Unit 3 - Operations Flashcards Preview

Higher Business Management > Unit 3 - Operations > Flashcards

Flashcards in Unit 3 - Operations Deck (61)
Loading flashcards...
1

What is Just In Time?

The business holds almost zero inventory.
Materials are order and products are assembled JUST IN TIME.
Must be a close relationship between manufacturer and supplier for it to work.

2

How are JIT figures calculated?

Nothing is produced unless customers are demanding the product.
Marketing department predicts the expected demand and figures
OR
The business waits until there is demand.

3

JIT advantages?

Capital is not tied up in stock so can be used elsewhere
More responsive to customer demand
Reduction in storage costs

4

JIT disadvantages?

Production is disrupted if products do not arrive on time.
High dependency on suppliers.
May lose bulk-buying discounts.
No room for error.

5

What is optimum stock level?

Storage costs are at a minimum level but there is enough inventory to meet requirements.

6

What could happen if a business understocks?

Production could stop
Customer complaints due to not receiving orders on time
Business could gain bad reputation

7

What could happen if a business overstocks?

Increased costs for security and storage
Waste of stock due to it becoming out of date
Higher risk of stock being stolen

8

What is the purpose of an inventory management system?

Ensure there is enough stock available when it is needed
Ensure production does not stop
Avoid stock deterioration

9

What is a lead time?

Time that passes between ordering stock and it arriving

10

What is re-order level?

The quantity at which more inventory is ordered.

11

What is maximum stock level?

The highest amount of inventory that can be stored

12

What is buffer inventory?

A safety supply of around 100 items that are held in case deliveries are delayed or there is an unexpected large order.

13

What is re-order quantity?

The quantity that is re-ordered to bring levels back to the maximum.

14

What is minimum stock level?

The lowest amount of stock that should be stored at one time.

15

What does the type of storage used by a business depend on?

The type of stock
Finance available for storage
Size and location of customers
Accessibility

16

What is centralised storage?

This involves storing inventory in 1 central location – a large warehouse.

17

What is decentralised storage?

This involves storing inventory in various locations within the organisation. Each branch or department is responsible for ordering and maintaining its own inventory. E.g. Tesco

18

What are advantages of centralised storage?

Can store large amounts, therefore can receive bulk buying orders

May be cheaper

19

What are disadvantages of centralised storage?

Specialist staff are hired so costs increase

The cost of a warehouse is high

20

What are advantages of decentralised storage?

Inventory is always close by when required

Smaller stores are more responsive to local needs

21

What are disadvantages of decentralised storage?

Can face consequences of under-stocking

Security isn’t as tight due to lack of specialist

22

What is logistical management?

How the product is transported and distributed from the manufacturing site to the customer/store.

23

What are examples of methods of distribution?

Road
Rail
Air
Sea

24

What is capital intensive?

Where the production process relies more on machinery and equipment than human input.

25

Capital intensive advantages?

Can work 24/7
Standardised quality
Fewer employees

26

Capital intensive disadvantages?

Machinery/equipment is expensive
Breakdowns can cause production to stop and can be expensive

27

What is labour intensive?

This is where a business uses a larger proportion of human input than machinery.

28

Labour intensive advantages?

No expensive equipment
Unique products

29

Labour intensive disadvantages?

Expensive and time consuming to recruit and train
Training takes time
Quality can vary (mistakes)

30

What is batch production?

Capital intensive

Groups of identical products being made at one time