Unit 5 Flashcards
operations
management
concerned with providing the right goods and
services in the right quantities and at the right
quality level in a cost-effective and timely manner
labour intensive
when the manufacturing or provision of a product
relies heavily on labour
production process
the method of turning factor inputs into outputs
by adding value in a cost-effective way
social sustainability
examines social interactions and structures that
are necessary for sustainable development
capital intensive
when the manufacturing or provision of a product
relies heavily on machinery and equipment
ecological footprint
measures the impact of resource consumption
and waste production on the natural environment
ecological
sustainability
the capacity of the natural environment to meet
the needs of the current generation without
jeopardising the ability of future generations to
meet their needs
economic
sustainability
the development that meets the economic needs
using existing available resources
green technologies
environmentally friendly innovation that consider
the long-term impact on the environment
production methods
batch production, mass production, job/
customised productions, flow/process
production, cellular manufacturing
batch production
involves producing a set of identical products-
used when the demand for a product is frequent
and steady, multi operations per production, appropriate for manufacturing business
cellular
manufacturing
organises workers into independent ‘cells’ with
each team comprising of multi-skilled staff with
responsibility and autonomy for completing a
whole unit of work in the production process
flow production
uses continuous and progressive processes,
carried out in sequence, large quantities, standarizedl and simplified products, capital intensive
mass production
the large-scale manufacturing of a homogenous
product
job production
involves the manufacturing of a unique or one-off
job- can be completed by one person or by a
team of people, single product of a time, highly skilled workforce, appropriate for stort-ups, labour intensive
productivity
the level of labour and/or capital efficiency of a
business by comparing its levels of inputs with the
level of its output
standardisation
producing an identical or homogenous product in
large quantities, such as printing a particular
magazine, book or newspaper
specialisation
the division of a large task or project into smaller
tasks- essential part of mass and flow production
andon
a lean production method that uses visual control
systems to indicate the status of an aspect of the
production process
benchmarking
the process of identifying best practice in an
industry, in relation to products, processes and
operations
cradle-to-cradle
a sustainable model of production based on
natural processes
ISO 9000
the world’s most widely recognised standard for
quality management
just-in-time
an inventory management system based on stocks
being delivered as and when they are needed in
the production process
kaizen
the Japanese term for ‘continuous improvement’ a
lean production philosophy where workers and
managers continually try to find ways to improve
work processes and efficiency
kanban
a method of lean production used to ensure that
inventory is based on actual customer orders
using a card system
lean production
the approach used to eliminate waste in an
organisation
quality control
the traditional way of quality management that
involves checking and reviewing work processes
quality management
the function concerned with controlling business
activities to ensure that products are fit for their
purpose
total quality
management (TQM)
the process that attempts to encourage all
employees to make quality assurance paramount
in the various functions of an organisation
zero defects
the goal of producing each and every product
without any mistakes or imperfections
assisted areas
regions identified by the government to be
suffering from relatively high unemployment and
low incomes
bulk-increasing
business
involved with the products that increase in weight
during the production process
bulk-reducing
business
businesses that need to locate near the source of
raw materials because they are heavier, and
hence more costly, to transport than the final
product
clustering
when a business locates near other organisations
that operate in similar or complementary markets
footloose
organisation
a business that does not gain any cost reducing
advantages from locating in a particular location
industrial inertia
the reluctance to relocate due to the
inconvenience of moving
insourcing
the use of an organisation’s own people and
resources to accomplish a certain function or task
which would otherwise have been outsourced
offshoring
involves relocating business functions and
processes overseas
outsourcing
the practice of transferring internal business
activities to an external organisation to reduce
costs and increase productivity
buffer stock
the minimum stock level held by a business in case
there are unexpected events e.g. late deliveries
capacity utilisation
measures a firm’s existing level of output as a
proportion of its potential output
just-in-case (JIC)
the traditional stock management system that
maintains buffer stocks in case there are
unexpected fluctuations in supply
just-in-time (JIT)
a stock control system whereby materials and
components are scheduled to arrive precisely
when the are needed in the production process
labor productivity
a measure of the efficiency of a firm’s workers by
calculating the output per worker
lead time
the duration between placing an order and
receiving it
make-or-buy
decisions
situations where a firm has to decide between
manufacturing a product and purchasing it from a
supplier, based on comparing the cost to make
(CTM) with the cost to buy (CTB)
maximum stock
level
the upper limit of inventories that a firm wishes to
hold at any point in time
minimum stock level
the smallest amount if inventories that a business
wishes to hold
optimum stock level
the best inventory level for a firm, which ensures
that there are sufficient stocks for production
whilst incurring minimal costs
productive capacity
a firm’s maximum output if all its resources are
used fully and efficiently
productivity rate
the degree of efficiency in the use of resources in
the production process
re-order level
the level of stock when a new order is placed
re-order quantity
the amount of new stock ordered
stock-out
occurs if a business does not hold enough stocks
to meet orders for publication
stockpiling
occurs when a business over-produces so holds
too much stock
stocks
the materials, components and products used in
the production process e.g. raw materials
supply chain
the sequence of activities from the production of
a good or service to it being delivered to the end
customer
usage rate
refers to the speed at which stocks are depleted
adaptive creativity
a category of incremental innovation that adjusts
or develops something that already exists
development
the use of research findings to create products
that might be commercialised
incremental
innovation
minor improvements to products or work
processes
innovation
the process of commercially pioneering new
ideas and creations in the production process
innovative creativitv
radical in nature as it involves creating something
that is new
positioning
innovation
refers to changing the context of a product,
focuses on repositioning the perception of an
established product by the use of appropriate
innovation strategies
process innovation
changes in the way production or delivery takes
place i.e. how something is done
product innovation
refers to new creations or the development and
improvement of existing products e.g. the
introduction if existing products
prototypes
trail or test products used in the R+D process
radical innovation
major and disruptive innovations that tend to
involve high risks- can be a major source of
competitive advantage
research and
development
the technological and scientific research that
helps to generate a flow of new ideas and
processes
contingency
planning
involves developing a plan before an unwanted
or unlikely event occurs by using “what if?”
