3.4 - Operations Flashcards

Question

How does 'competitor's actions and performance' influence operational objectives and decision?

Answer 1

if a competitor has a successful new product a business may introduce its own new product

Answer 2

Technology can affect a business' costs, the quality of its products, and levels of productivity within the business. These factors are key performance targets for operations management and therefore is, arguably, the most important factor. Decisions on methods used can also be modified if technology changes

Answer 3

Interest rates are one economic factor that has a major impact on operations management objectives and decisions. The effectiveness of operations management is dependant on capital investment, and if interest rates increase, this can hinder the success of operations management in two different ways.

Answer 4

- it can increase costs by increasing the interest paid on loans, therefore reducing profitability. As a result, the introduction of new machinery may be delayed, reducing the efficiency of production - it may reduce sales levels as people cannot afford loans. This will mean lower output and so some targets, such as low unit costs, will be harder to achieve because bulk-buying opportunities have been reduced

Answer 5

minimising production costs: this can cause conflict with politicians, who may disagree with the methods used to reduce costs, especially if this involves exploitation of workers or unsafe working conditions

Answer 6

the potential for health and safety risks, the operations management function is heavily controlled by legislation

Answer 7

as a result of environmental legislation and pressures, firms are now much more closely controlled in terms of the products they make, the raw materials they use, and the processes in their factories

Answer 8

most businesses work closely with suppliers to ensure flexibility, high quality and relatively low-unit cost materials. A supplier that delivers these three factors can help a business to achieve its operations management targets and to compete effectively with rivals

Answer 9

measuring how the business is performing in relation to its operation objectives

Answer 10

- labour productivity - unit costs - capacity - capacity utilisation

Answer 11

the amount a worker produces over a given time

Answer 12

- usually a significant part of total costs - business efficiency and profitability are closely linked to productive use of labour - in order to remain competitive, a business needs to keep its unit costs down

Answer 13

labour productivity = output in period ( units ) / no. of employees at work

Answer 14

labour costs per unit = labour costs / output (units)

Answer 15

It increases

Answer 16

It decreases

Answer 17

- extent and quality of fixed assets ( e.g equipment, IT systems) - skills, ability and motivation of the workforce - methods of production organisation - extent to which the workforce is trained and supported (e.g working environment) - external factors (e.g reliability of suppliers)

Answer 18

- introducing new technology to speed up the production process - modifying the production process so that is operates more efficiently - recruiting workers with better qualifications and motivation - implementing new approaches to improve workers' motivation - providing better training for the workforce - improving the flexibility of operations so that less time is wasted

Answer 19

- potential 'trade-off' with quality - potential for employee resistance (e.g introduction of new technology) - employees may demand higher pay for their improved productivity

Answer 20

costs that do not vary with the level of output / production e.g rent, salary, insurance costs.

Answer 21

costs that vary directly with the level of output / production e.g raw materials, packaging, delivery costs

Answer 22

fixed costs + variable costs

Answer 23

the average production cost per unit

Answer 24

- change suppliers - use cheaper resources / materials - improve the production process - reducing waste

Answer 25

the maximum total level of output at production that a business can produce in a given time period.

Answer 26

- the level of demand for a product - flexibility of production lines - seasonability of demand/output - implications of failure to meet demand - opportunities for sub-contracted or outsourced production - availability of staff and resources

Answer 27

this measures the extent to which a business is using its production potential it is the % of total capacity that is actually being achieved in a given period

Answer 28

capacity utilisation = (actual level of output / maximum possible output) x 100

Answer 29

the more resources that are being fully utilised

Answer 30

- suggests relatively low demand - likely high cost per unit because the fixed costs are not being spread over many units. This means a high fixed cost per unit which may result in low profit margins

Answer 31

No scope for maintenance or repair. The business may also find that it cannot respond to sudden orders or deal with emergency situations.

