3.4 Decision making to improve operational performance Flashcards
What is the operations function of a business?
The operations function is the business ‘engine room’, how it operates
Why does a business set operational objectives? What are some values of doing so?
In order to monitor its performance and improve.
-Focus for decision making
-Motivating employees
-Provides a benchmark against which success or failure can be measured
-To improve efficiency by examining reasons for failure
What are the key operational objective areas?
-Cost and volume targets
-Quality targets
-Efficiency and flexibility targets
-Enviromental targets
What are some internal and external influences on operational objectives?
Internal:
-Coorpoate objectives
-Finance
-Human resources (skills of workers)
External:
-Available resources from suppliers
-State of the economy, consumer confidence
-Competitor actions
What is capacity?
The maximum output a business can produce in a period of time given a set amount of resources.
What is capacity utilisation?
The % of total capacity that is being achieved in a given period of time
What is labour productivity? How is it calculated?
The measure of output per worker in a given period of time.
output per period of time / number of employees at work = Avg. Labour Productivity
How can labour productivity be increased? Are there any downisdes to doing so?
-New technology speeds up production
-Modifying production systems to improve efficiency
-Recruiting higher skilled workers
-Providing better training
Downsides=
-Cost of doing so must be outweighed by increases in revenue
-May conflict with other objectives; may be a loss of quality if too focused on increasing output
What is unit cost?
total costs/units of output = Unit cost AKA average cost
What is capital costs?
Costs incurred by capital resources I.E; Machinery, vehicles, buildings
What is a labour intesive business?
A business whos labour costs outweigh its capital costs
What are some consequences for operating too far below max.capacity?
-Business will have resources it is not utilising, increasing unit costs as the firm has fixed costs
What are some consequences for operating too close to max.capacity?
-Firm has no flexibility if a big order suddenly comes in
-Firm has less time for maintence and repair
-Firm has less time for training workforce
How may a business increase capacity utilisation?
-Marketing starts to increase demand
-Rationalisation = downsizing organisation to reduce max.capacity
How may a business decrease capacity utilisation?
-Outsource some operations
-Reduce demand in short term w increased prices and waiting lists
-Expand organisation in long term
What is lean production?
A management approach, based on japanese manufacturing companies, that focuses on cutting out waste while mainting quality.
Why is waste bad? What are some examples of waste?
Waste = cost
- Over production leading to excess stock
- Waiting time (equiptment and people standing idle)
- Holding excessive amounts of stock
- Defects in output
What are the 4 types of lean production?
- Just In Time
- Kaizen
- Cell production
- Lean design
What is the Just In Time style of production? What are some positives and negatives?
Lean production method
-The aim is to organise production so that inputs only arrive when they are needed.
+s =
- Holding lower stock, reduced storage space, saves rent and insurance, lower costs
- Less working capital tied up in stock, benefiting cash flow
- Less likely to have ‘obselete’ inventory = stock perishing
-s =
-Little room for error as minimal stock is kept for redoing faulty products
-Highly reliant on suppliers
-Harder to respond to sudden increases in demand
-Complicated and costly
What is ‘Kaizen’ style of production? What are some positives and negatives?
It is a lean production method
‘Kaizen’ translates to continuous improvement, in a business context this refers to coninuosly searching for ways to make changes/improvements to the organisation.
Traditional approach to improvement is that change is infrequent and significant in scale, with Kiazen the are small and frequent. Everyone in the business is encouraged to make suggestions.
+s =
- Small changes are easier to implement
- No large disruptions
- Changes are less likely to be met with resistance
-Can be motivating if employees feel valued
-s=
-Difficult to implement in an already existing traditional management approach
-Employees usually fear being open to management about certain things
-Extensive training required to implement new system
What is a ‘Quality Circle’?
A group of workers who do the same or similar work, meeting regularly to identify, analyse and solve work related problems.
What is ‘Cell production’ style of production? What are some positives and negatives?
A lean production method
A form of team working where production processes are split into cells, each cell takes full responsibility for a specific unit of work
+s=
- Closesness of cell members can improve communication
- Can reduce time waste, improve efficiency through specialisation
- Quality improves
-s=
-Different cells may work at different speeds
- Company culture has to encourage trust
- Labourers need to be multi skilled incase there is a need to switch between cells
What is ‘Lean Design’ style of production? What are some positives and negatives?
A lean production method
Based on fast product design in order to rapdily adapt to changes in consumer preferences.
+s=
-If succesful, a business gets first mover advantage, allowing them to price skim
-s=
- HIGH COST on tech to both research, design and produce products in time
What is the traditional style of production? What are some positives and negatives?
The traditional style of production is known as ‘Just in Case’, is where the business hold lots of stock.
+s=
- EOS benefits, buying in bulk, lowering AC
- WIll spend less on delivery costs than JIT
- Less reliability on suppliers
-Easily react to unexpected increases in demand
-s=
- High storage costs
-Higher risk of stocks perishing and waste
