Unit 4: Operations Flashcards
(148 cards)
1
Q
Give 2 reasons why businesses set operational objectives
A
- to act as a focus for decision making
- to improve co-ordination
- to improve efficiency
2
Q
Give 4 operational objectives
A
- cost
- quality
- speed of response
- environmental obj
- added value
- dependability
- flexibility
3
Q
How does lower cost make a business more competitive
A
Lower costs = lower prices = increase sales
4
Q
How can you reduce the unit cost
A
Reducing the fixed cost or the variable cost
5
Q
How do you reduce variable costs
A
By cutting labour and raw material cost
6
Q
Is reducing fixed cost or reducing variable cost a more specific focus
A
Fixed cost - it’s a manageable target and a more specific focus
7
Q
What can be a problem with businesses trying to lower their costs
A
Quality might be sacrificed, especially if the competition comes down to cost
8
Q
What five measures of quality are used
A
- customer satisfaction
- customer complaints
- level of product returns
- scrap rate
- punctuality
9
Q
What is good about customer complaints
A
It shows if a business has problems that need rectifying
10
Q
What is bad about customer complaints
A
It can damage a business’ reputation
11
Q
What is a sign of customer dissatisfaction
A
If customers return a high percentage of goods they’ve purchased
12
Q
What is scrap rate
A
Where manufacturers track rejects through the manufacturing process
13
Q
What does the scrap rate show
A
It shows whether the production process is working effectively because scrap is wasted money which will increase the unit cost
14
Q
What does punctuality measure
A
How promptly a business delivers its goods
15
Q
What does speed of response refer to
A
The speed at which a business can respond to change
16
Q
What does a quick speed of response lead to
A
It leads to customer satisfaction which can lead to customer loyalty
17
Q
What are the 4 different types of flexibility
A
- volume flexibility
- product flexibility
- mix flexibility
- delivery flexibility
18
Q
What is volume flexibility
A
The ability to change level of output in response to customer demand
19
Q
What is product flexibility
A
The ability to switch production from one product to another
20
Q
What is mix flexibility
A
The ability to provide wide range of alternative versions of particular product/service
21
Q
What is delivery flexibility
A
Being able to adapt quickly to changes in timings and volume of deliveries
22
Q
What does dependability entail in terms of providing a service
A
a consistency of quality in the services
23
Q
What does dependability entail in terms of providing a product
A
The durability of the product and how long it lasts
24
Q
Why are environmental objectives important in the operations
A
It’s important they operational side doesn’t harm environment, especially for the CSR report
25
Give 4 environmental objectives
- reducing waste
- reducing carbon footprint
- self-sufficiency
- increase recycling
- reduce noise level/pollution
- reduce water pollution
26
What is added value
The process of increasing the worth of the resources by modifying them
27
Give 2 added value objectives
- increase spending on research and development
- achieving a certain number of patents
- developing particular innovation
28
Give 4 external influences on operational objectives
- market objectives
- competitors actions & performance
- technological change
- economic factors
- environmental factors
- politics/legislation
- suppliers
29
Give 3 internal influences on operational objectives
- corporate objectives
- finance
- Human Resources
- nature of the product
- resources available
30
What are the 4 measures of operational performance
- labour productivity
- unit costs
- capacity
- capacity utilisation
31
What is a labour intensive business
A business where labour costs outweigh capital costs of a business
32
What is labour productivity
The volume of output that is obtained from each employee - this is a measure of business efficiency
33
What is the equation for labour productivity
Output per period ÷ no. of employees
34
Give 3 things achieving high labour productivity depends on
the quality and extent of machinery
skills
motivation
method of production
reliability of raw materials and suppliers
35
Give 3 ways to achieve labour productivity
- better training/ new workers w/ better qualifications
- investment in equipment and tech
- improve workforce motivation
36
Give 2 costs of improving labour productivity
- it may conflict with other objectives
- training takes time
- it involves additional expenditure so a business should only implement them if it generates additional revenue to pay for the changes
37
What is equation for unit cost
total cost ÷ units of output (in volume)
38
At what point is it vital for a business to achieve lower unit costs
When competition is based on price
39
Give 2 internal influences on unit cost
- how many units a business can make with its resources
- how efficient a workforce is producing the goods
- how efficient the machinery is
- how easily variable cost can be controlled
40
What is capacity