Answer 32

- when a machine is having maintenance problems (reduced) - labour; by working more production shifts/overtime, capacity can be increased - seasonal or unexpected changes in demand (easter eggs in Nov & Dec before shipping to shop after Christmas)

Answer 33

- equipment; production line - facilities; building rent, insurance - labour; wages & salaries involved in production or delivering a service

Answer 34

- increasing workforce hours (extra shifts, encourage overtime : temp. staff) - sub-contract some production activities (assembly of components) - reduce time spent maintaining production equipment

Answer 35

- negative effect on quality (production is rushed. less time for quality control) - employees suffer (added workloads & stress, de-motivating if sustained for too long) - loss of sales (less able to meet sudden or unexpected increases in demand, production equipment may require repair

Answer 36

An approach to management that focuses on cutting out waste, whilst ensuring quality. This approach can be applied to all aspects of a business - from design, through production to distribution.

Answer 37

- doing the simple things well - doing things better - involving employee in the continuous process of improvement and as a result, avoiding waste and therefore reducing costs

Answer 38

waste = cost

Answer 39

- over-production - waiting time - transport - stocks - motion - defects

Answer 40

making more than needed; leads to excess inventories which may then become unsavable

Answer 41

equipment and people standing idle waiting for a production process to be completed or resources to arrive

Answer 42

moving resources (people, materials) around unnecessarily

Answer 43

often held as an acceptable buffer, but should not be excessive

Answer 44

a worker who appears busy but is not actually adding any value

Answer 45

output that does not reach the required quality standard - often a significant cost to an uncompetitive business

Answer 46

- good relations with suppliers - committed, skilled and motivated employees - a culture of quality assurance; continuous improvement & willingness to embrace change - trust between management and employees

Answer 47

- just in time production (JIT) - cell production - time based management - simultaneous engineering

Answer 48

JIT aims to ensure that inputs into the production process only arrive when they are needed

Answer 49

- based on a 'pull' system of production, customer orders determine what is produced - requires complex production scheduling - achieved using specialist software to connect production dept with suppliers - requires close co-operation with high quality suppliers

Answer 50

- lower stock holding means a reduction in storage space which saves rent and insurance costs - as stock is only obtained when it is needed, less working capital is tied up in stock - less likelihood of stock perishing, becoming obsolete or out of date - less time spent on checking and re-working production as the emphasis is on getting the work right first time

Answer 51

- there is little room for mistake as minimal stock is kept for re-working faulty products - production is highly reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed - there is no spare finished product available to meet unexpected orders, because all products is made to meet actual orders - a need for complex, specialist stock items

Answer 52

a form of team-working where production processes are split into cells. Each cell is responsible for a complete unit of work

Answer 53

- closeness of cell members should improve communication - workers become multi-skilled and more adaptable to the needs of the business - greater employee motivation, from variety of work, team-working and responsibility - quality improvements as each cell has 'ownership' for quality on its area

Answer 54

- without a culture of trust, workers can feel they are being pushed for greater output with no respite - business may have to invest in new materials handling and ordering systems - machinery may not be used as intensively as in traditional flow production - some small scale production lines may not yield enough savings to make a switch cell production worthwhile - allocation of work to cells has to be efficient so that employees have enough work, but not so much that they are unable to cope

Answer 55

a general approach that recognises the importance of time and seeks to reduce the level of wasted time in the production processes of a business

Answer 56

- quicker response times (reduced lead times) to meet changing market and customer needs - faster new product development - reduction in waste, therefore greater efficiency

Answer 57

- flexible production methods (able to change products quickly, can change production volumes/runs) - trained employees (multi-skilled staff, trust between workers and managers)

Answer 58

an approach to project management that helps firms develop and launch new products more quickly. All parts of the project are planned together. Everything is considered simultaneously (together, in parallel) rather than separately (in series)

Answer 59

- new product is brought to the market much more quickly - business may be able to change a premium price that will give a better profit margin and help recoup R&D costs - a greater sense of involvement across business functions improves staff commitment to the project - can be a source of competitive advantage (first mover advantage) for the firm if it can get a reliable new product into the same market and build brand loyalty before its competitors

