3.4 Flashcards

Question

Dangers of operating at low capacity utilisation

Answer 1

- Higher unit costs - impact on competitiveness - Less likely to reach breakeven output - Capital tied up in under-utilized assets

Answer 2

- Can be possible in the short-term - Increase workforce hours > Extra shifts; encourage overtime; temporary staff - Sub contact some production activities - Reducing time spent maintaining production equipment

Answer 3

- Negative effect on quality (possibly) > Production is rushed > Less time for quality control - Employees suffer > Added workloads & stress > De-motivating if sustained for too long - Loss of sales > Less able to meet sudden or unexpected increases in demand > Production equipment may require repair

Answer 4

- In general high capacity utilisation is better than low - Capacity has a cost - it needs to be used - Flexibility of capacity is also important: the ability to adjust to meet changes in demand

Answer 5

An approach to management that focuses on cutting waste, whilst ensuring quality. This approach can be applied to all aspects of business - from design, through production to distribution

Answer 6

- Doing the simple things well - Doing things better - Involving employees in the continuous process of improvement - And as a result, avoiding waste and therefore reducing costs

Answer 7

WASTE = COST

Answer 8

Over production - Making more than is needed: leads to excess inventories which may then become unsalable Waiting time - Equipment and people standing idle waiting for a production process to be completed or resources to arrive Transport - Moving resources around unnecessarily Stocks - Often held as an acceptable buffer, but should not be excessive Motion - A worker who appears busy but not actually adding any value Defects - Output that does not reach the required quality standard - often a significant cost to an uncompetitive business

Answer 9

- Good relationship with suppliers - Committed, skilled and motivated employees - A culture of quality assurance; continuous improvement & willingness to embrace change - Trust between management and employees

Answer 10

- Time based management - Simultaneous engineering - Just in time production (JIT) - Cell production

Answer 11

A general approach that recognises the importance of time and seeks to reduce the level of wasted time in the production processes of a business

Answer 12

- Quicker response times to meet changing market and customer needs - Faster new product development - Reduction in waste, therefore greater efficiency

Answer 13

- Flexible production methods > Able to change products quickly > Can change production volumes/ runs - Trained employees > Multi skilled staff > Trust between workers and managers

Answer 14

- An approach to project management that helps firms develop and launch new products more quickly - All parts of the project are planned together. Everything is considered simultaneously rather than separately

Answer 15

- New product is brough to the market much more quickly - Business may be able to charge a premium price that will give a better profit margin and help recoup R&D costs - A greater sense of involvement across business functions improve staff commitment to the project - Can be a source of competitive advantage for the firm if it can get a reliable new product into the market and build brand loyalty before its competitors

Answer 16

A form of team working where production processes are split into cells. Each cell is responsible for a complete unit of work

Answer 17

- Closeness of cell members should improve communication - Workers become multiskilled and more adaptable to the needs of the business - Greater employee motivation from variety of work, team working and responsibility - Quality improvements as each cell has 'ownership' for quality on its area

Answer 18

- Culture has to embrace trust & participation or workers can feel they are being pushed for greater output with no respite - Business may have to invest in new materials handling and ordering systems suitable for cell production - Cell production may not allow a firm to use it machinery as intensively as in traditional flow production - Some small scale production line may not yield enough savings to make a switch to cell production worthwhile - Allocation of work to cells has to be efficient o that employees have enough work, but not so much that they are unable to cope

Answer 19

JIT aims to ensure that inputs into the production process only arrive when they are needed

Answer 20

-Based on a pull system of production - customer orders determine what is produced - Requires complex production scheduling- achieved using specialist software to connect production dept with suppliers - Supplies delivered to production line only when needed - Requires close cooperation with high-quality suppliers

Answer 21

- Lower stock holding means a reduction in storage space which saves rent and insurance costs - As stock is only obtained when it is needed, less working capital is tied up in stock - Less likelihood of stock perishing, becoming obsolete or out of date - Less time spent on checking and re-working production as the emphasis is on getting the work right first time - Improves firms liquidity

