3.4 - OPERATIONAL PERFORMANCE Flashcards
1
Q
what are operational objectives?
A
- objectives that help a company achieve its overall goal
- operational decisions will become focused on meeting these objectives
2
Q
operational objectives - COSTS
A
- may aim to cut costs, especially of competing on price
- firm can cut either fixed or variable costs
2
Q
operational objectives - QUALITY
A
- involve maintaining/improving quality
- eg -> may aim to reduce customer complaints on quality
3
Q
operational objectives - FLEXIBILITY
A
- need to react to what customers want
- eg need to vary amount of goods and services they produce
4
Q
operational objectives - EFFICIENCY
A
- aim to make better use of resources to decrease costs and increase profits
- may mean increasing capacity utilisation
5
Q
operational objectives - INNOVATION
A
- can set R&D department innovation targets
- these can be hard to reach, as unexpected problems often occur
6
Q
operational objectives - ENVIRONMENT
A
- pressure from customers and the government often leads to forms setting environmental objectives, like cutting carbon emissions’
7
Q
operational objectives - SPEED OF RESPONSE
A
- the speed which a business operates is important
- may mean decreasing production time or decreasing the wait time for customers
8
Q
added value
A
- adding value means increasing the difference between the cost of raw materials and the price that customers pay
- can be achieved by increasing selling price or by reducing costs of raw materials
9
Q
internal factors influencing operational objectives
A
- nature of product
- availability of resources
- other departments (finance, marketing, HR)
- overall objectives
10
Q
external factors influencing operational objectives
A
- competitors performance
- market conditions
- demand for product
- changing customer needs
- new technology
11
Q
methods of production - job production
A
- one-off items by skilled workers
12
Q
methods of production - flow production
A
- mass production on a continuous production line
13
Q
methods of production - batch production
A
- production of small batches of identical items
14
Q
methods of production - lean production
A
- streamlined production with waste at a minimum
15
Q
what is capacity utilisation?
A
- capacity is the max amount a company can produce
- capacity utilisation is how much capacity a business is using
- will depend on number of employees, technology, production process, investment
16
Q
100% capacity utilisation is bad
A
- 100% and good quality is hard
- may have to turn away customers as cant produce anymore
- no downtimes for machines, can cause problems if something breaks
- no margin of error
- can’t temporality increase output when high demand
17
Q
under-utilisation
A
- low capacity
- inefficient as it means business are not getting use out of their machines
- can be dealt with trying to increase demand or reducing capacity
18
Q
labour productivity
A
- companies need to know how productive their workforce is as it can have a massive impact on the business
- the higher the about productivity, the better the workforce is working
19
Q
ways to increase labour productivity
A
- improving worker motivation
- training
- new technology
20
Q
lean production
A
- keeps waste to a minimum
- inefficient production methods costs, so lean production can save business lots of money
- lean production methods include, just-in-time, time-based management, kaizen
21
Q
just-in-time
A
- aims to reduce waste by having as little stock as possible
- less waste, reduced storage costs, more flexible
- problem when production strikes and suppliers have to be reliable
22
Q
time-based management
A
- reduces waste in the production process
- often used with high fashion brands trying to get on the market fastest
- reduces lead time, customers satisfied quicker, help drive innovation
- however there’s complaints about speed being over quality
23
Q
advantages of technology
A
- increased productivity
- reduced waste
- more effective and efficient delivery
- more effective marketing
- reduce administrative costs
- better communications
24
disadvantages of technology
- high initial cost
- may require maintenance + consistent updating
- increase in staff training
- may replace staff - redundancies
25
what is a capital intensive firm?
- when businesses use more machinery and fewer workers
- larger firms tend to be more capital intensive
26
advantages of a capital intensive firm
- cheaper than manual labour in the long term
- more precise than human workers
- able to work 24/7
- easier to manage then people
27
disadvantages of capital intensive firms
- high initial costs
- usually only suited to one task (inflexible)
- breakdowns can lead to long delays
- fear of being replaced by a machine can cause motivation to decrease
28
what is a labour intensive firm?
- uses more workers and less machinery (eg NHS)
- labour intensive firms are more common when labour is cheaper
29
advantages of labour intensive firms
- people are flexible and can be retrained
- cheaper for small-scale production
- workers can solve problems and suggest ways to improve quality
30
disadvantages of labour intensive firms
- harder to manage people
- people can be unreliable
- people need breaks
- wage increases mean that labour costs can become very expensive
31
quality control
- means checking goods as you make them or when they arrive from suppliers to see if anything is wrong with them
- massumes errors are unavoidable
- detects errors + puts right
32
quality assurance
- introducing measures into production process to ensure things don't go wrong
- assumes that errors are avoidable
- prevents errors and aims to get it right first time
- self-checking system
33
total quality management
- means the whole workforce is committed to quality improvements
- idea is that every department focuses on quality to improve the overall quality of the products and services
34
advantages of TQM
- involves all employees and helps them bond as a team
- TQM boots a company's reputation for providing quality goods
- usually leads to fewer faulty products being being made, reducing waste
35
disadvantages of TQM
- can take along time to introduce TQM, may not see immediate improvement
- can demotivate staff as it takes a lot of effort
- usually expensive to introduce, often involves investing in training
36
Quality circles
- meet regularly to discuss quality control issues
- use knowledge of employees from various departments
- aim to identify and solve quality problems
- get staff involved which can increase motivation and productivity
37
Kaizen
- lean production
- continuous improvements in the business
- employees on the bottom line are given some control over decision making
- cheap to introduce
- not great for urgent needs to change
38
stock control
- aims to keep stock level just right as it's costly to hold lots of stock
- amount of buffer stock needed depends on storage space and the type of product
- the longer the lead time (time for goods to arrive after ordering from supplier)
- inventory control charts allow managers to analyse and control stock over a period of time
39
supply chains
- consists of the group of firms that are involved in all the various processes required to make a finished product or service available to customer
- all members need to be dependable, as it could lead to poor quality and a bad reputation
- businesses also need to be flexible on the time taken to supply goods and the volume of goods they supply
40
outsourcing
- when businesses contract out some activities to other businesses rather than in-house
- can benefit from specialist knowledge of other businesses they outsource to, also means businesses don't have to pay for permanent staff when only needed occasionally
- however no control over the quality of outsourced work
41
mass customisation
- method of producing to order, combines flexibility with low cost mass production
- with mass customisation a company must have a flexible and efficient production process and supply chain
- allows greater customer choice and competitive advantage
- however can be very difficult for a business to be efficient this way
42
important factors to consider when managing supply chains
- price
- payment terms
- quality
- capacity
- reliability
- flexibility
43
how can companies build relationships with suppliers
- linked networks (shared IT systems)
- JIT systems
- shared costs
- innovation (sharing ideas)
44
economies of scale
- as a business grows, costs will fall
- eg bulk buying or mass production decreasing unit costs
45
diseconomies of scale
- occurs when firms become too large/inefficient
- eg bad communication, bad coordination, lack of motivation