Answer 60

a product or service is of good quality if it meets the needs & expectations of the customer

Answer 61

- performance (fit for purpose) - appearance - availability & delivery - reliability / durability - price/value for money

Answer 62

When it fails to meet the customer's needs and expectations

Answer 63

- markets are highly competitive - customers are more : - knowledgeable and demanding, prepared to complain about poor quality, able to share information about poor quality - a reputation for high quality means a competitive advantage

Answer 64

1 ) buying process 2 ) product reliability 3 ) cost of ownership 4 ) after-sales service

Answer 65

- quality control (based on inspection, takes defects out) | - quality assurance (based on processes, builds quality in)

Answer 66

- traditional way of managing quality - involves checking and reviewing product - focuses on detection rather than prevention - usually requires sampling - spots and removes sub-standard products - costly - focus on outputs - targeted at production activities

Answer 67

1) when raw materials are received prior to entering production 2) whilst products are going through the production process 3) when products are finished and before being dispatched to customers

Answer 68

- sub-standard products are spotted before they reach customer - minimises disruption to the production process - applies a consistent standard to quality

Answer 69

- costly - often at the end of the production process - too late - inconsistent inspections - may not be compatible with modern production systems - done by inspectors rather than employees themselves

Answer 70

the processes that ensure production quality meets the requirements of customers

Answer 71

to design the production process in such way as to minimise the chances that output will be sub-standard

Answer 72

quality will be built in

Answer 73

there is less need to inspect output (quality control)

Answer 74

- focuses on processes - achieved by improving production processes - emphasises the customer - targeted at the whole business - quality is built into the product

Answer 75

(an approach to quality assurance) A management philosophy committed to a focus on continuous improvements of product and services with the involvement of the entire workforce

Answer 76

- essentially an 'attitude' - the whole business understands the need for quality and seeks to achieve it - everyone in the workforce is concerned with quality at every stage of the production process - quality is ensured by workers and not inspectors

Answer 77

- puts the customer at the heart of the production process - motivational as workers feel more involved in decision- making - less wasteful than throwing out defective finished products - eliminates the cost of inspection

Answer 78

- requires strong leadership - substantial investment in training and support (but the return on investment may take time) - may become bureaucratic - disruption and costs may outweigh benefits

Answer 79

(another approach to quality assurance) - based on concept/culture of continuous improvement - encourages employees to engage fully with finding ways to improve quality process.

Answer 80

The ability of an organisation to change its operations in some way e.g product, volume, delivery, mix

Answer 81

- design of production lines - maintaining high levels of spare capacity - having a flexible workforce mix flexibility requires a combination of all of these

Answer 82

Provision of a wide range of alternative versions of the same basic product.

Answer 83

it has led to the growth of mass customisation

Answer 84

(offering individually tailored goods or services to customers on a large scale)

Answer 85

- 'pull' methods of production - a customer chooses a particular version of a product, which then leads to the manufacture of that product, meeting the specific needs of that customers

Answer 86

- collaborative customisation - adaptive customisation - transparent customisation - cosmetic customisation

Answer 87

Businesses work together with customers to develop a product that meets their specific needs (e.g Dell)

Answer 88

A standardised product that can be adapted by the customer based on their individual needs

Answer 89

Unique products are provided to each customer based on their individual needs

Answer 90

Standardised products are marketed to different customers in different ways e.g packing (baked beans -heinz)

Answer 91

- a market in which customers value variety and individuality and are therefore prepared to pay a premium price - quick responsiveness to market changes so that products can be quickly adapted to changing customer needs - the ability to provide customisation through flexible operations - scope for mass efficiency / economies of scale to ensure cost-effective operations

Answer 92

- cost reduction - higher revenue - greater customer loyalty - competitive advantage - improved understanding of customers' wants - greater protection from market changes - improved workforce motivation - higher profits

Answer 93

The use of 'pull' methodology means there is less waste because business do not need to keep stocks of products. Instead the products are manufactured and then provided directly to the customer.