Answer 22

- There is little room for mistakes as minimal stock is kept for re-working faulty product - Production is highly reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed - There is no spare finished products available to meet unexpected orders, because product is made to meet actual orders - A need for complex, specialist stock systems

Answer 23

- No buffer stocks of any type are held - No production is to order - Stocks are ordered only when is needed - No spare workers are employed - Staff are multi-skilled and capable of filling on for their absent colleagues - It is used by lean producers

Answer 24

- Just in case used to be the system operated by firms for stock - Additional stock was kept JIC for example: > There was a sudden increase in demand > Some of the current stock was defective > Stock deliveries didn't turn up - JIC raised costs because of increased storage costs; for stock deteriorating/ perishing or being stolen

Answer 25

- Quality is about meeting the needs and expectations of customers - Customers needs & expectations: > Performance (fit for purpose) > Appearance > Availability & delivery > Reliability/ durable > Price/ value for money - If a product or service meets all those standards then it passes the quality test - If it doesn't then it is sub-standard

Answer 26

A product or service is of good quality if it meets the needs and expectations of the customer

Answer 27

Tangible - Reliability - Function & features - Support levels & standards - Cost of ownership (e.g. repairs) Intangible - Brand image - Exclusiveness - Market reputation

Answer 28

- Markets are highly competitive - Customers are more: > Knowledgeable & demanding > Prepared to complain about poor quality > Able to share information about poor quality - If a business can develop a reputation for high quality then it may be able to create an advantage over its competitors

Answer 29

- Customer satisfaction - Repeat purchase - Customer recommendation - Lower marketing costs - High customer loyalty

Answer 30

- Fewer businesses are competing solely on price - At a similar price, the higher-quality product is likely to win - Quality can enable a business to differentiate its product from the competition

Answer 31

- Product fails - e.g. a breakdown or unexpected wear and tear - Product does not perform as promised - Product is deliver late - Poor instructions/ directions for use - Unresponsive customer service

Answer 32

- Lost customers - Cost of reworking or remaking product - Costs of replacements or refunds - Wasted materials - Poor quality is a source of competitive disadvantage - If competitors are achieve higher quality, then a business will suffer

Answer 33

- Customer service ratings - Product return - Warranty claims - Rejected output from production - Levels of repeat business - Market surveys - Profit margins

Answer 34

- Financial costs (e.g. compensation) - Lost customer loyalty - Damaged business reputation - Need for greater controls and checks - Competitors take advantage

Answer 35

- Achieving high quality does not happen by accident Quality management is concerned with controlling activities with the aim of ensuring that products and services are fit for their purpose and meet the specifications Two main approaches - Quality control > Based on inspection > Takes defects out - Quality assurance > Based on processes > Build quality in

Answer 36

The process of inspecting products to ensure that they meet the required quality standards

Answer 37

- Traditional way of managing quality - Concerned with checking and reviewing output - Mainly about "detecting" defective output - rathe than preventing it - Can be a very costly process Pros - Ensures bad products do not reach public - Responsibility only rests with one trained individual Cons - Does not encourage others to take responsibility - High levels of waste

Answer 38

- When raw material are received prior to entering production - Whilst products are going through the production process - When products are finished - takes place before products are despatched to customers

Answer 39

- Costly - Often at the end of the production process - potentially too late - Inconsistent inspections - Often not compatible with modern production systems - Done by inspectors rather than workers themselves

Answer 40

The processes that ensure production quality meets the requirements of customers - How a business can design the way a product or service is produced or delivered to minimise the chances that output will be sub-standard - Focus of quality assurance is on the product design/development stage > If the production process is well controlled then quality will be "built-in" > If the production process is reliable - there is less need to inspect production output - Self checking - Modern method - Encourages responsibility - Get it right first time - Less waste - Higher level of quality - All staff trained

