business > 3.4 Operations > Flashcards

3.4 Operations Flashcards

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1
Q

What are operational objectives?

A

Targets set for production

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2
Q

Define the 7 operational objectives

A

Quality
Costs
Flexibility
Efficiency
Innovation
Environment
Speed of response
Added value

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3
Q

Operational objectives:
Define quality

A

Involves either maintaining or improving levels of quality

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4
Q

Operational objectives:
Define costs

A

Many firms aim to cut costs e.g cut fixed or variable costs

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5
Q

Operational objectives:
Define flexibility

A

Businesses need to be able to react to what customers want e.g need to be able to vary the amount of goods/services they are producing so that volume doesn’t exceed demand

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6
Q

Operational objectives:
Define efficiency

A

Aim to make better use of resources in order to reduce costs and increase profit e.g increasing capacity utilisation

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7
Q

Operational objectives:
Define innovation

A

Businesses can set their R&D department innovation targets e.g car manufacturer set an objective to produce an electric car that fully charges in 5 minutes in the next two years

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8
Q

Operational objectives:
Define environment

A

Pressure from customers and the government = firms setting environmental objectives e.g cutting carbon emissions

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9
Q

Operational objectives:
Define speed of response

A

Speed at which a business can operate

Might mean decreasing the production time of a product or waiting time for customers

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10
Q

Operational objectives:
Define added value

A

Adding value means increasing the difference between the cost of raw materials and the price the customer pays

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11
Q

Formula for added value?

A

Sales revenue - cost of bought - in goods and services

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12
Q

How can added value be achieved?

A

Increasing the selling price of the product or by reducing costs of raw materials

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13
Q

Define capacity

A

Capacity of an organisation is the maximum output that it can produce in a given period

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14
Q

What does capacity depend on?

A

Number of employees and how skilled they are, technology the business has, kind of production process

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15
Q

What is capacity utilisation?

A

How much capacity a business is using

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16
Q

Capacity utilisation formula?

A

Output / capacity x 100

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17
Q

What are the drawbacks of 100% capacity utilisation

A

Might not be possible to upkeep high levels of quality

Business may have to turn away potential customers as it can’t increase output

No downtime - machines on all the time, if machine breaks down delays will be caused

Business can’t temporarily increase output for seasonal demand or one-off orders

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18
Q

How can businesses increase capacity?

A

By using their facilities for more of the working week

Businesses can buy more machines

Increasing productivity - reorganise production by reallocating staff to the busiest areas

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19
Q

Define outsourcing

A

When a business uses another firm to do some work on its behalf

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20
Q

Benefits of outsourcing?

A

Businesses can outsource work to other businesses in busy periods - means they can meet unexpected increases in demand without increasing their own capacity and having extra costs

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21
Q

Drawbacks of low capacity utilisation?

A

Inefficient as it means a business is not getting use out of machines and facilities that have been paid for

Increases costs as it causes fixed costs to be spread over fewer units of output, so unit costs increase

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22
Q

Unit costs formula?

A

Total costs / units of output

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23
Q

How can firms deal with low capacity utilisation?

A

They will first try to increase demand or reduce capacity

  • Businesses stimulate demand by changing the marketing mix
  • outsourcing work for other firms to fill spare capacity
  • reduce capacity by closing part of their production facilities
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24
Q

How is productivity measured?

