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Component 1 Functions. > Operations > Flashcards

Operations Flashcards

1
Q

What is added value?

A

The difference between the selling price of a product and the cost of bought in materials and components.

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2
Q

How is added value different to profit?

A

Profit considers all costs.

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3
Q

How can a business increase added value?

A

-Cheaper raw materials.
-Customer loyalty and brand image.
-Increase selling price.
-Add features.
-Offer convenience.
-Improve efficiency of production.

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4
Q

Benefits of added value?

A

-Creates customer loyalty.
-Can increase profit margins.
-Spread risks.
-Higher prices can be charged.
-Job security for employees.
-Higher dividends and better image for shareholders.
-More convenient and better quality for customers.

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5
Q

Limitations of added value?

A

-No guarantees that adding value will be able to be covered with higher prices.
-Higher prices need to cover higher costs could reduce demand.
-Difficult in competitive markets because can choose cheaper alternatives.

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6
Q

What is job production?

A

-Making products one at a time, usually to the buyer’s specification.
-Wedding cakes, buildings, suits.
-Made by highly skilled workers.

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7
Q

Benefits of job production?

A

-High quality products so a high price can be charged as they have lots of added value.
-Workers are motivated.
-Can be differentiated.

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8
Q

Drawbacks of job production?

A
  • Unit costs are higher than using flow production.
    [Labour intensive processes, so cannot use machinery as much]
  • Requires skilled employees who may demand higher wages and/or ongoing training
  • Takes longer to produce.
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9
Q

What is batch production?

A

-Making a limited number of identical products in batches.
-At each of production, the work is completed for all the products before moving on to the next stage.
-Semi skilled workers.
-Bakeries and furniture.

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10
Q

Benefits of batch production?

A

-Lower cost per unit and higher output than job.
-Can access economies of scale.
-More motivating than flow.
-Can still differentiate.

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11
Q

Drawbacks of batch production?

A

-Time is lost when resetting machines/switching methods.
-May not be able to deal with large numbers.
-Products are not as bespoke.

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12
Q

What is flow production?

A

-Involves identical products being made on an assembly line. The product is made in stages, with parts being added as it moves along the assembly line.
-Production is broken down into simple tasks so machinery/robots can be utilised.

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13
Q

Benefits of flow production?

A
  • Businesses can produce on a larger scale
  • Uses less labour than job production
  • Consistent quality standard, because of division of labour.
  • Lower unit costs than job production
  • Economies of scale
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14
Q

Drawbacks of flow production?

A
  • Production can be inflexible due to use of machinery (little variation of products)
  • Jobs are repetitive for staff and can lower motivation
  • Initial set up and purchase costs can be high
  • Can’t differentiate products.
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15
Q

What is productivity?

A

the efficiency with which a production or service activity converts inputs into outputs, expressed as ratios

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16
Q

What is labour productivtiy?

A

output/number of workers

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17
Q

what is capital productivity?

A

output/capital employed.

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18
Q

What is overall productivity?

A

output/number of employees and machines.

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19
Q

What is revenue contribution of machines/workers?

A

Sales revenue/number of workers ormachines.

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20
Q

What affects productivity?

A

-amount of capital equipment accessible
-amount of eduction/training of employees
-motivation.
-supply issues.
-experienced staff leaving.

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21
Q

How can productivity be improved?

A

-training.
-Improve motivation.
-Invest in new technology/machines.
-Retention schemes.
-Better quality raw materials so less are wasted.

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22
Q

What are the advantages of high productivity?

A

-Increased economies of scale and competitiveness.
-Spreads fixed costs over a higher output.
-Lower cost per unit.
-Higher performance bonuses.
-Higher dividends for shareholders.

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23
Q

What is capital utilisation?

A

The percentage of total capacity that is actually being achieved by the business.

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24
Q

How to calculate capital utilisation?

A

(current output/full capacity) x100

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25
Q

Why can businesses be below full capacity?

A

Lower demand, inefficiency, increases capacity has not been matched with demand.

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26
Q

What are the problems of spare capacity?

A

-Demotivaiton of staff because no overtime available or the threat of redundancy.
-Increased costs to a business (redundancy payments).
-Reduced profits.
-Lack of return on investment capital.

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27
Q

How can businesses deal with increased demands?

A

-Increase workforce hours.
-Subcontract production.
-Purchase new equipment.

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28
Q

How does increasing demand solve under utilisation?

