Unit 4-decision making to improve operational performance

Question 1

what are the operations function of a business responsible for?

Answer 1

the actual production of a good or service

Question 2

what are some operational objectives?

Answer 2

-reduced unit costs
-quality targets
-environmental objectives
-dependability
-speed of response and flexibility
(must be SMART)

Question 3

what are some external influences on operational objectives?

Answer 3

-political or legal influences
-economic influences
-technological influences
-competitive influences

Question 4

what is the economic cycle?

Answer 4

it is the natural fluctuation of the economy between periods of expansion (growth) and contraction (recession)

Question 5

what are some internal influences on operational objectives?

Answer 5

-finance
-marketing
-HR

Question 6

what are the 4 main areas or operations?

Answer 6

-capacity
-capacity utilisation
-labour productivity
-unit costs

Question 7

what is capacity?

Answer 7

the total or max amount that a business can produce in a given time period if it is working flat out

Question 8

what is capacity utilisation?

Answer 8

the actual production of a business in a given time period as a percentage of the maximum capacity

Question 9

formula for capacity utilisation

Answer 9

actual output in time period/ max possible output per period x100

Question 10

what its labour productivity?

Answer 10

the efficiency of individual workers and of its interest to Human Resources as well as operational managers

Question 11

formula for labour productivity

Answer 11

output per time period/ number of employees

Question 12

what are unit costs?

Answer 12

‘the average cost of production’ and it is the cost of producing one unit of output

Question 13

formula of unit cost

Answer 13

total cost/ units of output

Question 14

what happens to productivity and unit costs if capacity utilisation increases with no change in numbers employed?

Answer 14

-productivity rises
-unit costs fall

Question 15

what happens to productivity and unit costs if capacity utilisation decreases with no change in numbers employed?

Answer 15

-productivity falls
-unit costs rise

Question 16

what is excess capacity?

Answer 16

occurs when actual production falls bellow max potential production

Question 17

why are efficiency and labour productivity important?

Answer 17

an increase in labour productivity will lead to a reduction in unit costs and therefore will lead to the business being more competitive in terms of price

Question 18

how can you increase efficiency and labour productivity

Answer 18

-investment in technology
-improvements in training and motivation
-job redesign
-reduction in the labour force

Question 19

what is JIT¿? (just in time management)

Answer 19

it is an inventory strategy that companies employ to increase efficiency and decrease waste by receiving goods only when they are needed in the production process

Question 20

adv of JIT

Answer 20

-reduced waste in terms of damaged stock
-reduced space and staff due to less warehousing
-lower costs
-improved motivation due to involvement
-greater responsiveness to changes

Question 21

dis of JIT

Answer 21

-running out of stock
-opportunities for bulk purchase
-trust with supplier

Question 22

what are some difficulties of increasing efficiency and labour productivity?

Answer 22

-cost
-quality
-resistance of employees

Question 23

what are the resources that are factors of production?

Answer 23

-land: physical land and natural resources eg: oil and iron ore
-labour: the workers employed
-capital: machines and equipment
-enterprise: the skill of combining the other factors of production

Question 24

what does capital intensive mean?

Answer 24

describes those businesses requiring a large amount of capital relative to labour

Question 25

what does labour intensive mean?

Answer 25

describes those businesses requiring a large proportion of labour relative to capital

Question 26

how might a business overcome situations of excess or spare capacity?

Answer 26

-increase sales: undertaking a new marketing campaign or extension strategies -reduce capacity: rationalise production and sell off some capacity -alternative uses: introduction of new products or leasing it to other businesses

Question 27

how might a business deal with a lack of capacity?

Answer 27

-outsourcing: transferring portions of work to outside suppliers -investment: investing into the permanent establishment of new capacity, only if demand is expected to be high in the future -reducing demand: increasing price, use of dynamic pricing

Question 28

what are the types of technology used in operations that may affect production?

Answer 28

-more advanced computer systems: automated stock control systems and electronic data interchange -internet: promote and sell products and communicate with customers -computer-aided manufacture (CAM): robots as an integral part of the production process -computer-aided design (CAD): can be linked to CAM systems

Question 29

what are the benefits of a new and updated technology?

