3.4: operations

• 3.4.1

  costs - businesses with low unit costs are able to charge low prices (increase sales and market share)
• 3.4.1

  quality - consumers want high quality to fufill their needs
• 3.4.1

  speed of response - the time beetween order and delivery - lead time
• 3.4.1

  environmental - reducing waste, land fill etc. helps reputation but also have to invest in better quality materials
• 3.4.1

  added value - improvements added to make a product more valuable
• 3.4.2

  labour productivity - output of workers

  total output / number of workers
• 3.4.2

  unit costs- the price of making a singular unit of stock

  total costs / total output
• 3.4.2

  capacity utilisation - how much the max capacity of the business is used (80% is ideal as there is room for fluctuation)

  current / max output x 100 (=%)
• 3.4.2

  operational efficiency - measure of how many costs are made through production
• 3.4.2

  underutilisation - not using capacity to the max means there will be high average units and low profit margins
• 3.4.2

  overutilisation - using more than they have in their capacity - there will be no time to train staff or repaire machinery
• 3.4.2

  economies of scale - cost advantages from increasing output
• 3.4.2

  diseconomies of scale - rising unit costs due to increased output
• 3.4.2

  why use operational data?

  • locate issues
  • quality control
  • reliability
  • monitor
• 3.4.3

  increasing productivity

  1. bonus ; a sum used to show staff appreciation and rise motivation levels
• 3.4.3

  2) new machinery ; more advanced tech makes it easier to use and this motivates workers
• 3.4.3

  3) training ; high skilled staff will be able to problem solve and have high self actualization needs so they will be motivated
• 3.4.3

  TQM - continuous improvement from employees, supply chains and errors
• 3.4.3

  lean production - minimizing waste whilst maintaining high quality (enviromental)
• 3.4.3

  pros and cons of lean production

  + streamlined

  + boosts productivity

  + satisfaction

  -may not work in fluctuating/unpredictible demand
• 3.4.3

  cons of overutilising

  • staff error
  • strain on resources
  • HASAWA 1974 issues
  • quality
  • repuation
• 3.4.3

  cons of underutilisation

  • shut down
  • high unit costs
  • staff leave
  • flexibility
• 3.4.4

  how is quality found?

  • taste
  • on time
  • strong
  • durable
• 3.4.4

  pros of quality

  • motivation
  • reputation
  • customer satisfaction
• 3.4.4

  cons of quality issues

  • expensive
  • negative reviews
• 3.4.4

  quality control;

  • check after product is made
  • they look for faults
  • inspect and correct
  • product orientated
  • REACTIVE
• 3.4.4

  quality assurance:

  • looking throughout the process
  • prevents faults
  • PROACTIVE
• 3.4.5

  outsourcing examples:

  • production
  • pay roll
  • IT
  • delivery
• 3.4.5

  part time staff - under 35 hours, keeps costs low, possible lack of loyalty from staff
• 3.4.5

  temporary - only needed to cover certain periods such as seasonal periods. meeting demand and shortages
• 3.4.5

  producing to order - charging more for personalised products (USP), beginning to make product after it is ordered.
• 3.4.5

  buffer stock - efficient to keep incase of fluctation in demand - expensive in warehouse costs
• 3.4.5

  what is a good supplier?

  • secure
  • reliable
  • fast
  • capacity
  • flexible
• What is operations management?

  Process using resources to provide goods/services
• What are operational objectives?

  Specific targets of operations management
• What are the 4 ways operational objectives are used?

  • Act as a focus for decision-making
  • Provide a benchmark for success measurement
  • Improve coordination
  • Improve efficiency
• What are the 7 types of operational objectives?

  • Costs
  • Quality
  • Added value
  • Speed of response
  • Flexibility
  • Dependability
  • Environmental objectives
• What is meant by unit costs?

  Cost of producing one unit of output
• What is the unit cost formula?

  Unit cost = Total Costs / Units of output
• How do you achieve lower unit costs?

  • Reduce fixed costs
  • Reduce variable costs per unit