A

-Advertising, product development and innovation.
-Increased production means utilisation rises.
-However, demand will not overcome inefficiency, and some products may not have inelastic demand.

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29
Q

How can subcontracting solve under utilisation?

A

-Someone else produces goods for you.
-Reduces the capital investment required so there is is reduction in risk.
-Can lead to difficulty in quality control and higher prices, so customers may be dissatisfied.

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30
Q

How does rationalisation solve under utilisation?

A

-Concentrating on core products.
-Most efficient at producing these and also reduces the overall full capacity, so percentage is likely to increase.
-Customers can be lost.

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31
Q

How can use of assets solve under utilisation?

A

-Retailers can sublet to other businesses.
-Manufacturers can look into new product ranges or be subcontractors for other businesses.

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32
Q

What are the problems with working at full capacity?

A

-Stressed and overwokred workforce.
-Negative effect on quality in production is rushed or if there is no time to quality check.
-Miss out on sales as you cannot deal with a sudden increase in demand.
-More machine break down/failures.St

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33
Q

Strengths of using capital utilisation?

A

-Indicates how effectively resources are used.
-As utilisation rises, cost per unit falls.

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34
Q

Weaknesses of using capacity utilsation?

A

-Higher utilisation, more negative effects on quality.
-Pressures on workforce.

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35
Q

What new technology is used in operations?

A

CAD, CAM, computer modelling, robotics, I.T.

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36
Q

CAD:

A

-Computer aided design.
-The use of computers to design new products or altering existing designs.
-Quicker design process and less likely to make mistakes.
-The output is a file that you can send to clients or straight to CAM.
-Cheap but need to have the skills to use.

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37
Q

CAM:

A

-Computer aided manufacturing.
-Computer programmed to operate robotics and manufacture products using CAD output.
-More efficient and can work 24/7, and there is more consistent quality.
-More expensive and needs specialist workers.

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38
Q

Computer modelling:

A

A computer program that attempts to simulate an abstract model of a particular system.
-Can answer many what if scenarios.
-Will improve the customer experience because more scenarios are considered.

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39
Q

I.T:

A

-Pre-formatted letters, spreadsheets and cash flow modelling helps to make each department more efficient and save time.

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40
Q

Advantages of new technology?

A

-Computers have high precision so better quality, therefore better for customers.
-Faster innovation, CAD is quicker with designing.
-Less dependant on labour.
-Increased productivity, which could lower prices for customers.
-Less waste.
-Employees have opportunities to learn new skills.
-Increased skill and capacity for technology is attractive to other businesses to locate in the UK, so the government benefits.

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41
Q

Disadvantages of new technology?

A

-Very large upfront costs.
-Workers may be made redundant.
-Managers have to train the workers to use the technology.

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42
Q

What is lean production?

A

An approach to management that focuses on cutting out waste whilst ensuring quality, productivity and reducing costs.

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43
Q

What is considered as waste?

A

-Raw material lying around.
-Work in progress products.
-The finished product waiting to be delivered.
-Skills and knowledge not being used.

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44
Q

What are the lean production practises?

A

Just in time, kaizen, cell production, time based management.

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45
Q

Benefits of lean production?

A

-Decrease in waste saves cost.
-Workers are encouraged to be involved which increases motivation.

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46
Q

Drawbacks of lean production?

A

-Businesses will struggle to meet demand if supplies are not delivered on time.
-May not be able to access economies of scale.
-Workers may be reluctant to change.W

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47
Q

What is just in time production?

A

type of lean production system that brings together all materials at the precise time they are required at each production stage. Products are only made when there is demand for the products.

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48
Q

Just in time: management understanding?

A

-Managers must walk the line and understand the whole process used to complete the product.

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49
Q

Just in time: supplier relationship?

A

-Need effective communication and a strong relationship as any delays can delay the whole production process.
-Depends on proximity and flexibility of supplier.

50
Q

Just in time: Kanban?

A

-A visual system that manages workflow, it tells you what the produce and when.
-Uses order cards to ensure a regular supply of components.

51
Q

Just in time: employee involvement?

A

-Employees must be trained to use the system and know their role.
-There must be sufficient motivation as they may be reluctant to change and quality needs to be right the first time.

52
Q

Just in time: customers?

A

-if orders can be placed electronically the product can automatically go straight from the production line to delivery, to avoid being held into a warehouse.

53
Q

Advantages of just in time production?

