Decision making to improve operational performance (4) Flashcards
(62 cards)
1
Q
What are operational objectives?
A
Targets set for the production of goods and services
2
Q
What are the main operational objectives of business?
A
- Quality (maintaining or improving)
- Low costs, High volume-
- Efficiency/ flexibility
- Dependability
- Environmental targets
3
Q
What is the formula for added value?
A
Added value= Sales revenue-costs of making product
4
Q
How can added value be achieved?
A
- Increasing selling price
- Reducing costs
5
Q
What are the internal factors influencing operational objectives?
A
- Nature of the product
- Availability of resources
- Other departments (finance, marketing, HR)
- Overall objectives
6
Q
What are the external factors influencing operational objectives?
A
- Competitors’ performance
- Market conditions
- Demand
- Changing customer needs
- New technology
7
Q
What are the five common production methods?
A
- Job
- Flow
- Batch
- Cell
- Lean
8
Q
What is the capacity of an organisation?
A
The maximum output it is able to produce in a give time
9
Q
What does capacity depend on?
A
- Number of employees and their skill
- Technology
- Production process
- Investment into business
10
Q
What is the formula for capacity utilisation?
A
Capacity Utilisation= (Output/capacity)*100
11
Q
Why is it not optimal to operate at 100% capacity utilisation?
A
- Quality may not be maintained
- May not be able to cope with an increase in demand
- Machines are on all the time- no time for maintenance
- No margin for error
- If output> demand there will be surplus stock (not good to have working capital tied up in stock)
12
Q
How can firms increase capacity?
A
- Use facilities for more if the working week
- Buy more machinery
- Recruit new staff or ask staff to work overtime
- Reallocating staff to busy areas
- Increase employee motivation
- Subcontract work
13
Q
What is subcontracting?
A
When a business uses another firm to do work on its behalf
14
Q
Why does under-utilisation lead to an increase in unit costs?
A
Fixed costs are spread over a smaller output, when capacity utilisation increases the output increase without fixed costs increasing lower unit cost
15
Q
What is the formula for unit/ average cost?
A
Unit cost=Total costs/ output
16
Q
How can a business deal with under-utilisation ?
A
- Increase demand
- Reduce capacity
17
Q
How can a business increase demand?
A
- Change marketing mix
- Subcontracting work for other firms
18
Q
How can a business reduce capacity?
A
- Rationalisation
- Stopping overtime and reducing length of working week
- Not replacing staff when retired
- Making staff redundant
- Selling of assets
19
Q
What is rationalisation?
A
Reducing capacity by closing part of their production facilities
20
Q
What is productivity?
A
Output per worker in a given time period
21
Q
What is efficiency?
A
Getting more output for a given amount of inputs
High efficiency -> lower unit costs and higher profits
22
Q
What is the formula for Labour productivity?
A
Labour productivity= total output/ no. Employees
23
Q
How can labour productivity be increased?
A
- Improving motivation
- Training
- New technology
24
Q
What are the negatives for increasing labour productivity?
A
- If workers are encouraged by bonuses quality may suffer and more waste produced
- If capacity isn’t increased workers may become redundant reducing morale
- New technology can be expensive and may not be worth the investment
25
What is lean production?
An efficient form of production which aims to keep waste to a minimum.
26
What are the benefits of lean production?
- Lower costs
- More value-added
- Better for environment
27
What are three examples of lean production
- Just-in-time
- Time-based management
- Kaizen
28
What is just-in-time production?
A form of production which aims to reduce waste by holding as little stock as possible, supplies are delivered as needed.
29
JIT ADVS
- Lower storage costs
- Better cash flow
- Less waste
- More flexibility, easy to adapt products
30
JIT DISADVS
- Dependent on supplier
| - No spare stock if maintenance is needed or there is a spike in demand
31
What is time-based management?
An approach which aims to reduce wasted time in the production process.
32
Time-based management ADVS
- Reduced lead times (time between order and delivery) so the cost of holding stock falls and customer needs are satisfied quicker
- Helps drive innovation
33
Time-based management DISADVS
-May sacrifice quality
34
What are the two main technologies used by business'?