Answer 41

Quality assurance - Focuses on processes - Achieved by improving production processes - Targeted at the whole organisation - Emphasises the customer - Quality is built into the product Quality control - Focus on outputs - Achieved by sampling & checking (inspection) - Targeted at production activities - Emphasises required standards - Defect products are inspected out

Answer 42

Advantages - No waste, cost saving - Motivated staff - No need for reworking - Quality should increase Disadvantages - Cost of training staff - Not all staff may wish to take on responsibility

Answer 43

Potential challenges - Culture may need change - Poor quality likely to be the result of multiple issues - Potential high cost: training, new processes, information systems Evaluation - Can a business afford not to address poor quality - Quality is hard to improve in the short term - Competitors don't stand still

Answer 44

- Identify the problems with market research - R&D identifying new improved products and production methods - Kaizen group, staff identify small changes to improve the product or production process - Quality circles, autonomous groups of workers who are responsible for their own decisions

Answer 45

- Kaizen (or continuous improvements) is an approach of constantly introducing small incremental changes in a business in order to improve quality and/or efficiency - This approach assumes that employees are the best people to identify room for improvements since they see the process in action all the time. A firm that uses this approach therefore has to have a culture that encourages and rewards there employees for contribution to the process - All staff are encouraged to make suggestions and may be finically rewarded for successful ideas - Kaizen requires managers to listen to workers and changes this requires training for managers and a change in culture

Answer 46

- Better motivated staff as they feel they are being listened to and have greater responsibly - Costs saving in production, kaizen should result in less mistakes, less waste and goods being produced quicker - Kaizen should also result in better

Answer 47

- Groups of workers who are multi-skilled and can cover for each other - They take responsibility for their own quality regularly discuss how to improve quality - The should result in high levels of motivation and high levels of motivation and high quality products

Answer 48

- The main aim of TQM is to get it right first time and reduce waste. TQM should result in zero defects - With TQM everyone is responsible for quality not just managers. All work colleagues should be treated as a customers and therefore treated with value and respect. TQM also has a focus on continuous improvement this is know as Kaizen - TQM regards teamwork and teams as the best way of solving problems - TQM is a top down process which requires managers to completely accept all staff are important and have a voice - Firms need to also build close relationships with their suppliers to ensure quality suppliers

Answer 49

- Puts customer at heart of production process - Motivational since workers feel more involved and are making decisions - Less wasteful than throwing out defective finished products - Eliminates cost of inspection

Answer 50

- Requires strong leadership - often missing in business - Substantial investment in training & support - but return on investment not immediate - May become bureaucratic - Disruptions and costs may outweigh benefits

Answer 51

- Improved staff morale, higher productivity and lower labour turnover - Competitive advantage in the market place.

Answer 52

- Balancing the cost of improving quality against the benefits of quality - Companies that outsource their goods can struggle to ensure quality

Answer 53

Price - Often considered the most important, value for money is crucial - Lowest price isn't always best value, depends on quality Quality - Consistently high quality, right product at the right time Reliability - Delivers correct product on time - Goods and services work as described Communication - East to communicate with - e.g. place orders, build relationship Capacity - Able to handle increased volumes of supply, perhaps short notice Financially secure - Long term trading relationships requires suppliers to stay in business - More likely to offer better payment terms

Answer 54

- Meets the needs and wants of customers for a business, it needs effective "supply chains" - Suppliers determine many costs of a business - Suppliers closely linked to product quality - Suppliers can be a source of finance to a business - Key relationships are needed especially for business that use lead production and JIT

Answer 55

- Some firms take an aggressive approach with suppliers encouraging competition between rival suppliers to lower their price and improve delivery time - Some firms build long term relationships with there suppliers

Answer 56

- Suppliers must offer good value for money prices - Supplier prices can be lowered by: > Grouping purchases with fewer suppliers > Ensure suppliers compete against each other for regular orders