The maximum goal level of output/production that a business can produce in a given time period
41
Give 2 things the ideal capacity depends on
- the level of demand for a product
- seasonality of output
- flexibility of production line
- seasonality of demand
42
What is capacity utilisation
The extent to which the company’s maximum possible output is being reached
43
Why is capacity utilisation being at 100% bad
There’s no scope for maintenance and repair because all resources are being used to produce at max capacity
44
What is the equation for capacity utilisation
(actual output per annum ÷ max possible output per annum) x 100
45
Give 3 advantages of spare capacity
- more time for maintenance, repairs and training
- less pressure and stress for staff
- allows business to cope w/ sudden increase in demand
46
What does every point below 100% in capacity show
Resources not being used and a higher fixed cost per unit
47
Give 3 causes of spare capacity
- new competitors or new products = fall in demand for existing products
- changes in taste/fashion = fall in demand
- unsuccessful marketing
- seasonal demand
48
Give 2 disadvantages of spare capacity
- higher proportion of fixed cost per unit
- negative image of being unsuccessful
- less work = employees bored/ demoralised
- lower profits
49
Give 3 reasons why capacity is important
- can enable a business to meet level of demand for a product
- efficient capacity management ensures firm isnt excessive amounts on capital equipment
- ideally, firms capacity group allow some flexibility between production lines
- industries w/ seasonal demand = needs to ensure they have capacity to cope w/ peak demand periods
- in competitive industries, a lack of capacity can have serious consequences
50
What is rationalisation
A process by which a firm improves its efficiency by cutting the scale of its operations
51
When is a business likely to use rationalisation
When a business has spare capacity. It will use rationalisation to reduce capacity and save unnecessary expenditure
52
What 3 ways can you reduce capacity
- selling part of production area = cuts fixed costs
- changing to a shorter working week/ day
- laying off workers
53
What is the main cause of capacity shortage
An increase in demand which outpaces the firms ability to increase production levels
54
Give 3 ways to increase capacity
- building/ extending factory plants
- ask staff to work overtime/ longer times
- transferring resources from another area
- hire new staff
- outsourcing/ subcontracting
55
What are the dangers of operating at low capacity utilisation
- higher unit costs which impacts competitiveness
- less likely to reach breakeven output
- capacity tied up in under - utilised assets
56
Give 3 problems working at high capacity
- can have negative effect on quality
- employees suffer
- loss of sales if you cant meet unexpected increases in demand
57
What is the importance of labour productivity
- an increase in labour productivity will decrease labour costs per unit
- lower unit cost = lower prices = competitive advantage
58
What 4 factors influence labour productivity
- extent and quality of fixed assets
- skills, ability and motivation of staff
- methods of production
- external factors e.g., reliability of suppliers
59
What 3 things can a business do a as result of greater efficiency
- pay higher wages to workers
- offer lower prices / increase quality
- spend more money on local environment
60
How can a business increase efficiency and labour productivity
- improves fertility of land
- using recyclable resources
- greater employee education/ training
- increasing level of investment in capital equipment
61
What is economies of scale
When unit costs fall as output increases
62
What’s the difference between an internal and external economies of scale
Internal economies of scale arrears from increased output of the business itself and external economies of scale occurs within an industry and therefor all competitors benefit
63
Give 5 economies of scale
Technical
Purchasing
Marketing
Finance
Social and welfare
Specialisation
Research and development
Managerial and administrative
64
What are 3 difficulties trying to improve labour productivity
- Unlikely fertility of land can be increased indefinitely
- education and training consumes resources
- potential trade off with quality
- potential for employee resistance
- financial methods of motivation are more effective short term
- increasing level of investment in capital equip = too much emphasis on capital goods = consumers have fewer products available short term
65
What are diseconomies of scale
Disadvantages an org experiences due to increase in size. These cause a decrease in efficiency/ increase in unit costs
66
What are the 3 main diseconomies of scale
Coordination
Communication
Motivation
67
What is lean production
Production based on a range of time-saving and waste-saving qualities whilst ensuring quality
68
Give 4 types of waste
- Over production
- defects
- transport (moving resources around unnecessarily)
- motion (workers appear busy but not adding any value)
- waiting time
69
