Section 4 - Operations management (Chap 18 - 21) - stocks, production productivity, costs, break even, EOS, quality production

Question 1

what does operations management do

Answer 1

-process input to give output
-has multiple manager in charge of different things

Question 2

labor/ capital productivity formula (humans/ machines)

Answer 2

output/ no. humans/ machines

Question 3

productivity formula

Answer 3

no. output/ no. input

Question 4

what do manufacturing businesses have typically

Answer 4

-factory manager - responsible for no. & quality of products
-purchasing manager - provides materials
-research & development manager - responsible for design & testing of new products

Question 5

define production

Answer 5

making products/ services

Question 6

labor productivity formula

Answer 6

no. output/ no. employees

Question 7

define productivtiy

Answer 7

-how efficiently products are made

Question 8

ways to increase productivity

Answer 8

-improve quality control to reduce waste
-employee motivation
-new technology
-use machines instead of people
-train staff to be more efficient
-improve inventory control

Question 9

what happens when too less/ more inventory

Answer 9

less:
-run out of stocks
-no production
-waste money
more:
-storage & security cost up
-shelf life - lead to wastage
-money spent at first

Question 10

define stocks

Answer 10

resources needed to make goods/ provide service

Question 11

3 types of stocks

Answer 11

-raw materials: basic form
-work in progress: some work done
-finished goods: final product

Question 12

define stock chart

Answer 12

chart used to help maintain stocks

Question 13

how does stock chart work

Answer 13

-quantity over time
-max, reorder & min. level where stocks should not go over/ below max & min.
ideally:
-start at max level and slowly go down
-once below reorder level, order stocks again
-when min. level (buffer inventory), restocks come
-line down is usage of stocks
-line up is restocks

Question 14

define buffer inventory

Answer 14

stocks held for uncertain delivery of supply or customer demands

Question 15

types of waste in produciton

Answer 15

-overproduction - storage cost, possible damage
-waiting - good’s aren’t being processed
-transport - moving goods around
-unnecessary inventory - takes up space
-motion - action by employee wastes time
-over processing - machine for simple tasks
-defects - waste time inspecting product

Question 16

define lean production

Answer 16

-producing goods using fewer resources without dropping quality

Question 17

define buffer inventory

Answer 17

stocks held to deal with uncertain deliveries of supply & customer demand

Question 18

ways to do lean production & what they cause

Answer 18

-cut down wastage
-store less raw materials
-better use of equipment
-use each resource to the max
-practice kaizen
-practice just in time
cause:
-more efficiency
-less cost
-more saving

Question 19

define just in time

Answer 19

-a method to avoid keeping large stocks of raw materials & finished goods
-save money & space

Question 20

define kaizen

Answer 20

continuous improvement by reducing waste

Question 21

ways to do kaizen & what they cause

Answer 21

-don’t have too many goods which won’t be sold on time = no loss
-get supplies right on time = no loss
-less holidays for workers = more efficiency
-no expensive machine for simple tasks = better us of materials
-no faulty products = save time to fix them
-eg. reduce time for workers to walk btw jobs

Question 22

ways to do just in time & what they cause

Answer 22

-buy raw materials only when needed
-make product just in time to give to customer
cause:
-no cost to hold stocks
-warehouse space not needed = less cost
-product sold quickly, money comes back, better cash flow

Question 23

note: rationalize stocks depending on price & frequency of use

Question 24

define cell production

Answer 24

-where groups of people work together in cells to produce the final product
-promotes healthy rivalry
-motivates = more efficient, less likely for strike

Question 25

3 method of production

Answer 25

-job production -batch production -flow production

Question 26

define job production & eg.

Answer 26

-making 1 product at a time eg. houses, tailors

Question 27

advantages of job production

Answer 27

-for customized products - can charge high price -product meets exact requirement of customer -more varied tasks for workers = more motivation

Question 28

disadvantages of job production

Answer 28

-need skilled workers = more cost -labor intensive = expensive -takes long time -errors can be expensive -materials specifically bought = high cost

Question 29

define batch production & eg.

