Business - Unit 4: Decision-making to Improve Operational Performance

Question 1

Cost and volume objectives

Answer 1

Unit costs per item
Contribution per unit

Question 2

Quality objectives

Answer 2

Reliability
Customer satisfaction

Question 3

Efficiency and flexibility objectives

Answer 3

Capacity utilisation
Order lead times

Question 4

Environmental objectives

Answer 4

Rate of energy efficiency
Percentage of supplies of raw materials from sustainable sources

Question 5

Innovation

Answer 5

Putting a new idea or approach into action

Question 6

Product

Answer 6

Launching new or improved products on to the market

Question 7

Process

Answer 7

Finding better or more efficient ways of producing existing products or delivering existing services

Question 8

Benefits of Innovation

Answer 8

Motivates workers
Improves waste reduction
Improved quality
Enhances reputation as a innovative company

Question 9

Drawbacks of Innovation

Answer 9

Hard to achieve
Customers might not want the product

Question 10

Internal influences on Operational Objectives

Answer 10

Corporate objective
Finance
Human Resources
Marketing issues

Question 11

External influences on Operational Objectives

Answer 11

Economic environment
Competitor efficiency and flexibility
Technological change
Legal and environmental change

Question 12

Capacity utilisation

Answer 12

Measures the extent to which capacity is used during a specific period

Question 13

Why is Capacity Utilisation important?

Answer 13

Useful measure of productive efficiency
Average production costs tend to fall as output rises
High level of capacity utilisation is required if a business has a high break-even output due to significant fixed costs of production

Question 14

Why do businesses operate below capacity?

Answer 14

Lower than expected market demand
A loss of market share
Seasonal variations in demand
Recent increase in capacity

Question 15

Drawbacks of high capacity

Answer 15

Less time for repairs
Stress for employees
Customer service may deteriorate
A business is less likely to be able to respond to sudden or unexpected increases in demand

Question 16

How to increase capacity

Answer 16

Increase workforce hours
Sub-contracts some production activities
Reduce time spent maintaining production equipment

Question 17

Labour Productivity

Answer 17

Measures the amount or value of output per employee

Question 18

What influences labour productivity?

Answer 18

Quality of the assets
Method of production organisation
Workforce is trained
Reliability of suppliers
Motivation

Question 19

Issues with trying to improve labour productivity

Answer 19

Potential ‘trade-off’ with quality
Potential for employee resistance
Employees may demand high pay for their improved productivity

Question 20

How to improve labour productivity

Answer 20

Measure performance and set targets
Streamline production processes
Invest in capital equipment
Invest in employee training
Improve working conditions

Question 21

Unit Costs

Answer 21

The average cost per unit produced as measured over a particular time period

Question 22

Economies of scale

Answer 22

The effect of unit costs falling as output rises

Question 23

Labour intensive

Answer 23

Has a relatively high proportion of it costs related to the employment of people

Question 24

Benefits of Labour intensive

Answer 24

Unit costs may still be low in low wage locations
Labour is a flexible resource through multi skilling and training
Labour at the heart of the production process

Question 25

Drawbacks of Labour intensive

Answer 25

Greater risk of problems with employee/employer relationship Potentially high costs of labour turnover Need for continuous investment in training

Question 26

Capital intensive

Answer 26

Relatively low labour costs, but high costs arising from the extensive use of equipment

Question 27

Benefits of Capital intensive

Answer 27

Greater opportunities for economies of scale Potential for significantly better productivity Better equality and speed Lower labour costs

Question 28

Drawbacks of Capital intensive

Answer 28

Significant investment Potential for loss

Question 29

Mass Customisation

Answer 29

An approach to production in mass to achieve lower unit costs with customisation

Question 30

Quality

Answer 30

Meeting the needs and expectations of customers

Question 31

What would quality look like to a consumer?

Answer 31

Good design Reliability Durable Value for money Good functionality

Question 32

Costs of poor quality

Answer 32

Product fails Product delivered late Unresponsive customer service

Question 32

Why is Quality important?

Answer 32

Unique selling point Brand image Brand loyalty

Question 33

Quality Control

Answer 33

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

Question 34

Advantages of Quality Control

Answer 34

It can help to prevent faulty goods and services being sold Not disruptive to production Improved reputation for quality

Question 35

Disadvantages of Quality Control

Answer 35

It does not prevent waste of resources Does not encourage all workers to be responsible for quality Process of inspecting goods or services costs money

Question 36

Quality Assurance

Answer 36

The processes that ensure production quality meets the requirements of customers

Question 37

Advantages of Quality Assurance

Answer 37

Ensures product is not faulty Stops customer complaints/gives better customer satisfaction

Question 38

Disadvantages of Quality Assurance

Answer 38

Time consuming Costs a lot of money to train staff Time consuming to train staff

Question 39

What are inventories?

Answer 39

Finished goods held by a firm to enable production and meet customer demand

Question 40

Why do businesses hold stock?

Answer 40

Meet demand Allow for seasonal changes Allow efficient production Enable production to take place

Question 41

Influences on holding inventory

Answer 41

Need to satisfy demand Need to manage working capital Risk of inventory losing value Costs of holding inventory

Question 42

Costs of holding inventory

Answer 42

Cost of storage Interest costs Obsolete costs Stock out costs

Question 43

Maximum level

Answer 43

Max level of inventory

Question 44

Re-order level

Answer 44

Acts as a trigger point

Question 45

Lead time

Answer 45

Amount of time between placing and receiving the inventory

Question 46

Minimum level

Answer 46

Minimum level of inventory

Question 47

Buffer stock

Answer 47

An amount of inventory held as a contingency in case of unexpected offers

Question 48

Lean Production

Answer 48

An approach to minimise waste

Question 49

What waste would a business try to reduce?

Answer 49

Over- production Waiting time Transport Defects Stocks

Question 50

Kaizen

Answer 50

Change for the better of continuous improvement

Question 51

Just in Time

Answer 51

Products arrived when they are needed

Question 52

Advantages of Just in Time

Answer 52

Reduces stock holding space Less working capital is tied up in stock Less likelihood of stock perishing Less time spent on checking and re-working

Question 53

Why are supplies important?

Answer 53

Closely linked to product quality Costs Good relationship

Question 54

Disadvantages of Just in Time

Answer 54

Need for complex specialist stock systems Little room for mistakes as minimal stock is kept for re-working faulty products Highly reliant on suppliers

Question 55

Characteristics of effective suppliers

Answer 55

Price Quality Reliability Communication Financially secure Capacity