Operations Flashcards
operational objectives
- quality
- costs
- efficiency
- innovation
- environment
- speed of response
internal factors influences operational objectives
- nature of product - tech products have a focus on innovation
- avaliability of resources- increasing output requires capacity
- other departments- finance, marketing, HR
- overall objectives- if business is very environmentally friendly this must be considered
external influences on operational objectives
- competitors performance
- market conditions
- demand for product- flexibility of production to ensure output doesn’t go over demand
- changing customer needs
- new technology
Added value
sales revenue – cost of Brought in goods and services
Capacity utilisation formula
(current output/max capacity) x 100
effects of high capacity over 90
- decline in quality
- potentially need to turn away customers
- NO downtime = machines are on ALL the time
- NO margin of error
- can’t temporarily increase capacity , to deal with increase in demand
- potential surplus stock if output is higher than demand
How to increase capacity
operating more and for longer
- buying more machines
- increase staff levels
- increase productivity
- if demand increase is temporary they could sub-contract employees
Effects of low capacity utilisation
- increase costs/ unit costs
-
Dealing with under- utilisations (low capacity)
- aim to increase demand = changing marketing mix
- subcontracting work for other firms
- reduce capacity by closing down stores
- reducing overtime, allocating staff to work for other businesses, not renewing temporary contracts (SHORT TERM)
- redundancy, selling off equipment (LONG TERM)
Labour productivity calculation
output during period/ number of employees
How to increase labour productivity
- improving employee motivation
- training
- new technology
Lean production
keeping waste to a minimum
- save business costs
- can allow businesses to meet objectives like reducing costs, being environmentally friendly etc
- JIT, time- based management, Kaizen
JIT
holding little stock, all orders are made just in time for when customers order them
- lower storage costs
- improved cash flow, less money tied up in stock
- customers cannot be supplied during production strike
- supplier HAVE to be reliable
Time- base management
reducing wasted time within the businesses production process.
- allows companies to compete on time, by getting there products to the market quickest
- depends on flexible production techniques
- effective communication between manages and staff is essnential, NEED FOR CULTURE TRUST
- staff need to be multi skilled- training is important.
Advantages and disadvantages of capital intensive business
- cheaper than manual labour in the long term
- machinery is often more precise = limits human error
- machinery is able to work 24/7
-machines are easier to manage than people
HOWEVER - high set up costs
- machines are inflexible
- machines break downs take longer to fix
- fear of workers being replaced by machines can lead to decreased employee motivation.
advantages and disadvantages of labour intensive production process
- people are flexible and can be retained
- cheaper for small- scale production
- cheaper where low labour costs are available (China)
- workers can solve any problems that arise during production and suggest ways to improve quality
HOWEVER - its harder to manage people
- people can be unreliable
- people can’t work without breaks/holidays
- wage increases mean increases in costs
-labour costs as a percentage of turnover are high
Quality control
- assumes errors are unavoidable
- detects error and puts them right
- quality control inspectors check other peoples work and are responsible for quality
Quality assurance
- asumes you can avoid errors
- prevents error and aims to get it right first time
- employees check their own work. Workers are responsible for passing on good faulty work
Affects/ Needs for quality assurance
- empowering for employees therefore highly motivating
- training is very important
- ## workers must be motivated and committed
Total quality management
Meaning the whole workforce is committed to quality improvements Adv: - helps build team morale - boosts company reputation - fewer faulty products being made Disadv: - time consuming - can demotivate staff - usually expensive to introduce (Training)
Quality circles
Groups that meet regularly to discuss quality control issues
- knowledge of employees from various departments
- great way to get staff involved and improve motivation and productivity
- however suggestions can sometimes be unrealistic and management may not listen
Kaizen
Lean production method, employees should be improving their work slightly all the time
- employees have some control over decision making
- helps workers feel involved in quality assurance
- cheap to introduce
- not great when businesses are need of urgent improvements to quality
- firm needs to be committed to methods in the long term
Disadvantages of holding stock
- high storage costs
- wastage costs (perishable goods )
- opportunity costs - business could potentially invest the capital they have tied up in stock
Stock control element s
Lead time - the time it takes to receive goods after ordering them from supplier
buffer stock - the stock a business needs to have when they re-order to prevent them running out
Re-order quantity- the amount the company orders from supplier