Name the 5 lean production methods
- Just in time management
- Cell production
- Time based management
- Kaizen
- Simultaneous engineering
70
What are the 5 aims of lean production
- zero delay
- zero stocks
- zero mistakes
- zero waiting
- zero accidents
71
What 4 things does effective lean production require
- excellent communication and good relations
- reliable, committed, flexible and motivated employees
- suitable equipment
- culture of quality assurance
72
What is time based management
A general approach the recognises the importance of time and seeks to reduce level of wasted time in production process
73
Give 2 benefits of effective time management
- quicker response time to meet changing market and customer needs
- faster new product development
- reduction in waste = greater efficiency
74
What is cell production
A form of team-working where production processes are split into ‘cells’ (teams). Each cell is responsible for a complete unit of work
75
What are 2 advantages of cell production
- employee motivation - feel like they have more control over their work
- cell members can divide the work along themselves and share skills and expertise
- quality improvements
- improves communication
76
What are 2 disadvantages of cell production
- output m at be lower than ‘flow’ production system
- different ‘cells’ may work at different speeds = may lead to conflict and tension
- may need to invest heavily in machinery multiple cells require same equip
- allocation of work to cells has to be efficient so employees have enough work but not so much they’re unable to cope
77
What is just in time production
Producing products to order
78
What is the aim of just in time production
To ensure inputs/ stock into the production process only arrive when needed and reduce waste by eliminating the need for high levels of inventory
79
Give 3 benefits of JIT
- reduced stock holding = reduction in storage space = reduced costs
- increased labour productivity and efficiency
- more motivated workforce = reduced labour turnover and increased workers output
-reduced waste and inventory holding costs
- less risk - stock won’t perish/ go out of date
- less staff needed to manage and control stock
80
Give 3 difficulties/ drawbacks of JIT
- little room for mistakes as minimal stock is kept for reworking faulty products
- fewer opportunities for bulk buying
- halting of production if suppliers fail to deliver something
- no spare finished products to meet unexpected orders
81
What is simultaneous engineering
An approach to project management that helps firms develop and launch new products quickly. All parts of pricey planned together- everything is considered simultaneously (in parallel) rather than separately (in series)
82
Give two benefits of simultaneous engineering
- new product brought to market quickly
- improves staff commitment to project and greater sense of involvement
- can be source of competitive advantage (first move advantage) and can build brand loyalty before rivals
83
What are the 4 factors of production
- enterprise
- land
- capital
- labour
84
Name 4 factors that influence the operational resource mix
- method of production
- skills and efficiency of factors of production
- relative prices of resources
- reliability of labour and capital
- size and financial position
- nature of product/service
- availability of resources
85
What 3 things do you have to do to become more capital intensive
- raise finanace
- changeover: introduce new equip/ways of producing goods
- innovation: improve productivity through new equip
86
What 3 things do you have to do to maintain/ improve being labour intensive
- attract the right people
- keep the right people
- managing ppls knowledge: knowledge need to be stored so it can be shared efficiently
87
What is the main application of robotics
Can be programmed to carry out routine and increasingly complex activities
88
What is automation
The use of machinery to replace HR
89
what is computer aided manufacturing (CAM)
The use of computers to undertake activities such as planning, operating and controlling production
90
What does the EPOS (electronic point of sale) system do
When an item is sold, the EPOS system adjusts sycon levels and can order new stock from suppliers automatically
91
Give 3 advantages of IT in helping communication
- helps a business improve internal and external communication
- increases the speed of communication
- due to the growing use of loyalty cards, orgs can accumulate info in buying habits of customers
92
What is CAD
A computer software to design new products in 3D. It also includes programs to stimulate testing which can save money by eliminating production as testing of expensive prototypes
93
Give 2 disadvantages of technology
- expensive to introduce
- needs for regular updating and servicing
- for some businesses, the cost of tech can make them uncompetitive which can threaten their survival
- staff have to undergo frequent training which is an added cost that threatens efficiency
94
Name 4 tangible measures of quality
- appearance
- reliability
- durability
