Unit 4

Question 1

Why does a business set operational targets?

Answer 1

• to act as a focus for decision making and effort
• to provide a benchmark against which success or failure can be measured
• to improve co-ordination, by giving teams and departments a common purpose
• to improve efficiency, by examining the reasons for success and failure in different areas

Question 2

What are the 4 measures of operational performance?

Answer 2

• labour productivity
• unit costs (average cost)
• capacity
• capacity utilisation

Question 3

Labour productivity calculation:

Answer 3

Output per period
—————————————————
Number of employees per period

Question 4

How can an increase in labor productivity benefit a business?

Answer 4

Enhanced reputation: Streamlined operations and timely delivery build confidence with customers, business partners, and investors, leading to a better company reputation.
Customer satisfaction: More efficient processes often lead to better service delivery and higher customer satisfaction
Growth opportunities: Increased productivity can create opportunities for professional growth for employees and can support the overall growth of the business

Question 5

What are the 2 main types of business growth?

Answer 5

1) organic growth: growth that comes from within the business- such as increasing sales or opening new branches
2) inorganic growth: growth that comes from external sources, such as mergers, acquisitions or takeovers

Question 6

What is a strategic objective?

Answer 6

specific, measurable, long-term goals that an organization sets to achieve its overall vision and mission

Question 7

What is the difference between mission & vision statements?

Answer 7

• Mission statement: brief summary of a company’s core purpose and beliefs
• vision statement: forward-looking statement, outlines where business sees itself in future.

Question 8

What are some advantages of internal (organic) growth for a business?

Answer 8

• Less risk compared to external growth.
• more control over the process
• can improve efficiency & productivity without need for acquisitions (when a company purchases another company)

Question 9

What are disadvantages of mergers and acquisitions?

Answer 9

• High costs involved
• integration issues, differences in cultures
• potential job losses
• risk of negative impact on brand reputation.

Question 10

What is a SWOT analysis?

Answer 10

Strategic planning tool, identifies businesses Strengths, Weaknesses, Opportunities, and Threats. Helps businesses understand current position, make informed decisions

Question 11

What is the definition of operational objectives?

Answer 11

Specific, measurable goals set by a business’s operations function to support overall corporate objectives.

Question 12

What’s an example of setting operational objectives?

Answer 12

• Improve quality by reducing product defects by 10% over the next 12 months
• increase capacity utilisation to 85% within 6 months

Question 13

What are some types of operational objectives?

Answer 13

• Cost and volume targets
• quality targets
• efficiency and flexibility
• environmental objectives
• Innovation
• dependability

Question 14

Why do businesses set operational objectives?

Answer 14

• improve coordination
• guide decision-making
• motivate staff
• measure performance

Question 15

What is the formula for labour productivity?

Answer 15

Labour productivity = output per period / number of employees

Question 16

What is the formula for unit costs?

Answer 16

Unit costs = total costs / total units produced

Question 17

What is the formula for capacity utilisation?

Answer 17

Capacity utilisation (%) =( actual output / maximum possible output) x100

Question 18

Why is analysing operational performance important?

Answer 18

• Identifies strengths/weaknesses
• aids benchmarking
• informs strategic decisions

Question 19

What is the definition of efficiency?

Answer 19

a company’s ability to produce goods or services whilst minimising input, such as resources, labor, or time, while maximising output

Question 20

How can you increase efficiency?

Answer 20

• Invest in technology
• train employees
• lean production (JIT, time-based management, kaizen)

Question 21

What are some lean production techniques?

Answer 21

• Kaizen
• just-in-time (JIT)
• time-based management

Question 22

What are the benefits of higher productivity?

Answer 22

• Increased profitability: Higher productivity means more output for the same input, directly boosting revenue and profit margins.
• Economic growth: increasing the output per unit of input, which allows businesses to lower costs, pay higher wages, and generate more profits

Question 23

What are the disadvantages of higher productivity?

Answer 23

High upfront costs: Investing in new technology, machinery, or extensive training can be very expensive and carries financial risk, especially if future demand is uncertain.
Increased labor costs: Productivity gains may lead to demands for higher wages, increasing overall costs for the business

Question 24

What is the definition of quality?

Answer 24

Quality is about meeting or exceeding customer expectations.

Question 25

What are the methods of quality?

Answer 25

- Quality Control: Inspection at the end - Quality Assurance: Checks during production - Total Quality Management (TQM): Every employee involved - Continuous Improvement (Kaizen)

Question 26

What are the benefits of quality?

Answer 26

- Customer satisfaction - Brand reputation - Lower waste/returns

Question 27

What are the potential draw backs of quality?

Answer 27

- Costly to implement - Time-consuming - Training requirements

Question 28

What's an example of quality?

Answer 28

Using Total Quality Management at Toyota led to faster production and fewer defects.

Question 29

What is the definition of inventory?

Answer 29

the stock, or materials, a company holds for use in production or for sale

Question 30

What is the definition of buffer stock?

Answer 30

Buffer Stock: Backup stock for uncertainties

Question 31

What is the definition of lead time?

