section 4: operations management Flashcards
(64 cards)
production
the process of converting inputs such as land, labour and capital into saleable goods, for example shoes and cellphones
productivity
a measure of the efficiency of inputs used in the production process, especially labour and capital
labour productivity formula
labour productivity= total output/number of production employees
level of production
number of units produced in a given period of time
how to improve labour productivity
- increasing output with the same number of employees:
- improving the skill level of employees
- improving the motivation of employees
- introducing more automation and more or better technology
- improving quality of management decisions - keeping output at the same level but with fewer employees
inventories
the stock of raw materials, work-in-progress and finished goods held by a business
why businesses hold inventories
- raw materials are needed as inputs for the production process
- always have enough supplies
- protected against instability
- can respond to rise in demand
- if the business does not have finished goods in stock then customers’ orders cannot be met and the business will lose sales
- businesses often benefit from economies of scale when they buy inventories in large quantities because they receive a discount from the supplier
holding inventories adds to a business’s costs such as:
- warehousing costs
- handling costs
- shrinkage costs
- insurance costs
- obsolescence
- opportunity cost
lean production
the production of goods and services with the minimum waste of resources
target of lean production
reduce waste, lower costs per unit, increase competitiveness, increase profits
main sources of waste
- production defects
- high levels of inventories
- overproduction
- idle resources
- transporting goods
just-in-time inventory control
raw materials and components arrive from suppliers just as they are needed by the production process
kaizen
continuous improvement through the elimination of waste; small improvements leading to significant benefits
main methods of production
job production, batch production, flow production
job production
the production of items one at a time, most suitable for one-off products & personal services
job production pros
▪ the product meets the exact requirement of the customer
▪ workers will have more varied jobs as each order is different, improving morale
▪ very flexible method of production
job production cons
▪ Costs are higher, as it is usually labour-intensive
▪ Production often takes a long time
▪ Since they are made to order, any errors may be expensive to fix
▪ Materials may have to be specially purchased for different orders, which is expensive
batch production
the production of similar goods in batches. Each batch passes from one stage before moving to the next
batch production pros
▪ Variety for consumers & choice
▪ Cost saving can be achieved if materials bought in bulk
▪ A firm can handle unexpected orders better
batch production cons
▪ Take time for machines to be reset between production batches which delays production
▪ Finished goods will need to be stored which increases costs
▪ Less motivated employees, work become repetitive
flow production
the production of very large quantities of identical goods using a continuously moving process
flow production pros
▪ Costs are low in the long run and so prices can be kept low
▪ Can benefit from economies of scale in purchasing
▪ Automated production lines can run 24/7, and produced quickly and cheaply
▪ Capital-intensive production
flow production cons
▪ Large investment in technology (high capital cost)
▪ High levels of raw materials and finished goods need to be held in inventory- this is expensive
▪ If one machinery breaks down, entire production will be affected
▪ Very repetitive job, employees not motivated
capital intensive
production process that uses a high quantity of capital equipment comparers with labour input
