productivity? (4 ways)

Answer 11

• Improve the training of employees to raise skill level - Higher skilled employees will be more productive. Can be expensive and time consuming.
• Improve worker Motivation - The use of financial and non-financial motivators can encourage workers to work more efficiently.
• Purchase new technological equipment - A high cost investment with potential long term increase in productivity. High-cost investment will only be worthwhile if high output levels are maintained. Job losses? Worker security?
• More effective management - Think of the impact of ineffective stock management systems, poor scheduling.