A

-Lower stock holding means reduced storage space, saving rent and insurance.
-Stock is only obtained when needed so less working capital tired up in stock.
-Less likely for stock to perish.
-Avoids build up of unfinished products.
-Less time spent checking and reworking as there is an emphasis of getting quality right first time.

54
Q

Disadvantages of just in time production?

A

-Little room for mistakes as minimal stock is available.
-Production is very reliant on suppliers and if stock is not delivered on time, the whole process is delayed.
-No spare finished product available to meet unexpected demand.

55
Q

What is cell production?

A

A form of team working where production processes are split into cells. Each cell is responsible for a complete unit of work.
-Within a cell, workers are trained to carry out multiple tasks. These skills are established, so quality and efficiency is improved.
-Cells can be self managing if a team leader is appointed.

56
Q

Benefits of cell production?

A

-closeness of cell members should improve communication
-workers become multi-skilled and more adaptable to the needs of the business
-greater employee motivation, from variety of work team working and responsibility
-quality improvements as each cell has ‘ownership’ for quality on its area

57
Q

Drawbacks of cell production?

A

-Can feel demotivated if constantly pushed for more output.
-Rivalry and conflict between cells.
-Greater investment in management as complicated to set up.

58
Q

What is Kaizen?

A

Kaizen is the continuous improvement of the production process. Small incremental steps to improve productivity and quality. Each member asks themselves how they can improve their role.

59
Q

What are Kaizen groups?

A

Groups of workers in an area of a firm that meet regularly to discuss what improvement can be made.

60
Q

What are key elements of Kaizen?

A

-Does not ignore the need for technology but shows there are other ways to achieve competitiveness.
-Needs a motivated workforce and belief from management.
-Relies on the workers suggesting ideas.
-Need a trained workforce.
-Effective communication and job security, for the workers to be committed.

61
Q

Benefits of Kaizen?

A

-Less waste.
-Improved labour relations.
-Less large scale investment.
-Reduced waste.
-Improved motivation, quality and productivity.

62
Q

Limitations of Kaizen?

A

-Cannot be implemented into all business and is compliment to implement anyway.
-Need to be trained in a new system.
-Over time the enthusiasm wanes.
-Some staff may be reluctant to chnage.

63
Q

What are timed based management methods?

A

This is when emphasis is placed on reducing time taken in all aspects of the production process
-Business believe that speed adds value
-Involves simultaneous engineering (carrying out the tasks at the same time)

64
Q

What is simultaneous engineering?

A

doing multiple parts of the production process at the same time.

65
Q

Benefits of timed based management?

A

-Productivity increases.
-Time taken to respond to customer demand decreases.

66
Q

Drawbacks of timed based management?

A

-May need specialist machines.
-May not be able to access economies of scales.
-Human multitasking may decrease quality.
-Needs efficient planning.
-No prioritising.

67
Q

What is purchasing?

A

The acquisition of raw material by a business.

68
Q

Why is purchasing important?

A

-Increasing value and savings
-Building relationships and driving innovation
-Improving quality and reputation
-Reducing time-to-market
-Managing supplier risk
Need to find the right quality, delivery time and price.

69
Q

What is stock?

A

The value of product in the form of raw materials or unfinished product on the premises of the business.

70
Q

What is stock control?

A

The attempt to manage the levels of stock to ensure a smooth flow of goods to the customer but also to minimise the working capital caught up in stock.

71
Q

What should stock control do?

A

-Ensure there is stock available when the manufacturing process requires it.
-Partly finished goods do not sit around on the factory floor.
-Finished goods are available for timely delivery to customers.

72
Q

What is the traditional stock control method?

A

-Holding a large buffer stock just in case.
-Allows for late deliveries and unexpected increases in demand.
-However storage costs. Now there is more emphasis on reducing the working capital tied with stock.

73
Q

Interpreting stock control diagrams?

A

Maximum stock level= the maximum level a firm wants to hold to minimise working capital and risk of perishment.
Buffer stock= the stock held just in case.
Lead time= the time between reordering and delivery.
Re-order level= triggers the stock control system to automatically reorder supplies.

74
Q

What is a just in time system?

A

-Raw materials only arrive when needed and go straight to the factory floor.
-Minimises working capital and storage costs.
-Need an effective ordering system and strong relationships with suppliers and workforce.
-However, can’t bulk buy and delays to production can easily be caused. More risk of damaging the relationship with the customer.

75
Q

What a computerised stock control system?

