3.4.3 Making operational decisions to improve performance: increasing efficiency and productivity

• What does operational efficiency focus on maximizing for a given input?

  Output
• Operational efficiency involves minimizing waste and optimizing processes.

  True
• What does inventory turnover measure?

  Efficiency
• Operational efficiency focuses on maximizing output while minimizing waste.


  True
• What does capacity utilization measure?

  How much output is utilized
• What insights do KPIs provide into a business's operational performance?

  Effectiveness of input conversion
• Why is it important to use KPIs to measure efficiency in operational processes?

  To quantify process performance
• Match the operational strategy with its description:

  Lean Manufacturing ↔️ Reduce waste and streamline processes

  Automation ↔️ Implement technology for repetitive tasks

  Process Re-engineering ↔️ Redesign processes for better efficiency
• Capacity utilization is calculated by dividing actual output by maximum potential output.

  True
• Productivity measures how much output is produced per unit of input.


  True
• Capacity utilization measures how much of a business's maximum potential output is being utilized
• Bottlenecks in operational processes limit the overall output
• What is the formula for productivity?

  Output / Input
• What do key performance indicators (KPIs) measure in a business?

  Operational efficiency and productivity
• The defect rate measures the percentage of products that meet quality standards.

  False
• Steps to analyze operational processes for bottlenecks and inefficiencies

  1️⃣ Identify bottlenecks

  2️⃣ Measure efficiency metrics

  3️⃣ Observe process flow

  4️⃣ Gather employee feedback

  5️⃣ Analyze data
• What is the primary goal of lean manufacturing?

  Reduce waste and streamline processes
• Why is it crucial to measure the impact of operational decisions on performance?

  To track progress and improvements
• What does inventory turnover measure in terms of financial values?

  Cost of goods sold / average inventory value
• Productivity is the ratio of output to input
• What does output per labor hour measure?

  Productivity
• A high defect rate indicates inefficiency in operational processes.

  True
• Steps to analyze operational processes for bottlenecks and inefficiencies

  1️⃣ Identify bottlenecks

  2️⃣ Measure efficiency metrics

  3️⃣ Observe process flow

  4️⃣ Gather employee feedback

  5️⃣ Analyze data
• Output per labor hour measures the amount of output produced per hour of labor
• Output per labor hour measures productivity
• Inventory turnover measures how quickly a business can sell its inventory
• A constraint in a process that limits overall output is called a bottleneck
• Employee training equips staff with skills for new roles
• The formula for output per labor hour is total output divided by total labor hours