- functions and features
- cost of ownership e.g. repairs
- after sale service (cost, effectiveness)
95
Name 2 intangible measures of quality
- brand image
- reputation
- exclusiveness
96
Give 3 reasons why high quality is important to a business
- competitive advantage
- can have a good impact on sales volume and therefore profit
- can create a USP
- allows businesses to increase their selling price
- can reduce costs bc therese less waste from low quality products that need to be scrapped
- brand loyalty
- bad quality can damage reputation
97
Give 2 business that use quality as their competitive advantage
- marks and Spencer’s
- apple
- Waitrose
- BMW
98
Give two businesses that use both low price and quality while competing
- Aldi
- IKEA
- Nando’s
99
What is quality control
The process of inspecting products to ensure they meet quality standard. You detect defective output rather than prevent it
100
Give two benefits of quality control
- can prevent defective products reaching customers = less bad reviews
- a more secure system than one that trusts every worker to do their job properly
- may detect common problems throughout an org = mistakes can be put right more efficiently
101
Give 2 drawbacks of quality control
- costly
- placing responsibility for quality failure on inspectors = does little to encourage individuals to improve
- inconsistent inspections
- an expense that could be viewed as unnecessary of products produced ‘right first time’
102
What is quality assurance
A system that aims to achieve/ improve quality by organising every process to get product ‘right first time’ and prevent mistakes happening. It builds quality in.
103
Give two benefits of quality assurance
- sense of ownership rests with workers - herzberg argues this has a positive effect on motivation
- costs reduced - less waste and less need to rework products
- staff responsible for quality = higher consistent level of quality
104
What are the two systems of quality assurance
- total quality management
- kaizen
105
What is the aim of total quality management
Aims to develop quality culture throughout a firm. Everyone is concerned with quality at every stage of production process
106
What is kaizen
A process that is based on continuous improvement. This emerges from a corporate culture that encourages employees to identify possible way of improving the operation of the org
107
Give 3 difficulties of improving quality
- May be difficult to convince ppl there’s a problem
- may be difficult agreeing on best solution
- may be resistance to change
- introducing new methods and retraining staff may be time consuming
- keeping pace with change of customer cries on quality may be difficult
108
Give 3 costs of improving quality
- new training of staff
- installing equipment for quality testing
- employing inspection staff
- introducing/ updating system
- organising these of quality of inputs/ resources
109
Give 3 examples of poor quality
- product delivered late
- product fails e.g. expected tear
- product doesn’t perform as promised
- poor instructions/ directions of use
110
How might poor quality be measured
- warranty claims
- market surveys
- product returns
- profit margins
- customer service rating
111
To increase demand, you need to improve marketing mix
TRUE or FALSE
TRUE
112
What should a business do if they have a capacity shortage and high demand
Charge higher prices in order to reduce demand and therefore maximise sales revenue
113
When demand is low, is machinery a worthy or unnecessary expense
Unnecessary expense
114
What are the main 3 approaches to increasing supply
- producing to order
- use of temporary & part time workers
- outsourcing
115
Is producing to order a ‘pull’ or ‘push’ method of production
Pull method
116
What type of products does producing to order cover
Small-scale, tailor made products and large-scale one off planes whereby the basic model is determined but layout and fittings modified according to wishes of customer
117
Give 3 advantages of producing to order
- ability to supply product that meets customers exact specification = increased customer satisfaction and brand loyalty
- reducing costs of holding inventory
- potential for higher prices
- production planning easier - org doesn’t need to employ staff to forecast demand and less need for staff to persuade ppl to buy products
- it’s an extension of lean production methods
- able to modify basic basic products to target mass markets and niche markets
118
Give 3 disadvantages of producing to order
- fluctuations in production levels overtime
- higher costs due to inefficient capacity utilisation
- customer has unexpected demand in product = impossible to meet demand quickly = sale lost
- pressure of suppliers and employees bc of level of flexibility required
- culture of continuous improvement needs to be in place BEFORE
119
Name 3 factors that have to be considered when producing to order
- effect on staff
- impact on cost
- flexibility of capacity
- value to customer of customised product in comparison to standardised product
- cost of stockouts bc it can lead to loss of sales and loss of goodwill
