OPERATIONS

• Terms of inventory management


  • Minimum stock level
  • Maximum stock level
  • Re-order level
  • Re-order quantity
  • Buffer inventory
  • Lead time
• Minimum stock level


  The level that stock must not fall below or keep the quality of raw materials at a high level
• Maximum stock level


  This should be adequately high to meet the demands but low we ought to minimise stock holding costs
• Re-order level


  The level of stock that indicates an order must be made
• Re-order quantity


  This should be enough to bring stock level from minimum to maximum
• Buffer inventory


  Extra inventory below the minimum which prevents inventory entirely running out
• Lead time


  The time between ordering and receiving stock
• JIT


  This system keeps inventory level at a minimum and it can bs used between various processes or companies and their suppliers. The raw materials are ordered when they are needed, and the time period can be minutes or hours and the raw materials arrive on site moments before they are to be used
• Advantages of JIT


  • Closer relationship with suppliers
  • Reduced costs from holding stock
  • Capital not tied up in stock and can be spent on other priorities
  • Will not suffer from stock deteriorating or obsolescence
• Disadvantages of JIT


  • High dependence on suppliers – production may be disrupted due to non-arrival of stock
  • Increase in supplier transport costs – increased ordering as smaller amounts are ordered
  • May lose benefit of economies of scale – not buying in such large quantities
• Centralised storage


  Storing inventory in one central location, often close to infrastructure
• Advantages of centralised storage

  • Use of specialist staff
  • Benefit from economies of scale
  • Cheaper to store in a central location
• Disadvantages of centralised storage


  • Cost of regular deliveries to each division
  • Requires clear communication on usage levels and requirements
• Decentralised storage


  Storing inventory in many smaller locations
• Advantages of decentralised storage


  • Inventory close at hand
  • More responsive to local needs
  • Less overstocking problems
• Disadvantages of decentralised storage


  • Less security can result in theft or wastage
  • Inconsistency in how inventory is handled
• Inventory control system


  To anticipate running out of inventory before it happens, to ensure the production line will always be able to run if there is inventory, to ensure that customer orders are not delayed through lack of inventory and to control the admin costs if ordering as inventory is ordered at regular intervals
• Logistical management


  • Inventory
  • Storage
  • Orders
  • Distribution
• Labour-intensive production


  Cost of labour greater than the cost of capital. Job production: this is the most common in job production, where products are handmade and therefore one-off and unique
• Advantages of labour-intensive production


  • It allows products to be tailored to customers needs
  • Higher prices can be charged
• Disadvantages of labour-intensive production


  • Prone to error
  • Increases wage expenses
  • Time consuming
  • Ongoing training costs
  • Labour availability problems
  • Requires pensions/holidays/HR
• Capital-intensive production


  Producing products primarily using machinery
• Advantages of capital-intensive production


  • Business can benefit from economies of sale
  • 24/7 operation possible/no need for breaks
  • Products can be massed produced
  • Provided consistent quality/standardised
  • Reduced possibility of human error
  • Will save on labour costs
• Disadvantages of capital-intensive production


  • Huge set up costs
  • Technology will need to be improved/maintained
  • Breakdowns can be catastrophic
• Automation


  Production is fully automatic and makes use of computer aided manufacture and robotics
• Mechanisation


  Production machinery is operated by human labour
• Factors affecting production choice


  • Finance available
  • Quantity
  • Technology
• If large quantities of identical goods are required then a company will be more likely to use capital intensive methods of production. Whereas if the product being supplied is a low quantity of a tailored product, then labour-intensive methods would be preferred
• If the required technology to produce the goods is unavailable than the company would have no choice but to use labour intensive
• Poor quality can result in increased costs, bad reputation, and low quality staff
• CE marking


  Indicates conformity with health, safety and environmental protection standards for products sold in Europe
• BSI kitemark


  A UK product and service quality trademark which is owned and operated by the British Standards Institution
• Trade logos


  Some quality logos are specific to an industry
• Advantages of quality standards


  • Prove that product has met an agreed standard of quality
  • Can be used to promote and higher prices can be charged
• Disadvantages of quality standards

  • Can be time consuming to achieve the award
  • Annual checks can be disruptive
• Benchmarking


  Involves finding the best practice in your industry and then copying your competitor but adding some extra value to the product
• Advantages of benchmarking


  • Identifies best practice in the market which will improve if these methods are adopted by the organisation
  • Can provide a goal for employees, which will increase motivation
  • Can make the organisation more competitive in the market
• Disadvantages of benchmarking


  • May be difficult to gather required information from competitors
  • It can be time consuming to study techniques used by other companies
  • Internal factors such as lack of finance may prevent the adoption of competitors practice
• Quality circles


  A group of employees from across the organisation meet to discuss quality issues and to resolve them
• Benefits of quality circles


  • Systems can be improved based on suggestions from staff
  • Employees will feel empowered
  • Employees will be more obviated and will improve employee relations