Operations management

Question 1

Operations Management

Answer 1

The process of overseeing the transformation process to ensure things like quality, quantity, efficiency, cost per unit etc

Question 2

The transformation process

Answer 2

This describes how inputs are converted into outputs

Question 3

Inputs (in the Transformation Process)

Answer 3

The factors of production that a business utilises in order to produce goods and service. Includes Capital, Enterprise, Land and Labour

Question 4

Outputs (in the Transformation Process)

Answer 4

The goods or services that are produced by a business as a result of its operations

Question 5

Added Value

Answer 5

The difference between the costs of the inputs and the perceived worth (price) of the outputs. Often seen as profit

Question 6

Capacity

Answer 6

Measures the maximum amount of output a firm can produce at a given moment with its existing resources

Question 7

Capacity Utilisation

Answer 7

Measures the existing output relative to the maximum.

CALCULATION: (existing products/ maximum possible output in a given time period) x 100

Question 8

Capacity under-utilisation

Answer 8

This occurs when a business

is producing less than the maximum amount it can produce, given its existing resources

Question 9

Capacity shortage

Answer 9

This occurs when demand is too high for the firm’s capacity. Ie there are more people wanting tickets for a gig than there are places).

Question 10

Stocks

Answer 10

Stocks are any physical components that you hold, and represent an opportunity cost to the firm. They may include general supplies, components and materials, works in progress and finished goods/services

Question 11

Stock Levels

Answer 11

This measures the amount of stocks that a business is holding

Question 12

Labour productivity

Answer 12

This measures the relationship between the amount of labour used in production and the quantity of outputs of goods or services produced.
CALCULATION: Labour productivity = output per period/number of employees at work

Question 13

Capital productivity

Answer 13

This measures the relationship between the amount of capital used in production and the quantity of outputs of goods or services produced.

Question 14

Labour-intensive v capital intensive

Answer 14

If a business is labour intensive then it relies predominantly on people for its operations.
If a business is capital intensive then it relies predominantly on machinery for its operations.

Question 15

Opportunity Cost

Answer 15

The benefits foregone as a result of giving up the next best alternative

Question 16

Unit cost (cost per unit)

Answer 16

The average cost of producing one unit

Question 17

Rationalisation

Answer 17

Reorganising production in order to increase productivity and efficiency

Question 18

Sub-contracting

Answer 18

When one business provides goods/a service on behalf of another business. Can happen when a business has more demand than it is able to meet, or when it has spare capacity and another business asks it to produce their excess orders.

Question 19

Quality

Answer 19

Where a good or service meets a customer’s requirements and expectations

Question 20

Quality system

Answer 20

This is a method by which the quality of a business’s products is checked and improved upon

Question 21

Quality control

Answer 21

This quality system relies on the inspection of products at the end of the production process

Question 22

Quality assurance

Answer 22

This approach to quality puts more emphasis on prevention of mistakes, and requires employees to check their own work. They also have the right to ‘reject’ other people’s work. It stresses the need for employees to get it right first time.

Question 23

TQM (Total Quality Management)

Answer 23

This is an approach to quality that involves all of the employees in the organisation. It appreciates that everyone within the firm contributes to the overall quality of the product or service.

Question 24

Kaizen

Answer 24

An approach to quality that centres upon ‘continuous improvement’. It involves the whole workforce and encourages to always be looking to improve their work

Question 25

Quality standards

Answer 25

A quality standard is a recognition that certain targets have been achieved and that a system is in place to monitor the level of achievement and take action if required. There are various quality standards; BS 7550 etc

Question 26

BS 5750

Answer 26

This is a quality award available to firms in the UK (it is the equivalent of the EU’s ISO 9000. It is an award gained by firms that are able to show that they have a system whereby quality is regularly measured and in which action is taken if quality levels fall below the set targets.

Question 27

ISO 9000

Answer 27

An ISO 9001 sets out the criteria for a quality management system and can be used by any organization. The standard is based on a number of quality management principles including a strong customer focus, the motivation and implication of top management, the process approach and continual improvement. Using ISO 9001 helps ensure that customers get consistent, good quality products and services.

Question 28

Customer service

Answer 28

Customer service is the experience a customer gets when using products made by the business. Satisfied customers make repeat purchases and recommend the product to friends, leading to additional word-of-mouth sales.

Question 29

Suppliers

Answer 29

A person or business that provides the resources necessary for another business’s operations in the production of its goods and services. They provide the inputs necessary for the transformation process to occur.

Question 30

Partnership Approach

Answer 30

This is when a business works with its suppliers in a mutually co-operative manner – perhaps by paying fair prices rather than always trying to negotiate them down, paying on time (or within the agreed trade credit window) and helping each other with business opportunities.

Question 31

Non-Partnership Approach

Answer 31

This is when a business focuses upon the best short-term deals with regards to its suppliers and always put sits own interests ahead of theirs. Examples of this might include delaying payment, arguing over prices and doing your best to push them down, and threatening to switch suppliers if you get a better short-term offer, with little notice towards your current supplier.

Question 32

Credit

Answer 32

Trade credit is an arrangement between businesses or between a business and its customers to purchase goods or services without making immediate cash payment. The supplier provides the customer with an agreement to bill in a stipulated number of days.

Question 33

Cash flow

Answer 33

Cash flow refers to cash that flows into and out of a business over a period of time

Question 34

Technological Developments

Answer 34

Technological development is the process of research, creation, and improvement of technology. Technology is the use of knowledge tools and machines to solve a problem. It may also refer to the collection of such tools and machinery.

Question 35

Robotics

Answer 35

This is technology that deals with the design, construction and operation of robots for use in automation in the production process

Question 36

Information Technology

Answer 36

The technology involving the development, maintenance and use of computer systems, software and networks for the processing and distribution of data

Question 37

Automation

Answer 37

The replacement of workers with machines to perform tasks in production

Question 38

Design Technology - CAD / CAM etc

Answer 38

Design technology, or D.T., is the study, design, development, application, implementation, support and management of computer and non-computer based technologies for the express purpose of communicating, using various mediums, product design intent and constructability as well as to facilitate product operation and maintenance and to ultimately improve overall product design realisation, construction, operation and maintenance.

Question 39

Employee resistance

Answer 39

This is when employees find it difficult to accept a change in the workplace – for example the introduction of a new quality system, or new technology – and therefore slow down its introduction by objecting to it/refusing training etc. It can cause an increase in short-run costs as the workforce adapts to the change and gets used to it.