- willingness if customer to wait for product to be completed
120
Why is it inefficient to employ temporary workers full time when additional staff are needed
For most of the year they would have little to do
121
Give two advantages of temporary and part-time employees
- efficient way to keep costs down in areas where full time staff not necessary
- flexibility- business able to respond to changes in demand more easily
- if part-time work suits employees = more motivated and absenteeism reduced
122
Give two disadvantages of temporary/part-time employees
- May involve higher staffing costs as a result of paying fees to agencies and extra training and administrative costs
- staff may be less loyal and committed to business
123
What is outsourcing
The transfer of activities which were previously conducted in-house to a third party (outside of business)
124
What is subcontracting
When another business takes an assigned task/part of a task from another business under contract
125
Why do businesses use outsourcing
To reduce capacity utilisation problems
126
Give two advantages of subcontracting/outsourcing
- can react to changes in demand quickly
- specialisation can be bought in more efficiently than doing it themselves
- easier it achieve non standard orders w/out disruption to production line
127
Give two disadvantages of subcontracting/outsourcing
- no direct control over quality of products
- profit margins may be affected
- patents and methods of production may have to be shared w/ subcontractor
- too much subcontracting can damage businesses operation bases
128
Give 4 key reason to hold inventory
- precaution against delays from supplier
- provide buffer between production process
- to enable production to take place
- it allows efficient production
- allows for seasonal changes
- satisfying customer demand
129
What are the 4 costs of holding inventory
- cost of storage
- interest stock
- obsolescence cost
- ‘stock out’ costs
130
Give 3 advantages of high inventory control
- customer demand met quick
- no loss of goodwill caused by running out of inventory
- benefit from bulk buying = lower unit costs
- production lines not halted
- sudden increase in demand dealt w/ quickly
131
Give 3 advantages of low inventory levels
- reduced warehouse costs
- products becoming out of date minimised
- security and pilferage (theft) costs lower
- cash flow problems due to cash being tied up in inventory less probable
132
What is an inventory control chart
A diagram showing that’s used to register levels of stock/inventory over a period of time
133
Name all the key parts of an inventory control chart
- maximum level
- reorder level
- lead time
- minimum inventory level
- buffer stock
134
What is lead time
The amount of time between placing the order and receiving the inventory
135
What is the buffer stock
An amount of inventory held as extras in case of unexpected orders so that they can be met and in care of any delays from suppliers
136
What is the reorder level
The reorder level acts as a trigger point (when inventory falls to this level, next order should be placed)
137
What 3 factors does the reorder level depend on
- supplier lead time (how long it takes for suppliers to deliver order)
- demand for product (high demand = high reorder level)
- consequences of running out of inventory
138
Give 4 factors that determine what makes an effective supplier
- prices
- payment terms
- quality
- capacity
- reliability
- flexibility
139
What is vertical integration
Business strategy in which a company takes ownership of two or more key stages of its supply chain
140
Why is vertical integration good for businesses
Guarantees reliability, quality and flexibility of suppliers
141
What is a strategic supplier
Suppliers which businesses can not succeed without maintaining an effective supplier relationship. Their goods and services are crucial to business success
142
What is a commodity supplier
suppliers that provides good and services that can easily be bought elsewhere and which are not hugely important to business
143
What is a supply chain
A network of sellers of raw materials, manufacturers that transform those materials into products and wholesalers and retailers who get those products to customers
144
How can effectiveness and efficiency of a supply chain be measured
By its contribution towards achievement of firms operational objectives
145
What is the traditional approach to supply chain management
A policy of buying huge quantities in order to get the lowest possible price. Businesses would try to ensure supplies were sourced as cheaply as possible and have sufficient quality
146
What is the modern approach to supply chain management
Buying smaller quantities from a number of different suppliers which increases flexibility
147
What two ways does Michael Porter say a business can gain a competitive advantage
- cost advantage
- differentiation
148
Give 5 factors that influence a business’ decision to outsource
- available capacity
- expertise
- quality considerations
- nature of demand
- cost
- level of risk
- impact on profit
