3.4 DECISION MAKING TO IMPROVE OPERATIONAL PERFORMANCE Flashcards
(81 cards)
1
Q
Define ‘lead time’
A
The time between a supplier receiving an order and delivering it to you
2
Q
Define ‘re-order level’
A
The inventory level at which new stock is ordered (trigger point)
3
Q
Define ‘minimum level’
A
The minimum amount of product a business wants to hold in stock
4
Q
Define ‘maximum level’
A
The maximum stock a business can or wants to hold
5
Q
Define ‘buffer stock’
A
Stock held just in case of unexpected orders or supplier delays
6
Q
Axis on a stock control chart
A
Y-axis = Stock Held, X-axis = Time
7
Q
Factor affecting lead time
A
How long it takes for the supplier to deliver
8
Q
High lead time effect on re-order level
A
Higher re-order level needed
9
Q
Stock-out effect on re-order level
A
Higher re-order level and quantity needed
10
Q
Demand effect on re-order level
A
Higher demand = higher re-order levels
11
Q
Define ‘minimum level’ (Stock Control Charts)
A
Minimum amount of product the business would want to hold in stock
12
Q
Define ‘maximum level’ (Stock Control Charts)
A
Max level of stock a business can or wants to hold
13
Q
Define ‘buffer stock’ (Stock Control Charts)
A
An amount of stock held just in case of unexpected orders so that orders can be met just in case of any delays from suppliers.
14
Q
Axis on a stock control chart
A
Y = Stock Held
X = Time
15
Q
Factor affecting lead time
A
How long it takes for the supplier to deliver
16
Q
How would a high lead time affect re-order level?
A
Need a higher re-order level
17
Q
How would a stock-out (running out) affect re-order level?
A
Need high re-order level & quantity
18
Q
How would demand affect re-order level?
A
Higher demand normally means higher re-order levels
19
Q
Definition of ‘outsourcing’
A
Delegation of one or more business processes to an external provider
To a business specialized in tasks and can do it better and cheaper
20
Q
Main reason for outsourcing
A
Way of reducing costs
21
Q
How will outsourcing improve quality?
A
The supplier of the outsourcing will be more specialised in the specific field
22
Q
Disadvantages of outsourcing
A
Supplier will have other customers to focus on
Lack of flexibility, fixed contract
Loss of some control
Potential security risks
Reduces quality control
23
Q
Why would a business use In-House rather than outsourcing
A
Easier communication
May be a small fix so no outsourcing required
Easier to ensure and trace problems
Business has 100% control, less risk
24
Q
What makes an effective supplier?
A
Fair price
Quality
Reliability (e.g. delivery times)
Communication
Financially secure
Sustainable capacity available
25
Define a 'strategic supplier'
Business can't succeed without maintaining an effective supplier relationship
Supplies goods difficult to get anywhere else
26
Define a 'commodity supplier'
Provides goods that can be easily bought elsewhere
Aren't hugely important to a business
27
Ways to choose a supplier
Word of mouth
Exhibitions / events
Trade websites
Directories
Advertising
28
Key contents of a service agreement with a supplier
What
When
How much it will cost
Disputes
Termination (when the contract ends)
29
Define 'trade credit'
Where a business receives goods from supplier and pays later
30
Disadvantage of using trade credit
Can damage the relationship with suppliers if left too long
Opportunity cost of discounts
31
Define 'operational objectives'
Any part of a business that is involved in developing a product ready for customer use
Responsible for taking resources – such as raw materials and business' workforce – and using them to create finished goods or services
Ensures the business produces the 'right' goods for its customers
32
Advantages of outsourcing
Saves time
Reduces costs
Expertise: reduces risk of doing the job badly
Increased efficiency
33
Advantages of setting 'operational objectives'
Acts as a focus for decision making
Provides benchmark against which success or failure can be measured
Improves co-ordination
Improves efficiency
34
Examples of 'operational objectives'
Costs
Quality
Dependability
Added value
Flexibility
Speed of response
35
Advantage of having low unit costs
Enables a business to either keep the price low or enjoy a higher profit margin by keeping prices at their same level
36
Equation for 'unit costs'
Total costs / Units of Output
COST PER ITEM
37
Contextual example of unit costs
From maintaining low unit costs, Aldi have gained 6.9% market share and gain customers from the other big stores such as Tesco
This is all down to having these low unit costs, they can make their prices lower so it seems more appealing to customers
38
How would a business achieve low unit costs?
