OPERATIONS

?
3 ways unit costs of production could be decreased
achieving greater capacity utilisation
increasing productivity
negotiating better terms w suppliers
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what could consequences of bad quality be?
wastage - having to get rid of resources bc they’re not up for selling standard
returns - the amount of returns n faulty items
number of complaints - damage reputation
reliability - quality of service
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what is meant by SMART objectives
specific
measurable
achievable
realistic
time based
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how can operational decisions be affected by external influences ?
political / legal - eg health n safety, environmental
economic cycle - changes in D
technology - speedier innovation, production n better quality but consumers r more aware / demanding of price, quality n service
competitors - ⬆️pressure on costs, quali
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how do the 3 other factors affect operational decision
finance available- investment decisions
marketing - determine what has to be produced n the quantities
HR - skills of workforce determines what can be produced n what quality
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what is total capacity?
maximum amount a business can produce in a given time period if it’s working at full
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capacity utilisation formula?
actual output in time period / maximum possible output per period X100
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what is capacity utilisation?
the extent to which a business uses its production potential, expressed as a %
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bc hat happens to unit costs as capacity utilisation increases ?
unit costs decrease
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when does excess capacity occur ?
when actual production falls below maximum potential production - so resources eg factory space, equipment n possibly labour aren’t being used efficiently
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what is the optimum level of capacity
close to 100% whilst leaving sufficient spare capacity to cope w new orders
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what does labour productivity measure
the output / efficiency per worker in a given time period
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formula for labour productivity
actual output in a time period / maximum possible output per period X100
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what can increase in labour productivity mean for a business
more productive workforce - reduction in unit costs of production - increase competitiveness in terms of price
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how can investing in technology increase labour productivity
the investment may improve the quality and reliability of a product so there’s greater output from fewer employees - higher labour productivity
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how can retraining or improvements in training and motivation affect labour productivity
training = higher skills - greater output
training - employees feel more involved in a process - greater motivation - improvements in quality n output - increase retention
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how could a reduction in the labour force improve labour productivity
id the same level of output can be produced with less employees = greater productivity, could be attained by greater investment in tech, job redesign or better training
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formula for unit cost
total cost / units of output
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what will happen to. labour productivity if capacity utilisation rises
labour productivity rises (assuming number of employees remains the same. ) - unit costs of production will be reduced as fixed costs are spread out over fewer units of output
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what is lean production ?
approach to management that focuses on cutting out waste in terms of time, space and resources
features are JIT management, Kaizen , TQM, and quality circles
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what is Just in time management (JIt)
an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed for production
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advantages of JIT management
⬇️waste - eg damaged stock, obsolete stock (particularly important for food n tech industries)
⬇️costs - less storage space needed
⬇️num of employees needed
flexible for customisation n changing tastes
requires ⬇️involvement from employees - greater re
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3 main drawbacks of JIT
running out of stock - relies on supplier - no buffer stock - problems w transport/weather?
limit opp for bulk buying - supplies purchased in smaller quantities - no bulk discount
trust - relationship w suppliers - quality issues?
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3 difficulties in increasing efficiency and labour productivity?
cost - tech investments, trained employees may D ⬆️ wages, BUT ⬆️productivity - ⬆️comp
quality - labour productivity shouldn’t be at the expense of high quality eg piece rate pay
resistance of employees - job losses, job security, consider how tech is in
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difference between capital incentive and labour incentive
capital incentive - businesses requiring a large amount of capital relative to labour
could be where labour is expensive
labour - a large proportion of labour relative to capital
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methods to increase capacity utilisation
increase sales - new marketing campaign ?extension strategies ?
reduce capacity - rationalise production (downsize) n sell of capacity (big decision )
alternative uses - new products, leasing to other businesses
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if demand is so high that a business is facing too high utilisation and a lack of capacity it might consider what?
outsourcing - transferring work to outside suppliers - can focus on core competency
investment - into new capacity - expand ?
reducing demand - increase P? - dynamic pricing
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benefits of good quality
provide a USP - create brand loyalty
premium pricing - increase profit margins
⬆️rev - ⬆️sales - less returns n faulty products
enhance reputation n loyalty
greater flexibility in price
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what is quality assurance ?
a system for ensuring the desired level of quality in the development, production and delivery of products n services
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what is total quality management (TQM)
where there is a culture of quality throughout the organisation - checking throughout the process , aims for zero defects - minimises time n money spent on quality by preventing problems
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what is kiazen ?
continuous improvement, where all employees are encouraged to identify and suggest possible improvements in the production process - requires a culture of participation n involvement
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difficulties of improving quality
cost of training n equipment needed
employees can be resistant to change - could demand a higher page due to higher responsibility
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3 consequences of poor quality?
wasted resources - cost of scrapping / reworking products
costs of returns - poor cash flow
damage reputation - lose competitiveness- damage potential sales
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what is inventory
the stock a business holds im the form of raw materials , components n worl in progress
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what are the 3 areas of the supply chain
supply of materials to manufacturer
manufacturing process
distribution process
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what is mass customisation
the production of custom tailored g&s to meet customers diverse n changing needs - greater satisfaction n competitive adv
eg car industry
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what’s the difference between speed of response and dependability ?
how fast a business fulfills a order and dependability refers to whether it fulfils an order on time
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the level of inventory held will depend on what factors
nature of the product - perishable stock
nature of production - eg JIT method
nature of D - seasonal products - dynamic pricing
opportunity cost - £ tied up in stock is an opp cost n could be better used elsewhere
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what is the buffer level of inventory ?
minimum amount of inventory held, designed to cover for emergencies such as late arrival of inventory
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what is the reorder level
level of inventory at which a new order is placed
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what is meant by lead time ?
time between an order being made n its arrival in the business
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what is the maximum stock level on an inventory control chart
highest amount of inventory a business is able to hold
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what is the reorder quantity
the amount ordered
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what could influence a business decision on the choice of suppliers
dependability - is the supplier reliable?
flexibility - respond efficiently to changes in D?
quality n ethics
price n payment terms - are prices competitive
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benefits of outsourcing
respond quicker to demand increases - greater dependability for customers
save on costs as won’t have to invest in increasing capacity
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drawbacks of outsourcing
quality standards may be different
costly
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Card 2

Front

what could consequences of bad quality be?

Back

wastage - having to get rid of resources bc they’re not up for selling standard
returns - the amount of returns n faulty items
number of complaints - damage reputation
reliability - quality of service

Card 3

Front

what is meant by SMART objectives

Back

Preview of the front of card 3

Card 4

Front

how can operational decisions be affected by external influences ?

Back

Preview of the front of card 4

Card 5

Front

how do the 3 other factors affect operational decision

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