questions to identify all probably threats
crisis
a situation of instability that result in major
problems for a business
crisis management
being reactive to events and disasters that can
cause serious disruptions and harm to a business
quantifiable risks
probably and financially measurable threats to a
business
unquantifiable risks
threats to a business that are impossible or
prohibitively expensive to examine and measure
Evaluate the methods for achieving a TOM culture in a large
organization such as Jaguar = a luxury car maker.
There are substantial costs of training workers to be able to
take the required responsibility TQM demands. These costs are
ongoing as the firm recruits and inducts more labour into the
workforce. Appraisal systems within Jaguar will also need to be
carefully monitored to ensure employees are able to give feedback
to the organization if concerns or issues are raised.
TQM increases the degree of bureaucracy and record keeping
in ensuring objectives are being met and that the new working
environment is being maintained. Jaguar’s line managers in
particular could be put under significant pressure to ensure TQM is
being followed and will have to record significant amounts of data
to be able to justify that a TQM culture is having the desired effect.
Introducing any new management philosophy is not without risks.
It can be simpler in small organizations with a flatter hierarchy
and smaller spans of control. In large organizations, such as
Jaguar, small incremental improvements in quality may have to
be accepted as changing a workforce with many thousands of
workers to a TOM culture will take considerable time and capital.
Explain the advantages and disadvantages of Jaguar of using
just-in-time (JIT) production rather than the more traditional
just-in-case (JIC) systems.
Advantages of using JIT production at Jaguar:
JIT as part of kaizen demands an approach where TQM is at
the centre of the philosophy of operation. Quality becomes the
responsibility of a number of stakeholders and so Jaguar should
benefit from a reduction in waste, and improved quality of its
finished products, to name only two of the benefits.
JIT demands minimal level of stocks; for example, it is
estimated that the Nissan car plant in Sunderland had
managed to keep stocks to only one day’s worth of production.
This means that working capital is not tied up unnecessarily.
Some opportunity costs of holding too much working capital
can be avoided.
Linked to the above point is the reduction in storage costs,
including power, electricity and security, which are not needed
as warehouse space to house stocks of components and semi-
finished vehicles is not required.
Disadvantages of using JIT production at Jaguar:
•
JIT requires a complete change in organizational culture and
a thorough review of the supply chain. The adjustment and
transitional costs of these processes can be significant.
Economies of scale through ordering bulk quantities of
components in the assembly process of vehicles are not
experienced with JIT production but they could be with a
JIC system.
Some aspects of quality assurance for the final vehicle coming
off the production line are taken out of the hands of Jaguar.
There are potential short-term difficulties as suppliers come to
terms with the new working culture. For example, Nissan had
its suppliers on call for components 24 hours a day when it
was running production through the day and night.
Job production advantages
Advantages
• The organisation of this production
method is simple
• The workforce is motivated
• Firms produce original and unique
products according to the wishes of the
customer
Job production disadvantages
Disadvantages
• High labour costs
• Lead times can be lengthy
• May become costly once the demand
for the good rises
Batch production advantages
Advantages
• Flexibility: each batch can be altered to
meet customers’ wishes
• Skilled workers are not needed, which
decreases costs
• Machinery is more standardised, also
decreases costs
• Firms can respond quickly to changes
in demand
Batch production disadvantages
Disadvantages
• Machinery could be more complex to
compensate for the lower skill levels
required from the workers
• The workforce is less motivated
• Money will be tied up in
work-in-progress, since an order cannot
be dispatched until the whole batch has
been finished
Flow production advantages
Advantages
Unit costs are reduced as firms gain
economies of scale
The process is highly automated, which
reduces the need for labour
No need to stock large quantities of
goods
Flow production disadvantage
Disadvantages
Very high set-up costs
• No possibility of producing a wide
product range and meet different
customers’ needs
• The workforce is not motivated
• Breakdowns are costly
Contribution
Contribution: the amount of money left ever after variable couts have been auberacted
from revenue. The money contributes towards fixed costs and profit. We can
calculate either contribution per unit:
Contribution per unit = selling price - variable costs per unit
Or total contribution:
Total contribution = total revenue - total variable costs
Cost centres
Cost centres: the departments or units of business that incur (fixed) costs but do not
contribute to profit directly (e.g. marketing or HR departments). They must be
aware of their costs to help managers operate within the allocated budget, and they
must keep their costs below the predicted value.