Answer 94

Customisation meets consumer needs more closely and therefore should lead to greater demand and/or higher prices for products overall.

Answer 95

If customers are highly satisfied, they tend to be more loyal and provide the business with repeat orders.

Answer 96

Customisation provides a unique selling point and therefore gives a business a competitive advantage.

Answer 97

Although mass customisation relies on a good understanding of customer wants, it also improves a businesses' understanding of those wants. Data on transactions provide a record of the customer's preferences.

Answer 98

Mass production makes a business vulnerable to changes in tastes because production methods are geared towards a limited range of products. The flexibility offered by mass customisation means that it is probable that methods of production can be adapted to meet any market changes.

Answer 99

Customisation provides variety for workers and should lead to a more contented and motivated workforce.

Answer 100

Increased profit margins arise from the combination of significant increases in price and slight increases in unit costs. However, profit may also arise because mass customisation often allows the producer to deal directly with the end-user and so that the profit of the middleman (usually a retailer) is now taken by the producer.

Answer 101

- requirement for sophisticated information systems - greater expense in terms of IT, capital equipment and staff training - problems with rejected products - unsuitable supply chains

Answer 102

The management systems required to record and analyse data are complex, mass customisation requires a large capital input. This can make the business vulnerable if mass customisation does not succeed.

Answer 103

These expenses are likely to be higher and despite higher prices paid by customers, the end result may be no change in profit margins.

Answer 104

If the customer rejects a customised product, it will be more difficult for the business to sell it to another customer. This is because the product has been devised to meet the specific needs of one customer. This can increase wastage costs.

Answer 105

Mass customisation requires flexbility from suppliers. This can be an obstacle as flexibility adds costs for the supplier, who may prefer to sell standard items in bulk. The producer will probably need to pay higher prices for these components.

Answer 106

A strategy in which a business only manufactures a product once an order for that product has been received from a customer. It is often known as build to order (BTO) or make to order (MTO).

Answer 107

- Often adopt a modular approach to manufacturing | - There is a fixed basic element of the product, alongside elements of the product that can be customised.

Answer 108

- ability to supply a product that meets a customer's exact specification - reduced costs of holding inventory - potential for higher prices - production planning is easier - targeting markets

Answer 109

Increasing customer satisfaction, brand loyalty and gives business USP.

Answer 110

If every unit of output is planned for a particular customer then there will be no need to hold any inventory of finished goods. Saving costs e.g rental payments and potential losses through pilferage and damage

Answer 111

Customers likely to pay higher prices for a product exactly suited to their needs. If the production method enables producing to order to be comparable in costs to mass production, then the business should improve its profit margin.

Answer 112

No need to employ staff to forecast demand, to plan production schedules. Less need for sales staff whose job is to persuade people to buy products already made.

Answer 113

BTO allows to modify basic products to target a mass market with the basic products and niche markets through modifications

Answer 114

- considerable fluctuations in production levels over-time - higher costs - uncertainty about production levels can make it difficult to plan - inability to take advantage of sudden interest in a product - uncertainty about production levels can make it difficult to plan

Answer 115

Can prove to be more inefficient than a production schedule that spreads output more evenly throughout the year, because the latter will tend to use capital equipment and permanent labour much more cost-effectively.

Answer 116

Inefficient capacity utilisation will result from fluctuations arising from BTO leading to higher fixed costs per unit.

Answer 117

The level of flexibility required for BTO places pressure on suppliers, managers and employees.

Answer 118

PTO there isn't inventory held. If there is unexpected demand for a product it will be impossible to quickly meet demand. So, sales may be lost.

Answer 119

The level of flexibility required to BTO places pressure on suppliers.

