3.4 - Setting/Analysing operational objectives/performance

Question 1

Operational objectives may relate to

Answer 1

• Environmental issues
• Costs
• Quality
• Added value
• Speed of response and flexibility

Question 2

Labour productivity formula

Answer 2

= Output / No of employees

Question 3

Unit costs formula

Answer 3

= Total costs / Output

Question 4

Define capacity

Answer 4

The maxium amount that an organisation can produce in a period of time given its resources

Question 5

Capacity utilisation formula

Answer 5

= (Output/Capacity) x 100

Question 6

What does efficiency mean
How can efficiency be measured
What are some positive consequences of an efficient business

Answer 6

Using resources effectively

It can be measured in terms of labour productivity or wastage

Greater efficiency and high labour productivity result in lower unit costs allowing for a business to charge lower selling prices and making them more competitive

Question 7

Methods of being efficient in a business are:

Answer 7

Kaizen
Lean production
JIT production (or just in time)
JIC production (or just in case)

Question 8

What is Lean production

Answer 8

It is the range of waste saving techniques introduced by Japanese manufacturing firms.

Reducing waste can be in materials, time, factory space. This will result in lowered unit costs making it easier for businesses to offer lower prices to consumers

Question 9

What is just in time production

Answer 9

It means keeping minimal quantities of stock of materials and finished goods.

Materials are only ordered and goods are produced in response to specific orders

Question 10

What are some advantages and disadvantages of just in time production

Answer 10

Advantages
- Costs are reduced due to less wastage in the business

• It improves the cash flow due to shortened lead times to pay for materials and receiving payments for goods sold

Disadvantages
- There is more danger of failing to meet customer orders on time, especially if circumstances change e.g workers or suppliers become unreliable

• Workers may find JIT production too stressful because of increased pressure to meet deadlines

Question 11

What is just in case production

Answer 11

It is the alternative method to just-in-time production.

Meaning keeping high levels of buffer stocks in case there is an unexpected rise in demand for products or an unexpected shortfall of supply from suppliers

Question 12

Define kaizen

Answer 12

Kaizen means continuous improvement
It involves using ideas from employees to complete tasks more efficiently

Question 13

Advantages and Disadvantages of Kaizen

Answer 13

Advantages
Unit costs are lower due to the continuous flow of improvements. -> Provides a competitive advantage as firms can charge lower prices

Workers are motivated by having their suggestions taken seriously

Disadvantages
Meeting in groups takes workers away from usual work

The workforce may not like continuous changes happening

Question 14

Define the resource mix

Answer 14

Whether production is capital or labour intensive

Question 15

What is the difference between labour intensive and capital intensive production

Answer 15

Labour intensive production means using physical workers to do work instead of machinery or equipment whereas Capital intensive production means being reliant on machinery and equipment instead of people. It may include the use of automation and robotics

Question 16

Define what automation and robotics are
(They are two separate definitions)

Answer 16

Automation means using technology instead of people. It includes robotics and any sort of machinery or equipment that can replace labour work in the production process

Robotics means using robots during the production process

Question 17

Having an optimal mix of resources is important for a business. Why?

Answer 17

It shows that the business has a combination of both capital and labour production processes that is best for a particular business in terms of quality and unit costs

Question 18

Define quality

Answer 18

It is the standard of goods produced or services provided in relation to the customer’s expectations

Question 19

What is quality control

Answer 19

Using inspections to check the standard of goods that have been produced

Question 20

What is quality assurance.

Answer 20

It is a whole-organisation approach that makes quality the responsibility of every employee at every stage of the production of goods and services, ensuring customer satisfaction

The aim is for zero defects and all work to meet the standards for each stage of the production process

Question 21

Examples of Benefits of providing high quality goods and services and drawbacks of poor quality

Answer 21

High quality
-> Higher levels of sales due to customer satisfaction and good reputation
-> Lower costs due to less waste of time and materials

Poor quality
-> Lower levels of sales due to customer dissatisfaction and poor reputation
-> Higher costs due to more waste of time and materials

Question 22

What are some influences on choice of suppliers

Try know at least 5 of these

Answer 22

Prices charged: Lower prices paid to suppliers results in lower unit costs
Payment terms: Cash flows can be improved by longer receivable days by credit transactions
Quality: Better quality supplies mean better quality goods for customers
Reliability: To meet customer orders on time
Lead times: Suppliers with short lead times allows you to meet customer needs quicker
Capacity: Can the supplier cope with the amount of work involved?
Flexibility: Can the supplier cope with varying orders?
Ethical considerations: Fair trade or environmental issues