A

-Stock details are on a database which is instantly updated.
-This allows for automatic reordering and checks.
-More efficient and accurate.
-Example: supermarket tills are linked to the database to update it.

76
Q

The impact of holding too much stock:

A

-More likely to perish or deteriorate.
-Needs more storage space increases costs.
-More is spent on security and insuring the stock.

77
Q

The impact of holding too little stock:

A

-Delays to production process if suppliers are late or there is an unexpected increase in demand. Customers wait longer and damaged reputation.
-Can’t access economies of scale as easily.

78
Q

What is economies of scale?

A

when the average cost of producing a good or service falls as the quantity produced increases.W

79
Q

What are internal economies of scale?

A

Internal economies of scale are falling long-run average costs associated with an improvement in internal efficiencies.
-Financial, managerial, technical, purchasing, marketing.

80
Q

What are managerial economies?

A

Able to employ specialist managers that can get the absolute best value out of whatever function they work in. This will lower average costs for the production of products.

81
Q

What are purchasing economies?

A

The bigger you are, the more you can buy in bulk, often for a discount. So average cost per component decreases.

82
Q

What are financial economies (internal)?

A

As the business grows its assets mean it is more secure and therefore less risky for lenders, meaning they can therefore negotiate better interest rates. Can also access a more wide range of financial sources.

83
Q

What are technical economies?

A

Able to purchase the latest equipment and incorporate new methods of production, this increases productivity and efficiency, which reduces the average costs.

84
Q

What are marketing economies?

A

Large firms can spread out their marketing costs over a range of products, this results in lower average costs from their marketing operations.
One advert in a local area is spread across the sales of more stores in that area.

85
Q

What are external economies?

A

Average costs lower due to the expansion of the whole industry.

86
Q

What are supplier economies?

A

-A network of suppliers may be attracted to an area where particular industry is growing
-Lots of supplier businesses near to each other reduces buying costs and allows the use of systems such as JIT

87
Q

What are educational economies?

A

-Local colleges may set up training schemes suited to the industry with the largest sector/number of employees
-This reduces recruitment and training costs for businesses in that industry

88
Q

What is research and development economies?

A

facilities in local universities can help innovate and create new products.

89
Q

What are financial external economies?

A

Institutions make improvements geared towards particular industry. If there is an industry with cash flow problems, then more competitive debt factoring rates will be offered.

90
Q

What are diseconomies of scale?

A

A situation in which the long-run average cost curve rises as the firm increases output, due to inefficiency of larger organisations.

91
Q

What are the internal diseconomies of scale?

A

Coordination- larger=more difficult to coordinate as departments tend to head in different directions. Therefore frequent managerial meetings are needed and this increases costs.

Communication- levels of hierarchy increase, efficiency of comms breaks down. Messages and instructions become distorted and these mistakes cost the business money.

Motivation- harder to satisfy and motivate employees and they may feel undervalued and unheard, due to the distance between them and decision makers. The loss in productivity increases costs.

92
Q

What are the external diseconomies of scale?

A

Overcrowding- the area may be congested with traffic resulting in staff and delivery lateness, and also decreased reputation with local residents.
Increased price of resources- with higher demand for land, workers and materials, the price may increase.

93
Q

Why do small businesses fail?

A

-They cannot benefit from the benefits of economies of scale.

94
Q

What are the reasons small businesses survive?

A

-Flexibility to match demand.
-Providing a service for example an electrician, cannot become a large business, as it is harder to scale up production.
-Target market size and population density.
-Quality of service/product/customer service.
-Customer loyalty and customer service.
-Niche markets.

95
Q

Positive impacts of economies/diseconomies?

A

-Benefit from lower costs.
-Greater profit margins or lower prices for customers.
-Suppliers receive more orders.

96
Q

Negative impacts of economies/diseconomies?

A

-More risk of diseconomies.
-Risk becoming monopoly which is scrutinised by governing bodies.
-Can lose sight of customers needs and wants, losing satisfaction.
-Employees can be demotivated.
-If too big in one location, risk not able to locate anywhere else.

97
Q

What is research and development?

A

a set of activities intended to identify new ideas that have the potential to result in new goods and services as well as the testing, feedback and launch.

98
Q

What in innovation?

A

the process by which ideas are transformed into new products and services that will help firms grow

99
Q

What is the research and development process?

