Unit 4 - Decision making to improve operational performance

Question 1

What are operations?

Answer 1

The term operations embraces all the individual activities required to create and deliver an organization’s goods or services to its customers or clients.

Operations refer to the business processes that transform inputs into outputs.

Question 2

What is mean by operation management?

Answer 2

Operations management is concerned with designing, managing, and improving the systems that create the organization’s goods or services.

Question 3

What is the importance of operations? (6 points)

Answer 3

Allows the business to:

. Meet the demand
. Add value to products
. Control cost of production
. Guarantee the right level of quality and service
. Adapt to the needs of customers
. Enable a business to meet it’s ethical and/or environmental objectives

Question 4

What is the transformation process?

Answer 4

A process that converts inputs, such as labour and resources, into more valuable outputs.

This process is a way of adding value to the raw inputs.

Question 4

What is the transformation process?

Answer 4

A process that converts inputs, such as labour and resources, into more valuable outputs.

This process is a way of adding value to the raw inputs.

Question 5

What are operational objectives?

Answer 5

Targets a business sets in order to produce goods or services in the most efficient way, in a given period of time.

Question 6

What are the 6 operations management objectives?

Answer 6

. Ethical and/or environmental
. Reduced unit cost
. Quality targets
. Speed of response and flexibility
. Dependability
. Added value

Question 7

. Ethical and/or environmental?

Answer 7

Meeting targets to minimise any detrimental effects of the operations of the business on the environment.

Question 8

. Reduced unit cost?

Answer 8

Targets set to control the cost of each individual good or service supplied (unit cost or cost of one unit or cost per unit).

Question 9

. Quality targets?

Answer 9

Minimum acceptable standards in terms of the quality of raw materials. processes, output, and customer service.

Question 10

. Speed of response and flexibility?

Answer 10

The speed with which customers’ needs are met and the ability to tailor goods to meet individual needs.

The ability of a business to respond to changes in the market and consumer wants.

Question 11

. Dependability?

Answer 11

A target that considers how reliable or dependable a business is in satisfying customer needs. Involves getting the “right product”, in the “right quantity” and to the “right customer on time.”

In terms of good: “Dependability” would consider its quality and durability.

In terms of service: “Dependability” would consider the expertise and knowledge of personal.

Question 12

. Added value?

Answer 12

The ability to ensure that the value of the output is higher than the sum of the value of all the inputs i.e. the value of the finished output above the cost of achieving it.

Question 13

Internal influences on operational objectives?

Answer 13

• Corporate objective (Dictate the direction of the business and its functional activities)
• Finance (Budget) (How much is available for investment)
• Human resources (Quality and capacity of the workforce)
• Marketing issues (Regular changes to marketing mix puts strain on production, especially if relatively inflexible)

Question 14

External influences on operational objectives?

Answer 14

• Economic environment (Sudden or short-term changes in demand impact capacity utilization and productivity. Changes in interest rates impact the cost of financing capital investment in operations)
• Competitor efficiency and flexibility (Pressure on operations to deliver at least comparable performance to competitors, in terms of quality; efficiency; speed)
• Technological change (Innovation is rife and production processes are costly)
• Legal and environmental change (Regulation about the environment place new challenges for operations objectives)

Question 15

Bulky - Buying (Eco scale)?

Answer 15

Purchasing large quantities of a product or raw material results in a lower price per unit.

Question 16

Technical (Eco scale)?

Answer 16

Use of specialist equipment or processes to boost productivity cost per unit.

Question 17

Marketing (E scale)?

Answer 17

Advertising and marketing budget can be spread over a larger range of products, markets and customers.

Question 18

Specialisation (E scale)?

Answer 18

Larger businesses split complex production processes into separate tasks to boost productivity. By specializing in specific tasks or processes, the workforce is able to produce more efficiently, which lowers total cost per unit.

Question 19

What is economies of scale?

Answer 19

Unit cost falls as output increases.

Question 20

What does the term “Capacity” mean?

Answer 20

Maximum output achievable

Question 21

Labour productivity formula?

Answer 21

Total output / Number of employees

Question 22

Unit cost formula?

Answer 22

Total costs / Total output

Question 23

Capacity utilisation formula?

Answer 23

Actual output / Maximum output X 100

Question 24

Actions used to address under-capacity (under-utilization) (4 points):

Answer 24

1. Introduce overtime, a new shift or employ more staff on temporary contracts.
2. Increase promotions.
3. Find new markets (new segments or new markets abroad).
4. Sub-contract in work from another business.

Question 25

Actions used to address over-capacity (over-utilisation):

Answer 25

1) Dynamic pricing

2) Retrench or dismantle production sectors

3) Sub-contracting production out (Out-sourcing)

4) Expanding production capacity

Question 26

Benefits of focusing on quality?

Answer 26

• Provides USP and gives reason for people to buy the product (Competitive advantage).
• Allow a business to charge high prices.
• Enhance reputation <> brad loyalty.

Question 27

Consequences of poor quality?

Answer 27

• The cost of scrapping or reworking products.
• Damage to business rep.
• Cost of repairing goods under warranty.