3.4 - OPERATIONAL PERFORMANCE

Question 1

what are operational objectives?

Answer 1

• objectives that help a company achieve its overall goal
• operational decisions will become focused on meeting these objectives

Question 2

operational objectives - COSTS

Answer 2

• may aim to cut costs, especially of competing on price
• firm can cut either fixed or variable costs

Question 2

operational objectives - QUALITY

Answer 2

• involve maintaining/improving quality
• eg -> may aim to reduce customer complaints on quality

Question 3

operational objectives - FLEXIBILITY

Answer 3

• need to react to what customers want
• eg need to vary amount of goods and services they produce

Question 4

operational objectives - EFFICIENCY

Answer 4

• aim to make better use of resources to decrease costs and increase profits
• may mean increasing capacity utilisation

Question 5

operational objectives - INNOVATION

Answer 5

• can set R&D department innovation targets
• these can be hard to reach, as unexpected problems often occur

Question 6

operational objectives - ENVIRONMENT

Answer 6

• pressure from customers and the government often leads to forms setting environmental objectives, like cutting carbon emissions’

Question 7

operational objectives - SPEED OF RESPONSE

Answer 7

• the speed which a business operates is important
• may mean decreasing production time or decreasing the wait time for customers

Question 8

added value

Answer 8

• adding value means increasing the difference between the cost of raw materials and the price that customers pay
• can be achieved by increasing selling price or by reducing costs of raw materials

Question 9

internal factors influencing operational objectives

Answer 9

• nature of product
• availability of resources
• other departments (finance, marketing, HR)
• overall objectives

Question 10

external factors influencing operational objectives

Answer 10

• competitors performance
• market conditions
• demand for product
• changing customer needs
• new technology

Question 11

methods of production - job production

Answer 11

• one-off items by skilled workers

Question 12

methods of production - flow production

Answer 12

• mass production on a continuous production line

Question 13

methods of production - batch production

Answer 13

• production of small batches of identical items

Question 14

methods of production - lean production

Answer 14

• streamlined production with waste at a minimum

Question 15

what is capacity utilisation?

Answer 15

• capacity is the max amount a company can produce
• capacity utilisation is how much capacity a business is using
• will depend on number of employees, technology, production process, investment

Question 16

100% capacity utilisation is bad

Answer 16

• 100% and good quality is hard
• may have to turn away customers as cant produce anymore
• no downtimes for machines, can cause problems if something breaks
• no margin of error
• can’t temporality increase output when high demand

Question 17

under-utilisation

Answer 17

• low capacity
• inefficient as it means business are not getting use out of their machines
• can be dealt with trying to increase demand or reducing capacity

Question 18

labour productivity

Answer 18

• companies need to know how productive their workforce is as it can have a massive impact on the business
• the higher the about productivity, the better the workforce is working

Question 19

ways to increase labour productivity

Answer 19

• improving worker motivation
• training
• new technology

Question 20

lean production

Answer 20

• keeps waste to a minimum
• inefficient production methods costs, so lean production can save business lots of money
• lean production methods include, just-in-time, time-based management, kaizen

Question 21

just-in-time

Answer 21

• aims to reduce waste by having as little stock as possible
• less waste, reduced storage costs, more flexible
• problem when production strikes and suppliers have to be reliable

Question 22

time-based management

Answer 22

• reduces waste in the production process
• often used with high fashion brands trying to get on the market fastest
• reduces lead time, customers satisfied quicker, help drive innovation
• however there’s complaints about speed being over quality

Question 23

advantages of technology

Answer 23

• increased productivity
• reduced waste
• more effective and efficient delivery
• more effective marketing
• reduce administrative costs
• better communications

Question 24

disadvantages of technology

Answer 24

- high initial cost - may require maintenance + consistent updating - increase in staff training - may replace staff - redundancies

Question 25

what is a capital intensive firm?

Answer 25

- when businesses use more machinery and fewer workers - larger firms tend to be more capital intensive

Question 26

advantages of a capital intensive firm

Answer 26

- cheaper than manual labour in the long term - more precise than human workers - able to work 24/7 - easier to manage then people

Question 27

disadvantages of capital intensive firms

Answer 27

- high initial costs - usually only suited to one task (inflexible) - breakdowns can lead to long delays - fear of being replaced by a machine can cause motivation to decrease

Question 28

what is a labour intensive firm?

Answer 28

- uses more workers and less machinery (eg NHS) - labour intensive firms are more common when labour is cheaper

Question 29

advantages of labour intensive firms

Answer 29

- people are flexible and can be retrained - cheaper for small-scale production - workers can solve problems and suggest ways to improve quality

Question 30

disadvantages of labour intensive firms

Answer 30

- harder to manage people - people can be unreliable - people need breaks - wage increases mean that labour costs can become very expensive

Question 31

quality control

Answer 31

- means checking goods as you make them or when they arrive from suppliers to see if anything is wrong with them - massumes errors are unavoidable - detects errors + puts right

Question 32

quality assurance

Answer 32

- introducing measures into production process to ensure things don't go wrong - assumes that errors are avoidable - prevents errors and aims to get it right first time - self-checking system

Question 33

total quality management

Answer 33

- means the whole workforce is committed to quality improvements - idea is that every department focuses on quality to improve the overall quality of the products and services

Question 34

advantages of TQM

Answer 34

- involves all employees and helps them bond as a team - TQM boots a company's reputation for providing quality goods - usually leads to fewer faulty products being being made, reducing waste

Question 35

disadvantages of TQM

Answer 35

- can take along time to introduce TQM, may not see immediate improvement - can demotivate staff as it takes a lot of effort - usually expensive to introduce, often involves investing in training

Question 36

Quality circles

Answer 36

- meet regularly to discuss quality control issues - use knowledge of employees from various departments - aim to identify and solve quality problems - get staff involved which can increase motivation and productivity

Question 37

Kaizen

Answer 37

- lean production - continuous improvements in the business - employees on the bottom line are given some control over decision making - cheap to introduce - not great for urgent needs to change

Question 38

stock control

Answer 38

- aims to keep stock level just right as it's costly to hold lots of stock - amount of buffer stock needed depends on storage space and the type of product - the longer the lead time (time for goods to arrive after ordering from supplier) - inventory control charts allow managers to analyse and control stock over a period of time

Question 39

supply chains

Answer 39

- consists of the group of firms that are involved in all the various processes required to make a finished product or service available to customer - all members need to be dependable, as it could lead to poor quality and a bad reputation - businesses also need to be flexible on the time taken to supply goods and the volume of goods they supply

Question 40

outsourcing

Answer 40

- when businesses contract out some activities to other businesses rather than in-house - can benefit from specialist knowledge of other businesses they outsource to, also means businesses don't have to pay for permanent staff when only needed occasionally - however no control over the quality of outsourced work

Question 41

mass customisation

Answer 41

- method of producing to order, combines flexibility with low cost mass production - with mass customisation a company must have a flexible and efficient production process and supply chain - allows greater customer choice and competitive advantage - however can be very difficult for a business to be efficient this way

Question 42

important factors to consider when managing supply chains

Answer 42

- price - payment terms - quality - capacity - reliability - flexibility

Question 43

how can companies build relationships with suppliers

Answer 43

- linked networks (shared IT systems) - JIT systems - shared costs - innovation (sharing ideas)

Question 44

economies of scale

Answer 44

- as a business grows, costs will fall - eg bulk buying or mass production decreasing unit costs

Question 45

diseconomies of scale

Answer 45

- occurs when firms become too large/inefficient - eg bad communication, bad coordination, lack of motivation