Chapter 20 The nature of Operations Flashcards Preview

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Flashcards in Chapter 20 The nature of Operations Deck (20):

What is Operations Management?

‘Operations’ is concerned with the use if resources
called inputs – land, labour and capital – to provide
outputs in the form of goods and services


operation managers are concerned with?

1 Efficiency of production – keeping costs as low as possible will help to give competitive advantages
2 Quality – the good or service must be suitable for the
purpose intended
3 Flexibility – need to adapt to new processes and new
products is increasingly important in today’s world


What is the production process?

1 In all businesses at all stages of production, the
production process is basically the same
2 ‘Inputs’ are converted or transformed into ‘outputs’ and
this is sometimes called the ‘transformation’ process
3 This process applies to manufacturing and service
4 By ‘production’ we mean the making of tangible goods,
such as computers, and the provision of intangible
services, such as banking
5 The aim in all cases is to ‘add value’ to the inputs bough in by the business so that the resulting output can be sold at a profit


The production process

Outputs - finished goods, services, components for other firms.
Production Process
Inputs- land, labour, capital


How can value be added through the production process?

1 The design of the product
2 The efficiency with which the input resources are combined and managed
3 The impact of the promotional strategy on convincing consumers to pay more for the product than the cost of the inputs


What are the production Inputs?

1 Land – all businesses require somewhere to operate from
2 Labour – all business activity requires some labour input
3 Capital – this refers to the tools, machinery, computers and other equipment that businesses use to produce the goods and services they sell


What is production?

Production means converting inputs into outputs


What is productivity?

Productivity is the ratio of outputs to inputs during production, e.g. output per worker per time period


What is the level of production?

The level of production is the number of units produced during a time period


How to calculate Labour productivity(number of workers)?

Total output in a given time period
Total workers employed


How to calculate Capital productivity

capital employed


How to raise productivity levels?

1 Improve the training of staff to raise skill levels
2 Improve worker motivation
3 Purchase more technologically advanced equipment
4 More efficient management


What is Efficiency?

Efficiency means producing output at the highest ratio of output to input


What is effectiveness?

Effectiveness means meeting the objectives of the business by using inputs productively to meet customers’ needs


What is meant by labour intensive?

Labour intensive means involving a high level of labour input compared with capital equipment


What is meant by Capital intensive?

Capital intensive means involving a high quantity of capital equipment compared with labour input


Labour intensive Advantages

1 Marketing advantages of a ‘hand-built’ image
2 More suitable for certain types of job production


Labour intensive Disadvantages

1 Not as cost effective as capital intensive production
2 Not as efficient as capital intensive production


Capital intensive Advantages

1 Substantial opportunities for economies of scale and unit-cost reductions offered by large-scale capital utilisation


Capital intensive Disadvantages

1 Fixed costs tend to be high and the cost of financing the purchase of equipment can be beyond some businesses
2 Maintenance costs are often high
3 Technological change may render capital equipment obsolete and relatively inefficient