operations Flashcards
(36 cards)
why is operations important?
-makes the best use of limited resources available to maximise output
-helps reduce costs by identifying and minimising wastage in the production process
-it ensures a quality product which will satisfy customers and meet their needs
-decides on the most appropriate inputs and processes to produce the best output
centralised purchasing
> one order sent to the supplier for the whole organisation
✅centralised purchasing department- more efficient purchasing procedures
✅specialist purchasing staff employed - ensure best deal is negotiated and agreed
✅cost effective - can gain discounts through economies of scale/bulk buying
✅approved supplier - supplies come from known quality and reliable sources
✅huge range of suppliers - greater choice of goods and services available
features of effective inventory control
-employ a trained inventory clerk who is responsible for setting up procedures and monitoring/issuing/controlling inventory - have correct documents filled in and approved, inventory rotation, appropriate storage conditions eg temperature
-regularly monitor inventory levels for usage using suitable method:
>spreadsheet with embedded formulae that automatically and accurately calculates current balance
>movement of stock recorded using bar code and reader
>electronic inventory management systems for up to date balance
>best sellers/slow moving inventory identified so decisions can be made on changes to balances
>a physical count of inventory still carried out to get an accurate closing inventory figure to use in period end financial statements
-appropriate inventory levels set to prevent problems associated with over/understocking:
>maximum/economic inventory level
>reorder level
>reorder quantity
>minimum inventory level
>buffer inventory
what are the different inventory levels?
-maximum level, the balance that should not be exceeded
-reorder level, the balance when an order must be placed so inventory doesn’t run out, influenced by lead time
-reorder quantity, physical amount ordered, difference of maximum and minimum level
-minimum level, the balance inventory should not fall below so production doesn’t halt/run out of inventory
-buffer inventory, inventory below the minimum level kept ’just in case’
purpose of inventory control
having effective inventory control means:
✅anticipate when inventory is going to run out so action can be taken
✅production line in separation as there is inventory available at all times
✅fulfilling customer orders not delayed by lack of inventory, helps improve customer satisfaction and public image
✅administration costs should be controlled as inventory is controlled and ordered at regular intervals so no need for expensive rush orders to be sent
✅a skilled inventory clerk helps prevent theft, wastage and shortages that negatively impact production
just in time (JIT) inventory control
JIT involves:
>frequent deliveries
>of small quantities of inventory
>that are recieved just before it is needed
successful JIT depends on having:
>close relationship with reliable suppliers who deliver what was ordered on time
>consistently good quality supplies as it is not checked before it is used in production
>staff who accept the responsibility for identifying when more inventory is needed
advantages and disadvantages of just in time inventory control
✅funds are not tied up in inventory so can be invested elsewhere
✅reduced inventory holding costs eg staff, space
✅less deterioration/wastage as smaller amounts held for shorter periods
✅less vulnerable to changes in fashion/taste so less likely inventory will have to be sold off cheaply
❌if supplies are delayed then potential for production will be disrupted
❌sales lost if a customers rush order cannot be met
❌greater dependence on suppliers that may let the organisation down
❌loss of bulk buying discounts with small orders so loss of potential cost saving
features of a good storage area
-storage capacity of area should be more than supplies held at any time
-offer the correct environment eg freezers
-provide security and protection by having lockable doors, screens, cctv etc
-must be covered by insurance to protect against unforeseen events
-use FIFO to ensure oldest inventory is used first which prevents deterioration
-clearly labelled shelves etc to make things easy to locate
advantages and disadvantages of centralised storage
> all inventory stored in one area for entire organisation
✅improved security and control
✅lower storage costs as one large area
✅greater efficiency in inventory handling and management
✅bigger orders benefit from bulk buying discounts
✅precise balance always known and no duplication of items
❌staff need to travel to a centralised area resulting in time wastage movement around building
❌cost of specialist staff to operate stock room eg wages
❌difficult to meet individual needs of departments if they are highly specialised
❌if large amounts of inventory are held there is more chance of wastage or obsolescence
advantages and disadvantages of decentralised storage
> different areas where inventory stored depending on where it is most likely to be used/needs of functional areas
✅inventory always nearby when staff need to access/use it
✅orders placed reflect what is actually used by individuals departments
✅small amounts of inventory turnover more quickly so less risk of obsolescence or deterioration
❌theft and loss more likely as there is less control/management
❌increase in the amount of space taken up with several small rooms being used
❌difficult to get an accurate balance so actual amount of inventory held at any moment may be unknown
features of a good warehouse
-carefully designed to ensure a smooth operation and efficient use of space
