2.3

• The purpose of business operations is to maximise productivity and minimise waste when turning raw materials into goods and services
• productivity

  the amount produced (output) for a given number of employees (input) - businesses want productivity to be as high as possible to reduce costs
• How can a business improve productivity levels?

  • Motivating staff
  • Training staff
  • Making use of new technology
  • Offering incentives to staff
  • Creating the right culture in the workplace
• production process: input - transformation - output
• job production

  production of a product to meet the requirements of a specific customer
• Advantages of Job Production:

  • High quality
  • Products tailored to customer
  • Higher prices can be charged
  • Job satisfaction for workers
  • Differentiation possible

  Disadvantages of Job Production:

  • Higher unit costs
  • Labour intensive
  • Requires skilled employees
• batch production

  making a group of items together in batches, producing similar products with some variation
• Advantages of Batch Production:

  • Less time consuming compared to job production
  • Can manufacture a variety of products
  • More than one product produced at once: lower unit costs
  • Less different production equipment needed

  Disadvantages of Batch Production:

  • Repetitive and demotivating for employees
  • Time lost switching between batches
  • Stocks of raw materials needed
• flow production

  continuous movement of items through the production process, using production lines to manufacture products
• Advantages of Flow Production:

  • Using machinery can reduce costs as less staff are needed
  • More efficient
  • Large scale production
  • Workers can specialise
  • Production lines can operate 24/7 if necessary
  • Consistent, standard quality

  Disadvantages of Flow Production:

  • No differentiation: demotivating
  • If a machine goes wrong then all of the production stops, which wastes time
  • Buying up to date machines can be very expensive - high set up costs
  • Less skilled workers required; may result in low staff retention
• The process of managing stock involves ensuring sufficient amounts of:

  • Raw materials available to use
  • Finished goods to meet demand
• just in time (JIT) stock management

  involves storing minimum amount of stocks of raw materials and finished goods, as well as only ordering stocks when they are needed
• just in case (JIC) stock management

  involves the firm holding buffer stocks of raw materials and finished goods in case there is a problem with deliveries or an unexpected surge in demand
• Advantages of 'Just in Time':

  • Stock levels can be kept to a minimum
  • Reduced storage costs
  • Less waste
  • Improved cash flow
  • Works well when demand is consistent

  Disadvantages:

  • Reliant on a good relationship with suppliers
  • Vulnerable to disruptions in transport
  • Bulk buying benefits may be lost
  • More paperwork as many orders are placed
  • Careful planning required which is time consuming
• Advantages of 'Just in Case':

  • Stock is always available
  • Production is less reliant on suppliers
  • Spare products are available to meet unexpected orders
  • Economics of scale are possible from bulk purchasing

  Disadvantages:

  • More storage space required
  • Capital is tied up in stock
  • Stock might go out of date
  • Build up of unsold finished products
• procurement

  the whole process of managing the ordering and receipt of the goods or services in the business
• What does procurement involve?

  • Deciding what is needed
  • Selecting suppliers
  • Terms of payment
  • Managing how goods are ordered and received
  • Managing logistics
  • Negotiating contracts between the business and its suppliers
• supplier

  a business or individual that provides goods or services to a business
• Why are suppliers important?

  • To meet the wants and needs of customers, it needs an effective supply chain
  • Determine a business' costs
  • Linked to product quality
  • Important source of finance (trade credit)
  • Effective relationships with key suppliers are essential for just in time stock control
• Factors Affecting Choice of Suppliers:

  • Availability
  • Cash flow
  • Cost
  • Customers
  • Delivery
  • Government policy
  • Quality
  • Reliability
  • Speed
  • Tradition
  • Trust
• logistics

  a process which plans, implements and controls the distribution and storage of goods and services from when they are received from the supplier to when they are delivered to the customer
• supply chain

  the network of organisations that gets products to customers - usually suppliers of raw materials, manufacturers, wholesalers/retailers, customers
• Benefits of effective supply chain management and supply decisions:

  • Improved reputation
  • Increased efficiency
  • Lower unit costs
  • Customer satisfaction
• Issues to consider when making supply decisions:

  • Quality can suffer if costs are driven down too low
  • IT systems to monitor the supply chain can be expensive
  • Reliance on a supply chain means a business does not have full control over its operations
• quality

  a product is good quality if it meets the needs and expectations of the customer; a reputation for high quality can help a business to develop a competitive advantage
• How do we judge quality?

  • Consistency: products meet the same quality time and time again
  • Design: features, looks, styles
  • Durable: lasts as long as it should
  • Functionality: does the job well
  • Good after sales service: ease of gaining refunds, guarantees, warranties
  • Price/value for money: price reflects quality of product
  • Reliability: acceptable levels of breakdown or failure
• Consequences of quality issues:

  • Costs of recalling products, reducing the price of products that no one wants, refunds, replacements
  • Legal action may be taken against the business
  • Loss of customers
  • Reputation of the business worsens
• quality control

  traditional method of checking quality where all or a sample of products are checked at the end of the production process or after a service has been completed
• Advantages of Quality Control:

  • Protects the standard
  • Trained inspectors are used to check quality

  Drawbacks:

  • Wasteful if some products are thrown out
  • Workers are less likely to take responsibility for errors
  • High cost of inspectors
• quality assurance

  every member of staff is responsible for contributing towards quality, organising every process to manufacture the good or provide a service to 'get it right first time' to ensure mistakes never happen
• Advantages of Quality Assurance:

  • Less wastage
  • Increase in staff motivation
  • Consistent levels of quality could result in a competitive advantage

  Disadvantages:

  • High training costs
  • Reliant on staff remaining motivated
• sales process

  can be broken down into stages from attracting a potential customer's attention through to concluding the sale, including:

  • product information knowledge
  • speed and efficiency of service
  • managing customer expectation efficiently and effectively
  • post sales service
  • customer engagement
  • good or service meeting customer needs
  • response to customer feedback
• Importance of providing good customer service:

  • Increased sales
  • Customer retention/loyalty
  • Word of mouth promotion
  • Enhanced public image
  • More effective workforce
  • Lower costs
  • Increased profitability
• Problems of poor customer service:

  • Loss of loyalty
  • Loss of sales
  • Customers may not report problems
  • Unhappy customers spread the word