- Robotic engineering: robots in the manufacturing process
| - Computer technology: product development, business communications, finance departments
35
What are the advantages of using robots?
Makes the production process faster and cheaper
36
What are the disadvantages of using robots?
May lead to staff becoming demotivated
37
What developments in IT can make companies more efficient?
- Computer-aided design: helps with designing and visualising new products
- Computer-aided manufacturing
- 3D-printing
- Computers make managing stock easier
- Spreadsheets: useful in marketing and finance
- Email: for communication
- Internet helps reach a wider customer base 24/7
38
Technology ADVS
- Increased productivity and quality
- Reduced waste
- More effective and efficient delivery of goods and services to the customer
- More effective marketing campaigns through customer targeting
- Reduced admin and finance costs
- Better internal and external communication
39
Technology DISADVS
- High initial costs
- Expensive to maintain and update
- Staff training needed
- Staff redundancies if technology replaces workers
40
What is a capital-intensive firm?
A business that uses more machinery and few workers
41
Capital-intensive ADVS
- Cheaper than manual labour in the long term
- More precise and consistent quality
- Able to work 24/7
- Machinery is easier to manage than people
42
Capital-intensive DISADVS
- High set-up costs
- Machines are usually only suited to one task making them inflexible
- Delays if machinery breaks
- Workers may be demotivated with the fear of being replaced
43
What is a labour-intensive firm?
A firm that uses more workers and less machinery e.g. NHS
44
Labour-intensive ADVS
- People are flexible and can be retrained
- Cheaper for small scale production
- Cheaper where low-cost labour is available e.g.China
- Workers can solve problems in production and help improve quality
45
Labour-intensive DISADVS
- Harder to manage people than machines
- People can be unreliable
- People need breaks and holidays
- Wage increases mean costs can rise
- Labour costs as a % of turnover are high
46
Optimum resource mix
The mix of resources which allows for the greatest business efficiency
47
Advantages of high quality goods
- Increased customer satisfaction and improved reputation
- Can charge premium prices
- Workers will be proud and more motivated
- Reduced costs and increased revenue
48
Why does high quality lower business costs and increase revenue?
- Less materials and worker machinery wasted by mistakes
- Less promotion needed to persuade shops to stock goods
- Fewer complaints and refunds
- No need for discounts to sell damaged stock
- Quality acts as a USP
- Improved image and reputation
- Easier to keep and gain new customers
49
Disadvantages of high quality goods
- Hard to improve quality efficiently
- Can be expensive for the business
- Workers may feel stressed
- If a company outsources it can be hard to match quality
50
What are the two many method of checking quality?
- Quality control
| - Quality assurance
51
What is quality control?
-When quality inspectors check for errors after the good is made or it arrives. It assumes errors are unavoidable.
52
What is quality assurance?
Introducing measures into the production process to ensure things don’t go wrong in the first place. It assumes errors are avoidable and all employees are responsible.
53
Quality assurance vs quality control (Pros Cons)
- Empowering employees in quality assurance provides motivation
- But staff need to be better than trained and workers must be motivated and committed
- Quality assurance could lead to products only being ‘acceptable’, not high quality
54
What is Total Quality Management?
An approach to quality which means the whole workforce is committed to ensuring the quality of the product.
55
TQM ADVS
- Helps employees to bond as a team
- Boosts reputation
- Fewer faulty products= less waste
56
TQM DISADVS
- Can take a long time to introduce
- May demotivate staff if they are always thinking about quality
- Expensive to introduce, lots of training
57
What are quality circles?
Groups of employees which meet regularly to discuss quality issues. They aim to identify and solve specific issues.
58
Quality circles ADVS
- More staff involvement= increased motivation and productivity
59
Quality circles DISADVS
- Suggestions may be unrealistic
| - Management may not listen to floor staff
60
What is kaizen?
A lean production methods with a focus on employees always aiming to improve their work.
61
Kaizen ADVS
- Helps workers feel involved in quality assurance
| - Cheap to introduce
62
Kaizen DISADVS
- Not good if a business urgently needs to improve quality, good for long term though