Answer 57

- Some suppliers are strategically crucial to a business - Strategic = the business cannot succeed without maintaining good relationship with suppler. These goods are crucial to a businesses success - Commodity suppliers provide goods that can be easily brought elsewhere

Answer 58

Shows how people and management are organised in business

Answer 59

- Authority and responsibility - who is responsible for who and who is in charge

Answer 60

Size of business - Small businesses will tend to have informal or flat hierarchal structures - Large business have more complicated structures involving more layers Type of business - Does the business operate in one or several locations - Is the business in the service or manufacturing sector - Is the workforce highly skilled or not Management or leadership style - An autocratic leadership style will lead to a different structure compared to one who prefers to delegate responsibility The competitive environment - Organisation structure are influenced and changed by development in the market

Answer 61

The span of control is the number of employees whom a manager is responsible

Answer 62

- Gives subordinates the chance for more independence - More appropriate if labour costs are significant - reduce number of managers - Communication has to go through fewer layers

Answer 63

- Allows for closer supervision of employees - More layers may be required - Helps more effective communication in small teams

Answer 64

- Personality & skill/ experience of manager - Size and complexity of the business - Whether the business is centralised or decentralised - The extent of use of clear objectives throughout a business

Answer 65

- The chain of command describes the lines of authority within a business

Answer 66

The number of layers of management or supervision in the organisation structure

Answer 67

Tall structure - Many layers in hierarchy and narrow spans of control Flat structure - Flat hierarchy, wide spans of control - Delegation encourages

Answer 68

- Key features - many layers of hierarchy and narrow spans of control - Allows tighter control due to less delegation - More opportunities for promotion - Takes longer for communcation to pass through the layers - More layers = More staff = Higher costs

Answer 69

- Key features - few layers of hierarchy and wide spans of control - Less direct control and more delegation - Fewer opportunities for promotion, but staff given greater responsibility - Vertical communication is improved - Fewer layers = less staff = lower costs

Answer 70

why change the structure - Growth of the business means a more formal structure is appropriate - Reduce costs - Reduce complexity - Employee motivation needs boosting - Key function improvements Challenges - Managers and employee resistance - Disruption and de-motivation = potential problems with staff retention - Costs of redundancies - Negative impacts on customer service quality

Answer 71

- Removing layers of management from the hierarchy of the organisation

Answer 72

- Reducing layers in the hierarchy - Lower labour costs - Faster decision making - Shorter communication paths - Stimulating employee innovation - Widening spans of control - Greater emphasis on teamworking and empowerment

Answer 73

The assignment to others of authority for particular functions, tasks, and decisions

Answer 74

- Reduce management stress and workload - Allows senior management to focus on key tasks - Subordinates are empowered and motivated - Better decisions and use of resources - Good methods of on the job training

Answer 75

- Depends on quality and experience of subordinates - Harder in a small firm - May increase workload and stress of subordinates

Answer 76

Giving employees the power to do their job

Answer 77

- Linked with motivation and customer service - Employees need to feel that their actions count

Answer 78

- Decision making is about authority - Should authority rest with senior management (centralised) or should it be delegated further down the hierarchy (decentralised)

Answer 79

- Easier to implement - Prevents other parts of the business becoming too independent - Easier to control and co-ordinate - Economies of scale and overhead savings easier to achieve - Quicker decision making

Answer 80

- More bureaucratic - Lack of authority down the hierarchy may reduce manager motivation - Lack of training and developing junior management - Customer service misses flexibility and speed of local decision making

Answer 81

The traditional organisation structure of a business has focused on the functions, departments and main activities of a business

Answer 82

Organisational structure based around the product portfolio of the company

Answer 83

- Skills audit is the process of assessing the skills and competencies of an organizations employees. Some of the benefits of conducting a skills audit include: - Identifying skills gaps and and determining training needs - Helping organisations plan for future skills needs - Enhancing employee retention and reducing turnover