Answer 31

Lead Time: Time between ordering and delivery

Question 32

What is the definition of re-order level?

Answer 32

Re-order Level: When new stock should be ordered

Question 33

What is Just-in-Time (JIT) when managing inventory and supply chains?

Answer 33

Stock arrives exactly when needed — reduces storage costs but increases risk.

Question 34

What is supply chain management?

Answer 34

- Managing the flow of goods from suppliers to customers - Focus on efficiency, cost, reliability, and flexibility

Question 35

What are the benefits of effective SCM?

Answer 35

- Lower costs - higher quality - faster delivery

Question 36

What factors influence operational objectives?

Answer 36

- Corporate objectives - Finance available - Technology - Human resources - Competitor actions - Legal and environmental factors

Question 37

What's the difference between strategic and tactical operational decisions?

Answer 37

- Strategic: Long-term, affect the whole business (e.g., opening a new factory) - Tactical: Short-term, support strategy (e.g., scheduling staff shifts)

Question 38

What are the consequences of under-utilisation of capacity?

Answer 38

- Higher unit costs - Demotivated staff - Poor ROI on assets - Perceived decline in demand

Question 39

Benefits and drawbacks of high capacity utilisation?

Answer 39

✅ Spreads fixed costs over more units ✅ Increases competitiveness ❌ Can lead to overworked staff ❌ Less flexibility for maintenance or new orders

Question 40

Define lean production & give 2 examples

Answer 40

Lean production aims to minimise waste and maximise value. Examples: - JIT (Just-in-Time) - Cell production - Kaizen

Question 41

What are the benefits of cell production?

Answer 41

- Improves team motivation - Speeds up problem-solving - Greater flexibility

Question 42

Difference between labour productivity & capital productivity?

Answer 42

- Labour: Output per worker - Capital: Output per unit of capital (e.g. machinery)

Question 43

What are the costs of poor quality?

Answer 43

- Returns/refunds - Loss of customer loyalty - Reworking or scrapping products - Damage to reputation

Question 44

Define "zero defects" in quality management

Answer 44

Aiming for no mistakes in production — focus on getting it right the first time.

Question 45

What is a supply chain?

Answer 45

A network of suppliers, manufacturers, and distributors involved in producing and delivering a product.

Question 46

Risks of holding too much inventory?

Answer 46

- High storage costs - Obsolescence/spoilage - Increased risk of theft - Cash tied up in stock

Question 47

How can technology improve inventory control?

Answer 47

- Real-time stock tracking - Automated reordering - Improved forecasting - RFID and barcode scanning

Question 48

Advantages and disadvantages of just -in -time (JIT) inventory?

Answer 48

✅ Lower storage costs ✅ Reduced waste ✅ More cash flow available ❌ Risk of stockouts ❌ Reliant on reliable suppliers

Question 49

What is kaizen?

Answer 49

an approach of constantly introducing small incremental changes in a business in order to improve quality and/or efficiency.

Question 50

The key features of Kaizen:

Answer 50

- Improvements are based on many, small changes rather than the radical changes that might arise from Research and Development - As the ideas come from the workers themselves, they are less likely to be radically different, and therefore easier to implement - Small improvements are less likely to require major capital investment than major process changes

Question 51

Advantages of Just-in-Time

Answer 51

Reduced costs: Businesses save money on storage, handling, and financing inventory. Less stock also means a lower risk of goods becoming obsolete or damaged. Higher quality: Producing in smaller batches makes production errors easier to spot and correct quickly, leading to higher quality products

Question 52

Disadvantages of Just-in-Time

Answer 52

Vulnerability to disruptions: A single disruption in the supply chain, such as a supplier delay or a natural disaster, can halt production entirely because there is no buffer stock. Inability to meet sudden demand: JIT systems are not well-equipped to handle unexpected surges in demand, which can lead to missed sales opportunities

Question 53

Time-based management definition

Answer 53

a strategy that focuses on efficiently using time to improve productivity and performance by prioritizing, planning, and optimizing activities

Question 54

Benefits of time-based management

Answer 54

Reduced stress: Effective time management can lead to lower stress levels. Better work-life balance: It helps create more balance between professional and personal activities

Question 55

Drawbacks of time-based management

Answer 55

Lower quality: Rushing to meet deadlines can lead to poor-quality work, more mistakes, and a need for rework later Difficulty adapting: Rigid schedules can make it hard to handle unexpected obstacles or changes, causing work to get derailed

Question 56

Advantages of Kaizen

Answer 56

Improved employee morale and engagement: Involves all staff in the improvement process, which can create a sense of value and ownership. Increased efficiency and productivity: Encourages identifying and eliminating waste and bottlenecks through incremental changes.

Question 57

Disadvantages of Kaizen

Answer 57

Time-consuming: The process of collecting suggestions, implementing changes, and monitoring results takes significant time and effort. Requires long-term commitment: Management must be committed to the continuous nature of Kaizen for it to be successful; otherwise, initial gains may be lost.