2.3 Making Operational Decisions Flashcards
What are the purposes of business operations?
- to produce goods
- to produce services
What is Job production?
Used to manufacture individual, unique products
- each is a different design, based on customer specifications
- ie building ships, bridges, furniture making, bespoke products, cake orders, tailored clothes
What are the features of Job production?
- can take long time to produce a product, fewer made in a period of time compared to flow or job production-> low productivity
- high costs for skilled workers, higher wages, training
- can’t take as much advantage from economies of scale than other production methods-> high unit costs
- higher costs=higher prices to make profit. But high quality, unique products are valued by customer, so they still make sales-> can lead to higher profits
- greater job satisfaction
- can be easier for a business to differentiate from its competitors
- labour intensive
What is Flow production?
All products are identical and aim is to produce as many as possible in a set amount of time-> high productivity, assembly line
- continuous factories
- ie 24 hour factories, employees switch rotate shifts
What are features of Flow production?
- Benefits from Economies of scale, low average unit costs, allows for competitive pricing
- use robots, simple tasks along assembly line (than job production)
- costly machinery, lots of space for storage
- used for mass market products-> chocolate bars, TVs, phones
- consistent, standard quality
- inflexible due to machinery
- repetitive jobs for staff, can become repetitive
- machine breakdowns can result in delay, inefficiency
- lack of training needed, lower staff retention
- Business finds it hard to differentiate, has to compete with price (affects profit)
What is Batch production?
Producing a group of identical products at a time, different batches are different in colour, size, type of product etc.
- suited to identical products that are produced in limited quantities
What are features of Batch production?
- faster than job production-> higher productivity
- can buy materials in larger quantities than job-> can take advantage of economies of scale, lower unit costs, prices can be lower + more competitive
- time needed to change between batches-> lower productivity than flow
- more expensive than flow as different machinery and tools may be needed to produce products BUT prices can be less competitive than when using flow
How does technology affect production?
- robots pack goods instead of humans, assemble products
- cheaper and faster to employ robots
- used to design products, ie 3D printing to make a prototype, faster and cheaper than traditional methods
What are the advantages of using technology in production?
- carry out processes more quickly and accurately than humans-> increase productivity, consistent quality of goods
- machines can run 24/7, continuous production
- long term to cheaper than employing humans
What are the disadvantages of using technology in production?
- expensive, buy and install machines, regular maintenance. Staff training to use machines, expensive and time consuming
- could replace some manual work, staff can worry they will lose their jobs-> demotivation, cause decrease in productivity
- Usually only suited to one task, inflexible-> difficult for business to change its production method
What is the aim of managing stock?
the right quantity of stock is always available at the right time, at the right quality and at the right price
What is Just in Time?
- Aims to keep stock levels to the bare minimum
What are positives of Just in Time?
Cheaper- less storage
Quick production
Less cash flow issues
Working directly with companies, better connections
Stock levels kept to a minimum- computer systems calculate stock levels
Reduced storage and other costs (insurance, less warehouse space, less warehouse workers)
Less waste
Improve cash flow-> less delay between buying supplies and selling product
Stock is less likely to go out of date
What are negatives of Just in Time?
- requires lots of coordination between firms and suppliers
- needs lots of frequent deliveries of stock
- if there are mistakes or delays, firms could run out of stock
- buy small quantities of stock, rather than bulk-> lose out on economies of scale
Longer production line
Everything has to go right, easily delayed
Specific equipment- more expensive
Reliant on having good relationships forming with suppliers
Vulnerable to disruption to transport
Careful planning required: no spare buffer stock is held
Benefits from bulk buying may be lost
More administration/paperwork as many orders are places
What is buffer stock?
Extra stocks of items to use in case there is supply shortage or customer demand increases
PROBLEM- can be left with large stockpiles of items, which can be costly to store
Solution= use bar gate stock graphs, monitor stock levels of a business
What is Just in Case?
When a business chooses to hold stock within a business
Benefits of holding stock?
- Don’t go out of stock
- Bulk produce, cheaper
- Ordering less in higher numbers, less paperwork
- Stocks available
- Available to rework fault product
- Less reliant of suppliers, not majorly affected by delays
- Spare finished products to meet unexpected orders, increase levels of customer service
- Economies of scale, buying in bulk
What are disadvantages of holding stock?
- Expensive to hold stock
- No demand, losing money
- Higher stock, need for more storage space
- Money is tied up in stock, unavailable for other purposes
- Stock can go out of date, reduce prices to sell excess stock
- Build up of unsold finished products leading to higher stockholding costs
What is procurement?
The whole process of managing the ordering and receipt of the goods and services in the business
What is Logistics?
A process which plans, implements and controls the distribution and storage of goods and services from when they are received to the supplier to when they are delivered to the customer
What are the effects of having effective procurement and logistics systems?
- improves business efficiency (has supplies at the right time, no breaks in production, less wastage)
- reduce overall costs (supplies at the best price, less money wasted, reduced unit costs, more profit or can reduce customer prices)
- Ensure high quality, reasonable price, efficient delivery. Improves customer satisfaction + firm’s reputation
What does a business consider when choosing a supplier?
Quality
Trust
Availability
Delivery
Price
