21 - Operations Planning

Question 0

What is operational flexibility?

Answer 0

This is the ability of a business to vary both level of production and the range of products following changes in consumer demand

-It is a firms ability to produce a product in different ways

Question 1

What is operations planning?

Answer 1

This is preparing input resources to supply products to meet expected demand

Question 2

What is process innovation?

Answer 2

This is the use new or much improved production methods or device delivery system

-CAD and CAM are both examples of process innovation.
E.G. *Robots in manufacturing
*Faster machines to manufacture micro chips for computers
*Computers tracking stock levels
*Using the internet to track the exact location of parcels being delivered worldwide

Question 3

What is job production?

Answer 3

This is when a one off item is produced specifically to the customers needs. These items are unique and often expensive as the firm cannot mass produce

• This production method is motivational because there is flexibility and creativity in work. It also requires a highly skilled labour intensive workforce.
• There are high unit production costs and production is time consuming
• There is a wide range of tools and equipment needed

Question 4

What is batch production?

Answer 4

This is when a limited number of identical items are produced at a time, These products are produced in separate groups, allowing a degree of variety

• Every unit in the batch must go through an individual production stage before the batch as a whole moves to the next stage
• There is more of a scope for economies of scale than job production and there can be an aspect of flexibility and creativity in batch production. This makes it more motivating than flow production
• There are high levels of stock at each stage of production, increasing stock holding costs and unit costs are likely to be higher than flow production

Question 5

What is flow production?

Answer 5

Flow production is producing items in a continually moving process

• This production method is capable of mass production. This creates more scope for economies of scale as costs are spread over a larger output. This allows a firm to be more competitive in its pricing
• It is ideal for market segments with high demand for standardised products
• This production method is inflexible and it’s often time consuming and expensive to switch to another type of product
• It is expensive to set up flow line machinery

Question 6

What is mass customisation?

Answer 6

This is the use of flexible computer aided production systems to produce items to meet consumer requirements at mass production cost levels

• There is the combined low unit cost of flow production coupled with the flexibility of job production to meet consumer needs
• Expensive flexible capital equipment is needed
• Expensive product redesign may be needed to allow key components to be switched so as to gain variety

Question 7

What factors influence which production method is used?

Answer 7

• The market size, if the market is very small then job production would be appropriate. It’s pointless using flow production or mass customisation for a small market size as there isn’t much demand. If the demand fluctuates throughout the year then batch production would be the best option for this
• The amount of capital available, mass customisation and flow production are expensive and required large capital investments. This is probably not going to be a feasible option for small firms as they don’t usually have the finance required
• The availability of other resources, large scale flow production often requires a supply of relatively unskilled workers and as large flat land area. Job productions needs skilled crafts people. Also capital is a key factor in flow production and mass customisation. If these resources are unavailable then some production method may not be an option
• Consumer requirements, if the market has wealthy consumers, looking for unique products, then job production would be the best option. However if the market has consumers who want cheap standardised products, then flow production would be the best option

Question 8

What is the optimal location?

Answer 8

This is the location that gives the business the best combination of qualitative and quantitative factors

Question 9

What are quantitative factors?

Answer 9

These are factors that may influence business decisions that are measurable in financial terms
-These factors will have a direct impact on either the costs of a site or the revenue from it and it’s profitability

These include:

• The cost of the site
• Labour costs
• Transport costs

Question 10

What are qualitative factors?

Answer 10

These are non measurable factors that may influence business decisions

These factors include:

• Ethical considerations
• Environmental concerns
• Room for further expansions

Question 11

What is multi site location?

Answer 11

A business that operates from more than one location

• There is greater convenience to the consumer as there may be a closer branch
• Possibility for workers to be promoted in other regions, this motivates workers as there is the possibility of being promoted to another branch or factory
• Communication becomes crucial in order for the branches or factories to coordinate
• If sites are located too closely, they might compete and steal sales from each other

Question 12

What is off shoring?

Answer 12

This is when a firm bases some of its processes in another company so as to take advantage of lower costs

-This is different to outsourcing. Outsourcing doesn’t involve being based in another country, they just choose a supplier outside the country

Question 13

What does multinational mean?

Answer 13

A business with operations or production bases in more than one country

Question 14

What are trade barriers?

Answer 14

These are taxes or other limitations on the free international movements of goods and services

Question 15

What are the potential issues and problems of locating internatially?

Answer 15

• Language and other communication barriers
• Cultural differences
• Ethical considerations
• Supply chain concerns

Question 16

What does scale of operations mean?

Answer 16

The maximum output that can be achieved using the available input (resources)

This is influenced by factors like:

• Owners objectives, they may want to remain small and easy to manage
• Capital avaliable, if this is limited, growth will be less likely
• Number of competitors, if the market is very competitive, this is may result in a smaller market share
• Scope for economies, generally the larger the scope, the larger the firm

Question 17

What are economies of scale?

Answer 17

These are factors that result in a reduction in a firms average unit costs of production as the scale of operation increases

These are:
-Purchasing economies, this is bulk buying and firm purchases in large quantities so as to gain discounts from suppliers

• Technical economies, this is when a firm uses advanced technical equipment in its processes (CAD and CAM). This is also known as process innovation.
• Financial economies, this is when a firm has more assets available as collateral for bank loans, therefore they are able to get the loans at favourable interest rates
• Managerial economies, this is when a firm is able to attract skilled and experienced managers to work for them. This happens when a firm expands and is able to afford these managers that will improve efficiency and as a result, reduce average unit costs

Question 18

What are diseconomies of scale?

Answer 18

These are factors that cause average unit costs to increase as a business increases it’s scale of operation

These include:
-Communication problems, large scale operations will often lead to poor communication. There may be communication overload with the sheer volume if messages being sent. These communication inefficiencies

• Alienation of workforce, as a firm increases in its size and scale of operation, the workers may become alienated as it becomes more difficult for managers to communicate directly to each worker. This leads to them feeling insignificant
• Poor coordination, as a firm expands, there are more departments, decisions and products. These become even more difficult to coordinate and control. This could lead to poor coordination and prevent synergistic working within the firm