Answer 29

-products of same batch made in limited quantity eg. bakeries, clothes

Question 30

advantages of batch production

Answer 30

-production can change from 1 product to another -variety for workers = motivation -variety consumer choices

Question 31

disadvantages of batch production

Answer 31

-expensive -machines reset btw production = delay in production -need warehouse space for stocks -quality may differ from batch to batch -if quality is bad: recall products with batch no. compensate, loss of money & reputation

Question 32

define flow production

Answer 32

-producing the same product in unlimited quantities -eg. cars, food

Question 33

advantages of flow production

Answer 33

-high output -low cost = low prices = high sales -capital intensive = low labor cost, more efficiency -capital intensive = unskilled workers, little training -operate 24/7 = more output -consistent quality

Question 34

disadvantages of flow production

Answer 34

-demotivation for workers -need lots of stock storage -production line set up is expensive -if a machine breaks down, production line stops -needs a huge demand for product -little variety in products

Question 35

factors affecting production choice

Answer 35

-nature of product = type of product/ service -nature of demand = high demand, batch/ flow production -size of market = bigger market, bath/ flow production -size of business = how much money business wants to invest

Question 36

types of technology in production

Answer 36

-Automation: comp. control production process, few workers oversee process efficient, more precise, training workers cost -Mechanization: machines in factory operated by humans use machine to do dangerous tasks, training workers cost, 24/7, accurate machines -CAD: Comp. Aided Design - designing products done through comp. eg. software expensive, for detailed technical drawings -CAM: Comp. Aided manufacturing - comp. controls factory machines expensive -CIM: Comp. Integrated manufacturing - CAD linked to CAM

Question 37

types of technology in payments

Answer 37

-EPOS: Electronic Point of Scale - in checkouts product detail & payment goes to database of things bought print receipts -EFTPOS: Electronic Funds Transfer at Point of Sale eg. credit car, QR code online money in bank transferred after payment by swiping card -Contactless payment: paying without pressing buttons for small amounts of money fast, easy

Question 38

advantages of technology in production/ services

Answer 38

-more efficient, more output, more productivity -less workers, can lower prices -less expensive in long run -training will make workers skilled = motivated workers -better and consistent quality -safer workers -better com. with comp.

Question 39

disadvantages of technology in production/ services

Answer 39

-initially expensive -unemployment -demotivation -training workers cost money -bad for environment -tech. gets outdated quickly -cyber attacks -maintenance

Question 40

define revenue & formula

Answer 40

-money from selling goods/ services units sold x selling prices

Question 41

note: fc = fixed cost vc = variable cost EOS = economies of sclae

Question 42

formula for profit

Answer 42

-revenue - total cost -margin of safety x unit contribution

Question 43

define variable cost & formula

Answer 43

cost that varies directly with no. items sold no. units x vc per unit eg. textbooks for students, raw materials

Question 44

define fixed cost

Answer 44

cost that doesn't change with no. items sold eg. rent, electricity, worker salary

Question 45

define total cost & formula

Answer 45

-fc and vc combined -fixed cost + variable cost -avg cost x output

Question 46

uses of break even graph

Answer 46

-can set on a selling price -can choose to lower costs -choose to stop making a product -helps determine location of business -can know when to accept bargains

Question 47

goals for selling price

Answer 47

-make it low but cannot be below fixed cost -don't change quality

Question 48

define avg cost for each unit & formula

Answer 48

-total cost divided by no. output total cost/ units sold

Question 49

uses of finding cost data

Answer 49

-set prices that is not a loss -stop or continue production of a product -decide on location of business

Question 50

how to draw break even graph need: -fc -vc -total cost -total revenue -units sold

Answer 50

-x = units of production -y = cost & revenue -fc; flat line -vc; uniform line from 0 -total cost; line from fc -sales revenue ; uniform line from 0 -break even point; intersection btw sales revenue & total cost - above = area of profit/ below = area of loss -break even level of output = output below break even point -margin of safety = break even level of output to units sold -STOP THE GRAPH AT THE NO. OF OUTPUT

Question 51

define contribution & formula

Answer 51

-value added to product -vc + profit (not profit) unit contribution: -selling price - variable cost per unit

Question 52

why & when should you accept bargains

Answer 52

-offered price> fc = accept -offered price< fc = decline -to remove stocks

Question 53

goals for fixed & variable cost

Answer 53

-keep fixed cost as low as possible = lower prices = more profit -keep variable cost same = quality don't go down

Question 54

define Economics of scale EOS

Answer 54

-factors that led to a lower avg cost as business grows (making more units with the same amount of fct) benefits: -can bargain with raw materials -unit cost is lower

Question 55

define Diseconomies of scale DisEOS

Answer 55

-factors that led to a higher avg cost as business grows

Question 56

how to draw EOS graph

Answer 56

-x = output -y = unit cost -EOS = line goes down -DIsEOC = line goes up; when fc increases = unit cost increases

Question 57

advantages of break even graphs

Answer 57

-find is expected profit/ loss -redrawing graph shows impact of business decisions -set on selling price -show margin of safety -choose to stop making a product -helps determine location of business -can know when to accept bargains

Question 58

disadvantages of break even graphs

Answer 58

-assumes all goods are sold -fc is only constant if scale of production doesn't change -assumes that cost & revenues can be drawn in a straight line -focuses on break even point of production than other aspects of business -assumes selling price is constant