Answer 29

-reduces unit costs of production, enhancing competitiveness -can offer a premium price until the competition catches up -consistent standard of quality can be guaranteed using CAM -allow access to new markets -reduce waste -employees can work more efficiently

Question 30

what are the costs of a new and updated technology?

Answer 30

-it can drain on an organisation's capital, difficult to raise funds -inevitably requires training of the workforce, recruitment? -may face opposition from employees, especially if job security is threatened

Question 31

why is quality important?

Answer 31

-it can provide a USP and give customers a reason to buy the products -can charge higher prices, increasing profit margins -increased sales -enhance reputation and brand loyalty

Question 32

what is quality assurance?

Answer 32

a system for ensuring the desired level of quality, production and delivery of products and services -employees have to make sure that the quality is met at each stage of the production process

Question 33

what is total quality management (TQM)?

Answer 33

where there is a culture of quality throughout the organisation -checks throughout the process

Question 34

characteristics of TQM

Answer 34

-a focus on customer needs -continuous improvement -employee involvement and empowerment -managing suppliers

Question 35

what was Kaizen's philosophy?

Answer 35

-continuous improvement -all -employees are encouraged to identify and suggest possible improvements in the production process -culture of participation and involvement

Question 36

benefits of improving quality

Answer 36

-enhanced reputation and brand loyalty -competitive advantage (might give a USP) -increased revenue= higher sales and perhaps higher selling price -greater flexibility in terms of price

Question 37

difficulties of improving quality

Answer 37

-costs: training, administration of the system, equipment -employees may be resistant to change or might demand higher pay

Question 38

what is a supply chain and what is it composed of?

Answer 38

the whole process of getting a good or service to the consumer, composed of: -the supply of materials to the manufacturer -the manufacturing process -the distribution of the finished goods to the customer

Question 39

what is flexibility?

Answer 39

-the ability of a business to meet a customer requirements. -it can involve variations in specification (mass customisation)-> tailoring goods to specific customer requirements

Question 40

what is speed of response and dependability

Answer 40

-speed of response is how quickly a business fulfils an order -dependability is the punctuality or whether it fulfils an order on time

Question 41

how might a business be able to manage demand?

Answer 41

using the marketing mix -increasing or reducing prices -increasing or reducing advertising -sales promotions

Question 42

how can supply be managed?

Answer 42

-flexible workforce: multi-skilled workforce, part-time or zero hour contracts -increase capacity: invest in more capacity for a growth in demand -produce to order: used a lot by tailors, restaurants and aircrafts -outsourcing: another business is contracted to produce the extra goods required in order to satisfy demand

Question 43

what are some influences on the amount of inventory held?

Answer 43

-nature of the product: no holding stock of perishable goods -nature of production: JIT production = less stock held -nature of demand: seasonal products may need a higher level of stock than those that have regular demand -opportunity cost: an money tied up in stock can present an opportunity cost and can be used somewhere else

Question 44

what might you find in an inventory control chart?

Answer 44

-buffer level of inventory: minimum amount of inventory held, foe emergencies -reorder level: the level of inventory at which a new order is placed -lead time: the time between an order being made and its arrival in the business -max stock level: highest amount of inventory a business is able to hold -reorder quantity: amount ordered

Question 45

what are the influences on the choice of suppliers?

Answer 45

-dependability: reliable and able to order on time? -flexibility: able to respond efficiently to changes in demand? -quality: consistent and reliable quality? -price and payment terms: prices charged and payment terms (such as credit) competitive? -ethics: operates in a socially responsible manner?

Question 46

adv of outsourcing

Answer 46

-enabling of a quicker response to increase in demand -greater dependability for customers during periods of increased demand -lower cost, particularly in cases of temporary increase in demand

Question 47

dis of outsourcing

Answer 47

-quality may suffer -reliability of suppliers may not be guaranteed -likely to be more costly than producing in house