Answer 120

- value compared to a standardised product - willingness of customers for waiting of customisation - nature of product & cost (high skills, increased labour costs) - cost of holding inventory - cost of 'stock outs'

Answer 121

- BTO is cheaper because products are mass produced | - However more expensive products due to holding inventory (refrigeration - lose their value)

Answer 122

A stockout is a situation in which a business has no stock or inventory with which to meet a customer's request. This often leads to the loss of a potential sale and possibly a loss of goodwill. For BTO, customer do not expect the product to be held as inventory as they are asking the business to provide a product with their exact specifications.

Answer 123

Permanent employees who work a limited number of hours, such as 15 hours per week, in comparison to full-time employees, who are likely to work between 37 + 40 hours per week.

Answer 124

People whose employment is subject to a time limit, such as six months from the date of appointment or until the completion of a certain project.

Answer 125

- lowers cost where full-time cover is unnecessary - builds flexibility, responding to changes in demand more easily - if part-time work suits employees, increases motivation and productivity, absenteeism and stress decreases - creates a wider pool of candidates to recruit - enable a firm to retain valued employees, such as mothers who want part-time hours

Answer 126

- higher staffing costs due to fees paid to agencies (temp. staff) - extra training and administrative costs - some workers might also be less loyal to the business, particularly temp. contracts

Answer 127

The transfer of activities, which were previously conducted in-house, to a third party outside of the business. In most businesses, tasks such as catering and cleaning have been transferred and are outsourced.

Answer 128

When another business takes an assigned task or part from another business under a contract

Answer 129

- reduce capacity utilisation problems | - reduce supply to match a fall in demand by reducing the amount of work that it outsources

Answer 130

- businesses are able to react to changes in demand more quickly if they have access to a number of other firm's production plans - outsourcing providers may be more specialised and therefore more efficient in a particular activity - lets a firm focus on its core business and helps it to avoid becoming involved in activities in which it is less competent - a non-standard order can be outsourced so that the business profits from the order but suffers no disruption to its normal production

Answer 131

- quality is no longer directly under the firm's own control. An unreliable outsourcing provider may negatively influence the reputation of a business - excessive outsourcing erodes a company's operations base and its ability to initiate research and make changes - the cost of outsourcing should be evaluated. The outsourced producer also wants to make a profit, so it is possible that it will be more expensive to subcontract or outsource production rather than produce in-house. - may require firm to give confidential info to supplier, details of its methods. This may mean the firm loses its competitive advantage if the supplier steals its ideas

Answer 132

- available capacity - expertise - quality independence - nature of demand - cost - level of risk - impact on profit

Answer 133

High levels of spare capacity = more inclined to produce in-house. Shortage of capacity means it becomes a much more financially viable solution

Answer 134

High expertise = reluctant to outsource as strengths will not be played However, the company to which the work is being outsourced possesses better production skills, leading to more efficient production

Answer 135

selling a product on basis of quality means outsourcing is risky due to difficulty of the business to control the quality of products it sells. A number of UK centres, have been re-shored (returned to UK) because of concerns relating to the quality of the service being provided by offshore providers (offshoring)

Answer 136

outsourcing arises because of the business's need to protect itself from sudden fluctuations in demand. If demand is stable over a period of time, then a business may be more inclined to produce in-house rather than use outsourcing

Answer 137

If production is not a core competency of a business, it could be outsourced. This is evident in the case of products that are offshored to countries that benefit from low costs, such as low wage levels and reduced rental payments for property.

Answer 138

Outsourcing can increase risk, because of a loss of control over operations and a possible loss of know-how

Answer 139

Companies expect to make a profit. Therefore, a decision to outsource or subcontract may result in lower profits because another business is making profit from that particular element of production. Businesses should examine the financial implications of any decision to outsource, to ensure that it is not damaging the overall profitability of the business

Answer 140

Used to describe outsourcing/subcontracting when the activity being transferred takes place in a different country to the contracting company.