Question 59

define margin of safety & formula

Answer 59

-no. units that exceed break even level of output no. units sold - break even point level of output

Question 60

factors of EOS for big businesses

Answer 60

1) purchasing economies -buying bulk = discounts & bargaining -buy directly from manufacturers = cheaper 2) marketing economics -use same add worldwide -have own delivery trucks than relying on others 3) financial economics -easier for business to get loans or sell shares; less risky for banks = low interest rate = low avg cost 4) managing economics -hire experts to manage business 5) technical economics -invest in machines & technology = produce high output with less avg cost

Question 61

factors of DisEOS for big businesses

Answer 61

1) poor communication = low efficiency/ high avg cost -hard to com. with big business -mis com. -com. break downs 2) lack of motivation = low efficiency -too many workers = feel under valued -don't understand people personally 3) weak coordination -too many things happening = don't know what's going on -need more coordinators = more fc

Question 62

define break even level of output

Answer 62

no. units that must be sold for total cost = total revenue -total fc/ unit contribution

Question 63

define break even point & formula

Answer 63

-when total cost = total revenue ( no profit or loss) fc/ unit contribution

Question 64

define break even charts

Answer 64

-chart that shows cost & revenue change with sales & break even level of output

Question 65

benefits of good quality

Answer 65

-easier to get customers -creates brand image -brand loyalty -better reputation -more sales, more profits

Question 66

result of bad quality

Answer 66

-customers go to competitors -defect products need to be fixed -bad reputation -sued

Question 66

ways to maintain quality

Answer 66

-quality control -quality assurance

Question 67

define quality

Answer 67

producing good service/ goods that meet customer expectations

Question 68

define quality control & how does it work

Answer 68

-checks defects in products at the end of production by an inspector -picks samples to check on

Question 69

advantages & disadvantages of quality control

Answer 69

advantage:; -stop customers from getting defect products -less training for workers disadvantages: -expensive = need to pay for inspectors -high cost if need to redo products -allows defect products to be made already -picks a sample amount to check = assumes about other products

Question 70

define quality assurance & how does it work

Answer 70

-checks defects in product in every stage of production -everybody checks

Question 71

advantages & disadvantages of quality assurance

Answer 71

advantages: -stop defect products from getting to next stage of production -less customer complaints -less cost if products don't need to be redone disadvantages: -time consuming -expensive to train workers to check -workers need to be committed to standard set2

Question 72

define Total quality management (TQM)

Answer 72

-continuous improvement of products to get good quality products at every stage -aim: 0 defected products -everyone thinks about quality

Question 73

advantages & disadvantages of Total quality management

Answer 73

advantages -everyone focuses on quality -stop customers from getting defect products -no customer complaints -less cost = no redo of products -less waste -more efficient disadvantages: -expensive -everyone has to follow TQM & be accountable for it

Question 74

define quality standards

Answer 74

-product has to match a certain quality that gov. specifies -if gov. inspector thinks it is acceptable, product can have a logo saying it it approved by gov.

Question 75

define quality circles

Answer 75

-workers are in charge of quality & meet regularly to discuss problems & find solutions

Question 76

note: add formula in definition & apply context to Q

Question 77

note: DO NOT GO OVER THE OUTPUT LINE FOR BREAK EVEN GRAPH

Question 78

factors when choosing the physical location of a manufacturing business

Answer 78

1) availability of raw materials - need a good supply 2) availability of labor 3) market - needs people to buy, else have to transport goods 4) Gov. influence - can hinder or help eg. low taxes, grants 5) transport & communication - need to distribute goods & infrastructure, internet for com.s 6) climate of place

Question 79

what is infrastructure

Answer 79

-things the business needs to operate eg. banks, power, internet (customer service/ website)

Question 80

factors when choosing the physical location of a service business

Answer 80

1) market - needs a lot of people to visit the store 2) technology 3) labor - skilled workers 4) competition 5) cost - closer to the city where most customers are, higher the rent 6) personal prefrences

Question 81

factors when choosing the physical location of a retail business

Answer 81

1) parking for customers 2) availability of premises of building - area of building 3) access for delivering trucks - good roads, vehicles 4) security - crime free area 5) legislation - laws of the country

Question 82

factors when choosing the physical location in another country

Answer 82

1) Overseas market 2) cheaper methods of production - labor & raw materials 3) Rent & taxes 4) trade barriers - not allowing free trade (tariffs & Quota)

Question 82

what is a retail store

Answer 82

where goods & services are sold to customers

Question 83

examples of trade barriers

Answer 83

1) tariffs - tax when importing goods 2) Quota - physical restrictions on how much goods you can import