A

As the output per worker in a given time period

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25
How is efficiency different to productivity?
Efficiency is about getting more output from a given amount of inputs Reducing waste of all inputs
26
Labour productivity formula?
Output per period / number of employees
27
How can labour productivity be increased?
- improving worker motivation - training - new technology can increase the speed at which workers do their job
28
Drawbacks of increasing productivity?
- quality could suffer and more waste could be produced as a result of workers being encouraged to produce more by offering bonuses and incentives - training workers to be more productive could result in redundancies and job losses - new technology could be very expensive
29
What is lean production?
Efficient form of production that keeps waste to a minimum Includes just in time, time based management and kaizen
30
What is just in time production?
Aims to reduce waste of materials and products by having as little stock as possible
31
What is just in case production?
Where companies keep some extra stocks at each stage of the production process just in case
32
Advantages of JIT?
Storage costs reduced, cash flow improved as money isn’t tied up in stock, less waste as out of date or damaged stock isn’t lying around
33
Disadvantages if JIT?
No stock means customers cannot be supplied during production strikes. Suppliers have to be reliable as there isn’t much stock of raw materials to keep production going
34
What is time based management?
Where companies can also compete on time trying to be the fastest to get their product on the market
35
What does time based management depend on?
Flexible production facilities
36
Advantages of time based management?
Reduces lead times meaning cost of holding stock falls and customer needs can be satisfied quicker Machinery with more than one function makes it possible to offer a more varied product range
37
Drawbacks of time based management?
Criticised for placing speed above quality
38
Advantages of capital intensive production?
Cheaper than manual labour, machinery often more precise than human workers, machinery able to work 24/7
39
Disadvantages of capital intensive production?
High set up costs, machines usually only suited to one task which makes them inflexible, if machinery breaks down it can lead to long delays
40
Advantages of labour intensive production?
People are flexible and can be retrained, cheaper for small scale production, workers can solve any problem that arise during production and suggest ways to improve quality
41
Disadvantages of labour intensive production?
Harder to manage people than machines, people can be unreliable e.g get sick, wage increases mean that cost of labour can increase over time
42
Advantages of producing high quality products?
Don’t need to do as much advertising etc to persuade shops to stock high quality goods, fewer complaints and refunds, improve image and reputation of the business
43
Define quality control
Checks the quality of completed products for faults
44
Define quality assurance
Process of carrying out quality checks at specific stages during the production process
45
Advantages of quality assurance?
Empowering employees to self check the quality of their work can be highly motivating
46
Disadvantages of quality assurance
As training is important for QA workers might have to be retrained etc Workers must be motivated and committed to quality for quality assurance schemes to work
47
What is total quality management?
Means the whole workforce is committed to quality improvements. Idea that every department focuses on quality in order to improve the overall quality of their products and services
48
Advantages of TQM?
Help bond employees as a team, boosts company’s reputation for providing quality services or products, usually leads to fewer faulty products being made
49
Disadvantages of TQM?
Can take a long time to introduce TQM, can demotivate staff as it can seem like a lot of effort to think about quality in all parts of the business, usually expensive to introduce as often means investing in training for all employees
50
What is Kaizen?
Means employees should be improving their work slightly all the time, instead of making one off improvements Employees are encouraged to question why a problem has occurred
51
Pros of kaizen?
Helps workers feel involved in quality assurance and is cheap to introduce
52
Downsides of kaizen?
As it makes small changes over time, it is not great for businesses that urgently need to improve quality. Needs the firm to be willing to commit to the method in the long term
53
Define storage costs
Includes rent for the warehouse, heating lighting etc
54
Define wastage costs
Costs of throwing away useless stock
55
Define opportunity cost
Cost of investing money in stock instead of something else (cost of missing out on the next best alternative)
56
What does the maximum level of stock a business wants to hold depend on?
The size of their warehouse, their production method, and on opportunity cost
57
What is buffer stock?
A minimum level of stock so that a business won’t run out of raw materials etc
58
What does the amount of buffer stock a business has depend on?
Storage space available, kind of product, rate at which stock is used up and lead time
59
What is lead time?
Time it takes for goods to arrive after ordering them from the supplier
60
What is re-order quantity?
Amount the company orders from its supplier
61
Re -order level formula?
Lead time (in days) x average daily usage + buffer stock level
62
What does a supply chain consist of?
The groups of firms that are involved in all the processes required to make a finished product or service available to the customer
63
What can a well managed supply chain lead to?
Lower costs and more efficient production
64
What are factors businesses might consider when choosing a supplier?
Costs Payment terms Quality Capacity Reliability Flexibility
65
What are ways for a company to build strategic working relationships with their suppliers?
Linked networks e.g inventory control management and electronic data interchange which allow both the company and its supplier to view stock levels Innovation - companies who work closely with their suppliers are able to share new ideas and ultimately make or save more money through innovation
66
If a business works closely with the right suppliers what could happen?
Operational performance will improve: Productivity will increase, which causes costs to fall so profits increase
67
What are the two main technologies companies use in day to day operations?
Robotic engineering and computer technology
68
What can using robots lead to?
Reduced staffing costs: Robots mostly used to replace human staff for tasks which are dangerous, repetitive or boring
69
Use of technology is useful in a business if it leads to?
Increased productivity and quality Reduced waste More effective and efficient delivery of goods and services
70
What problems can introducing new technology or updating older stystems create?
Initial costs may be high, technology requires maintenance and constant updating, some technology might replace manual work leading to staff redundancies
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