-best located on ground floor to make it easier to move inventory
-use inventory handling equipment and machinery eg fork lifts to reduce human effort
-correct storage conditions for each item prevents deterioration
logistics
logistics manages how and when to move resources to the places they are needed
>the process of dealing with the whole order from start to finish
-2 basic forms of logistics:
>along the production line to coordinate sequencing of resources
>the transportation and storage network
benefits of good logistical management
✅prevent shortages that could halt production or leave customers unsatisfied
✅minimise transportation costs to maximise efficiency and meet social responsibility
✅minimise time taken to obtain materials and inventory which will optimise workflow
✅reduces storage requirements, length of time an item is unused and funds ties up
logistical planning
logistical planning means identifying the sequence in which particular resources are used and then arranging to send the resources to that location so they arrive when needed
> must consider transportation capacity to ensure transportation is evenly spread and also full loads are sent out whenever possible
scheduling
scheduling is the part of logistics that coordinates the way resources work together into a whole process
> it involves raw materials, components, workers, machinery, transport & sales outlets being brought together so work flows smoothly and delays are avoided
a Gantt chart helps coordinate task or batch completion
labour intensive production
uses mainly human effort into production - workforce completes tasks by hand so many workers can be employed to create a product
no automation because:
>simple tasks so not necessary
>creative/complex task so not possible
>personal service so not suitable as might devalue service in eyes of consumers
eg food processing (ready meals), hotels/restaurants, fruit farming/picking, hairdressing and other personal services
advantages and disadvantages of labour intensive production
✅easier improvements so greater satisfaction
✅alterations possible after production started
✅non repetitive and varied tasks motivate workers
✅items marketed as handmade/luxury so better image
✅high or premium price can be charged
✅lower labour costs and improved flexibility
❌employee absences and labour relation issues halt production
❌closer monitoring of quality is required to ensure consistency
❌shortages of skilled labour is possible
❌slow process/long lead time can cause dissatisfaction
❌higher wages paid to skilled workers so increased costs
❌costs can be difficult to predict so harder to set a price
capital intensive production
uses mainly machinery, technology or equipment in production and aims to create a product using as few workers as possible
this process could be entirely or partially automated with processes broken into simple and quick to complete steps that machinery designed to carry out
eg oil extraction and refining, manufacturing (eg cars), web hosting, intensive farming, transport
advantages and disadvantages of capital intensive production
✅machinery works faster and more efficient and no breaks
✅24/7 operations so large quantity available for sale
✅consistent quality - consumers know what to expect
✅no loss or shortage of skills with programmed machines
✅reduced labour costs and fewer human error
✅robots and machines don’t need paid so reduced wages
❌very large set up costs eg price installation and training
❌cannot meet individual customer needs reduces satisfaction
❌machinery and layout inflexible
❌lower worker motivation if repetitive jobs
❌breakdowns and servicing could halt production
❌potential higher wages if workers maintain complex machines
influences on choice of production methods
-actual product being sold
-size of market and potential demand
-finance available
-staff skills set
-technology available
-brand image
methods of assessing quality
-quality control, only used by manufacturers, inspectors check finished items at the end of production line
✅poor quality items can be sold off cheaper
❌results in wasted products
❌inefficient as errors not spotted immediately
❌testing may result in destroyed goods/entire batches wasted
-quality assurance, only used by manufacturers, operatives during production & inspectors at end check quality
✅problems spotted when they occur so stops flaws
✅should reduce wastage and improve efficiency
✅more effective method of assessing quality
❌staff participation and training essential which takes time and money
continual improvement
-quality management, used by both manufacturers and service providers, every member of staff involved, aim to get right first time and no errors, customers needs and satisfaction are central to every decision
✅every aspect of product considered
✅sets highest standard and develops a quality culture
✅focus on teamwork
❌staff need to be committed and given regular training
❌regular audits and performance reviews checks processes are followed
standard
the standard is a published and known specification used as a rule, guideline or definition by the organisation
a quality standard is a sign or symbol which indicates a known standard has been reached
advantages and disadvantages of achieving a standard
✅proves an agreed quality has been met
✅customers are guaranteed quality so will have more confidence in purchase and reduce customer complaints
✅symbol can be used as marketing tool to establish premium brand
✅allows for a higher/premium price to be charged
❌an expensive and time consuming process
❌if the standard isn’t awarded the product may not be able to be sold in a particular region/area
❌standard must be maintained at all times so need regular thorough checks
❌rigorous record keeping is needed to be used to justify the continued awarding of the standard