Reduce fixed costs
Reduce variable costs per unit
39
Ways of measuring quality
Customer satisfaction ratings
Customer complaints
Level of product return
Scrap rate: number of items rejected during production process
Punctuality (of deliveries)
40
Define 'scrap rate'
Number of items rejected during production process
Can judge if production is effective/working
41
Equation for 'punctuality'
Deliveries on time / Total deliveries (x100)
42
Advantages of high labour productivity
Increase output without affecting costs
Reduce costs without affecting output
43
Customer's perspective of quality may be influenced by…
Price
Brand
Customer service / impression made
44
Ways to express quality (product)
Aesthetics
Features
Core / actual aspects
Performance
Tangible / intangible aspects
45
Ways to express quality (service)
Friendliness of staff
Speed of service
Efficiency of service
Staff knowledge
Cleanliness of facilities
Appearance of environment
46
Advantages of 'quality assurance'
Positive effect on staff morale: gives them more responsibility, motivating
Lower wastage levels: faults identified earlier
Confidence in product performance: achieves certification and total assurance
47
Disadvantages of 'quality assurance'
Relies on commitment / motivation of employees
Additional training costs
Training takes time
Production process may take longer / be delayed = longer lead time for buyers
Accreditation for quality assurance does not ensure 100% quality
48
Example of Quality Assurance System
Total Quality Management (TQM)
ISO9000
49
Define 'ISO9000'
Family of quality management systems - set of standards that helps organizations ensure they meet customer needs
Set of internationally recognized standards
Lays out best practices, guidelines, and a standard vocabulary for quality management systems.
50
Dissect 'ISO9000'
Clear quality targets
System to achieve targets
System to measure results
Resources to take correct actions
51
Define 'Total Quality Management'
Sees quality as the responsibility of all employees
Each employee is a link in the chain and treats the next link as if they were an external customer
Employees will only pass the product on if correct
Philosophy of get it right first time
52
Why is quality important?
Can help achieve lower unit costs (less waste)
Positive image to customers: reputation
USP (Unique selling points)
Helps make pricing decisions
Improved competitiveness
53
Define being 'competitive'
Having a competitive advantage over other competitors
54
Examples of waste in a business
Over-production
Waiting time: idleness
Transport: fuel
Stocks: buffers stock- could go out of date
Motion: a worker who appears busy but isn't adding any value
Defects: output that doesn't reach required quality standards
55
Define 'Critical path analysis'
Identifies tasks which must be completed on time for the whole project to be completed on time. It also identifies which tasks can be delayed if resources need to be reallocated to catch up on missed or overrunning tasks.
56
Benefits of effective time management ('time-based management')
Quicker response times (reduced lead time) to meet changing market and customer needs
Faster new product development
Reduction in waste, therefore more efficient
57
Benefits of 'simultaneous engineering'
New products brought to the market quicker
Business able to charge premium prices
Less likelihood of a need to modify the product later due to unforeseen problems
A greater sense of involvement across business functions improves staff commitment to the project
Source of competitive advantage
58
Disadvantages of 'simultaneous engineering'
Complex to manage
Communication is critical: relies on everyone working together
Room for mistakes is small as it impacts all the departments or disciplines involved
59
Disadvantages of 'cell production'
Workers may feel pushed
Businesses may need to invest in new materials and ordering systems suitable for cell production
May not allow a firm to use machinery as intensively as in traditional flow production
Recruitment and training must support this approach of production
60
Define 'internal economies of scale'
As a business grows in size and increases its level of output, cost per unit will fall
61
Explain 'purchasing' (internal economies of scale)
Becomes cheaper for larger businesses to produce a unit of output when they grow and expand. As can purchase all of their stock and raw materials in bulks. Because they are conducting large orders with suppliers, may get discounts.
62
Explain 'marketing' (internal economies of scale)
As a business grows/expands, it can spill its marketing costs over more units of production. Purchasing advertising space in large quantities and can therefore get discounts.
63
Explain 'technical' (internal economies of scale)
Larger businesses can afford to invest in greater mechanisation, more up-to-date machinery, which can produce more products in a given time (more productive). This drives down unit costs.
64
Explain 'managerial' (internal economies of scale)
When a business is smaller, it may not be able to invest in much specialisation. As a business increases its scale of operations and produces in larger quantity, it becomes more sustainable for the business to recruit specialist managers.
65
Explain 'financial' (internal economies of scale)
As a business expands/grows, they have more access to sources of finance. They can obtain bank loans with better interest, becoming more of a valuable client to banks.
66
Define 'external economies of scale'
As a business grows in size and increases its level of output, cost per unit will fall. All organisations in the industry benefit from a reduction in costs, not just one firm. Business-enhancing factors that occur outside a company but within the same industry.
67
Examples of 'external economies of scale'
Having many specialist suppliers close-by. Access to R&D facilities. Pool of skilled labour close-by.
68
Define 'mass customisation'
A.K.A. build-to-order. Marketing and manufacturing technique that combines flexibility and personalisation to custom-make products with the low unit costs associated with mass production.
69
Define 'mass customisation'
A.K.A. build-to-order. (Marketing and manufacturing technique) combines flexibility and personalisation to custom-make products with the low unit costs associated with mass production. Output is tailored to the requirements of the customer.
70
Define 'collaborative customisation'
Identifying the range of needs of your customers and then offering them products which match these needs. So, you collaborate through research and dialogue with customers to figure out the areas where variation is most desired.
71
ID
Front
72
134
Define 'adaptive customisation'
73
135
Define 'transparent customisation'
74
136
Define 'cosmetic customisation'
75
137
Benefits of 'mass customisation'
76
138
Drawbacks of 'mass customisation'
77
139
Contextual examples of mass customisation
78
140
What does a business need to make 'mass customisation' work?
79
141
Define 'producing-to-order'
80
142
Benefits of 'producing-to-order'
81
143
Define 'obsolescence'