Answer 141

1) raw materials and components 2) work in progress 3) finished goods

Answer 142

- brought from suppliers | - used in production process e.g parts for assembly or ingredients

Answer 143

Semi or part-finished products e.g construction process

Answer 144

Completed products ready for sale or distribution e.g products on supermarket shelves

Answer 145

- enable production to take place - satisfy customer demand - precaution against delays from suppliers - allow efficient production - allow for seasonal changes - provide a buffer between production process

Answer 146

- need to satisfy demand = failure to have goods available for sale is very costly, demand may be seasonal or unpredictable - need to manage working capital = holding stock ties up cash in working capital, an opportunity cost associated with stock holding - risk of stock losing value = longer stocks are held, the greater risk that they cannot be used or sold

Answer 147

- cost of storage - interest rates - obsolescence risk - stock out costs

Answer 148

More stocks require large storage space and possible extra employees and equipment to control and handle them

Answer 149

Means tying up capital (cash) on which the business may be paying interest

Answer 150

The longer stocks are held, the greater is the risk that they will become obsolete (unusable or not capable of being sold)

Answer 151

It happens when a business runs out of stock. Resulting in: - lost sales & customer goodwill - cost of production stoppages or delays - extra costs of urgent, replacement orders

Answer 152

The overall objective of stock control is to maintain stock level so that the total cost of holding stock is minimised

Answer 153

Max level of stock a business can or wants to hold

Answer 154

Minimum amount of product the business would want to hold in stock. Assuming the minimum stock level is more than zero, this is buffer stock.

Answer 155

Acts as a trigger point, so that when stock falls to this level, the next supplier order should be placed

Answer 156

Amount of time between placing the order and receiving the stock

Answer 157

1) Lead time from the supplier : delivery time, longer = higher re-order level 2) implications of running out : if stock-outs are very damaging, a high re-order level will be needed 3) demand for product : higher demand = higher re-order levels

Answer 158

- lower stock holding costs (e.g storage) - lower risk of stock obsolescence - less capital (cash) tied up in working capital - can be used elsewhere in the business - consistent with operating "lean"

Answer 159

- production fully supplied - no delays - potential for lower-unit costs by ordering in bulk/high quantities - better able to handle unexpected changes in demand or need for higher output - less likelihood of 'stock-outs'

Answer 160

- Electronic point of sale (EPOS) scanners in stores help managers to keep better track of their inventory - Marketing databases mean businesses can forecast sales levels more accuracy - Communication links with suppliers have also improved making JIT more possible

Answer 161

Methods of production that use a high level of capital equipment in comparison to other inputs, such as labour. A fully automated factory or a nuclear power station are examples of capital-intensive production

Answer 162

Methods of production that use high level of labour in comparison to capital equipment. Many service industries, such as retailing, restaurants and call centres, use a large number of people in comparison to equipment

Answer 163

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

Answer 164

- value for money - low prices = keep production costs down - the price paid to suppliers will have a significant impact on the selling price of the finished product

Answer 165

- most suppliers offer credit terms ( when the purchase is made, the actual payment for goods is delayed often by 28/30 days - this fits with cash flow cycle meaning that the business has a chance to begin earning revenue from finished products before having to pay for materials supplied -> interest may be charged

Answer 166

This will be important as it will affect the quality of finished goods and as well as the ability of the business to compete effectively within its market

Answer 167

The supplier must be able to supply the quantity or materials required. Failure = significant impact on a business' production function

Answer 168

Unreliable supplier = whole production line coming to a halt. This is increasingly important with the move towards lean production methods and JIT stock management system.

Answer 169

Businesses sometimes need to make significant changes to orders from suppliers e.g if there is a sudden change in demand for a product. Flexibility on the part of the supplier in this situation is important or they may risk losing the business as a customer.

Answer 170

- the traditional approach was to buy large quantities from the supplier in order to get one lowest possible price. - many organisations have moved away from this in favour of buying smaller quantities from a number of different suppliers - more flexibility & competition between suppliers = improved quality. This has been in response to shifts in consumers' priorities away from price and towards quality and flexibility - many businesses require their suppliers to meet certain environmental or ethical standards

3.4 - Operations Flashcards

(194 cards)