A
  1. Identify problems 2. Research 3. Develop ideas and solutions 4. Develop prototypes 5. Finalise design 6. Testing 7. Manufacture and launch.
    Function, aesthetics and cost that add value and improve brand image/loyalty.
100
Q

Benefits of research and development?

A

Working environment is safer and cleaner, competitiveness, improve company’s image, adds value, reduced cost if more efficient, premium pricing/skimming for higher profit margins.

101
Q

Drawbacks of research and development?

A

High upfront costs, only large businesses can, products developed may be unwanted.

102
Q

What sectors rely of research and development?

A

-Airlines, pharmaceuticals and electronics need R&D to survive and as customers demand new visions and improved experiences.
-Important to car manufacturing but see how the market reacts first.
-Retailers prioritise marketing.

103
Q

What is quality?

A

The ability of a product or service to consistently meet or exceed customer expectations

104
Q

Why is quality important?

A

More satisfied customers
A better reputation
Lower costs as wastage is reduced
Quality can affect demand for the product

105
Q

Importance of quality to stakeholders?

A

OWNERS-Customer retention means higher profits.
-Methods increase costs.

MANAGERS-Higher quality leads to recognition and bonuses.
-Have to train and have responsibility.

SUPPLIERS-Need to supply high quality products to keep getting orders.

EMPLOYEES -Higher revenue could lead to pay rises.
-Need to be motivated.
-More pressure to perform.

CUSTOMERS-Need to be satisfied and price must match quality.
-More expensive production increases prices.

106
Q

What is quality control?

A

a system of maintaining standards in manufactured products by testing a sample of the output against the specification.

107
Q

What are the consequences of failed quality control?

A

-Product recalls and inspections.
-Process innovation.
-Training staff to perform jobs better or differently.
-Identify new suppliers of better quality materials.
-Hire new staff to replace staff who can’t produce quality.

108
Q

What is quality assurance?

A

refers to engineering activities implemented in a quality system so that requirements for a product or service will be fulfilledQ

109
Q

Quality assurance: teamwork?

A

-Responsible for a part of the production process.
-Improving teamwork so communication about mistakes in quality is more efficient.
-Improved morale means more motivated to produce high quality.

110
Q

Quality assurance: product design checking?

A

-The design must not facilitate any mistakes in the quality.
-Can result in financial costs and damaged image.

111
Q

Quality assurance: benchmarking?

A

-Benchmarking= the process of setting standards for quality and output based on what competitors can offer.
-Identify competitor figures, then set targets.
-Workforce must be committed.
-Can also compare strategies even if products are not the same.
-Increases market orientation and competitiveness.

112
Q

Quality assurance: production control?

A

-Ensures standards set are actually being used and met in the workplace.
-Monitoring costs using budgeting, controlling operations using CPA and supervision of output and feedback.

113
Q

Quality assurance: recognised standards?

A

-Shows achievement and maintenance of quality.
-ISO 9000 is often used.
-Also specific regulations for medical equipment, automotive and environment practice.

114
Q

What is total quality management?

A

a system of management based on the principle that every staff member must be committed to maintaining high standards of work in every aspect of a company’s operations.
-TOTAL= everyone is part of system.
-QUALITY= consistency, innovation, speed.
-MANAGEMENT= improving and monitoring quality, responsibility lies with top management.

115
Q

What are quality chains?

A

A system where each stage of the production process treats the next stage as a customer.

116
Q

What is empowerment?

A

employees’ beliefs in the degree to which they influence their work environment, their competence, the meaningfulness of their job, and their perceived autonomy. More motivated and feel more comfortable in pointing out mistakes.

117
Q

TQM monitoring?

A

checking the standards at each stage are achieved using statistical methods.

118
Q

TQM teamwork?

A

improves communication so problems with quality are quickly made known.

119
Q

What is quality circle?

A

A quality circle is a small group of employees who work together and meet regularly to discuss and resolve work-related problems and monitor solutions to the problems. This form of communication is vital to a successful TQM program.

120
Q

What is zero defects?

A

The incentive to achieve perfect quality everytime, so that every customer will be satisfied.

121
Q

Benefits of TQM?

A

-Increased customer satisfaction
-Lower input and operating process costs
-Reduced time-to-market for innovative products

122
Q

Drawbacks of TQM?

A

-It is expensive to train all employees to check the product or service
-Relies on all employees following TQM ideology and accepting responsibility for quality
-Staff may want higher pay.

Component 1 Functions. (4 decks)

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