1
Q
Operating Management is an area of management concerned with…
A
An area of management concerned with designing and controlling the process of production and redesigning business operations to maximise efficiency.
2
Q
Operational Objectives (6) :
A
- Costs.
- Quality.
- Speed of response and flexibility.
- Dependability.
- Environmental objectives.
- Added value.
3
Q
(Operational Objectives) Costs :
A
- Includes reducing unit costs, fixed costs and variable costs per unit.
- Important to ensure survival, these need to be as low as possible. The more items you produce, the lower the unit costs.
4
Q
(Operational Objectives) Quality :
A
- Measured using customer satisfaction ratings, scrap rate and punctuality.
- Important because it limits number of customer returns, they could also raise selling price of product, good reputation.
5
Q
(Operational Objectives) Speed of response and flexibility :
A
- For some businesses, the speed of response and having flexibility for change is vital.
- Important since it will improve customer service, ensure deadlines are met, utilise capacity and have more efficient production processes.
6
Q
(Operational Objectives) Dependability :
A
- Some businesses don’t want to let customers down so focus on ensuring they meet promises or are dependable. Ensure there’s money for maintenance costs.
- Important because they’ll have reputation of good quality, and if they have loyal customers they can increase the price.
7
Q
(Operational Objectives) Environmental Objectives :
A
- Include things like reducing waste and carbon footprint, increasing recycling etc.
- Important because pressure groups could impact sales of business e.g. boycotts. Bad reputation. It can add value.
8
Q
(Operational Objectives) Added Value :
A
- It allows the business to develop a USP for its product.
- Important because it’s necessary to make profit and can grow and improve businesses.
9
Q
Efficiency :
A
All businesses try to be as efficient as possible. This means controlling costs when making goods or services.
10
Q
Part of the Operational objectives is to be able to measure the efficiency of the business, this can be done using (4) :
A
- Labour productivity.
- Unit costs.
- Capacity.
- Capacity utilisation.
11
Q
Labour Intensive :
A
When labour costs outweigh capital costs of a business.
- Spent more (investing in) people to complete their goods and services than the capital (money) they have invested in.
e.g. hospitality, nail technician, Alton Towers.
12
Q
Capital Intensive :
A
Production methods that require a high level of investment in capital equipment and technology, rather than labor
e.g. Car manufacturers.
13
Q
Labour Productivity Formula :
A
Output per period/
No. of employees in that period
14
Q
Methods of improving Productivity (5) :
A
- Increase hours worked.
- Training.
- Changing way work is done.
- New technology.
- Motivation.
15
Q
Capacity is the maximum total…
A
The maximum total level of output or production that a business can produce in a given time period.
- A company that is producing at this level is said to be producing at full capacity.
16
Q
Capacity Utilisation is a measure of the extent to…
A
A measure of the extent to which an organization is using its available resources.
17
Q
Capacity Utilisation Formula :
A
Actual level of output
(units)
—————————— x 100
maximum possible
output per annum
(or month, units)
18
Q
Unit Costs, & FORMULA :
A
The cost of producing one unit of output.
Total Cost (in £)
———————-
Units of output (in volume)
19
Q
Spare Capacity allows you to…
A
Plan maintenance time, this is essential, especially if the machine or tools are very high value to the firm.
20
Q
___% capacity utilisation is the…
- Lower shows that…
- Too high means…
A
93% capacity utilisation is the optimum.
- Lower shows that resources aren’t being used, therefore high FC per unit.
- Too high means workers are pressured, no time for maintenance.
21
Q
Advantages of Spare Capacity (4) :
A
+ More time for maintenance repair.
+ Less pressure on employees.
+ Improvements can be planned in.
+ Can cope with sudden increase in demand, especially in a fast moving industry.
22
Q
Disadvantages of Spare Capacity (4) :
A
- Higher proportion of fixed costs per unit.
- Negative image of being un-successful.
- Higher unit costs lead to lower profits, therefore lower sales volume.
- With less work, employees become bored or demoralised.
23
Q
Methods to increase capacity (4) :
A
- Increase number of workforce hours (BUT, could demotivate them).
- Outsource production (BUT, quality could slip).
- Larger premises (BUT, risk of high-cost).
- Improve machinery (BUT, expensive).
24
Q
Capacity Utilisation is the percentage of…
- Ways of increasing it (3)…
A
The percentage of total capacity that is actually being achieved in a given period.
26/03/25 17:41
- Ways of increasing it are reducing capacity, marketing (higher sales), subcontracting (could act as a subcontractor for other businesses).
11/5/25 12:43
25
Lean Production :
Is an approach to production that aims to minimise waste, which can reduce costs and improve quality.
26
(Lean Production) The includes the waste of (4) :
- Materials.
- Times
- Energy.
- Human effort.
27
Aims of Lean Production (5) :
- Zero delay.
- Zero stocks.
- Zero mistakes.
- Zero waiting.
- Zero accidents.
28
Techniques involved in Lean Production (5) :
- Time-based management.
- Cell production.
- Benchmarking.
- Kaizen.
- Just-in-time.
29
Lean Production and Employees (3) :
- Requires all employees to...
- Managers need to motivate...
- Managers must ensure good...
- Requires all employees to involved in improvement of business processes.
- Managers need to motivate staff to find better ways of doing processes such as Kaizen.
- Managers must ensure good relations with staff so that the production process is not stopped.
30
(Lean Production) Just-in-time :
Production that holds as little stock as possible.
- Items are ordered just in time to be used.
31
(Lean Production, Just-in-time)
- JIT reduces...
- Suppliers must respond...
- Reduces waste so that production of products only takes place when an order is made.
- Suppliers must respond very quickly to orders so products are delivered on time and without any defects.
32
(Lean Production) Advantages of Just-in-time (5) :
+ Reduced stock holding.
+ Smaller warehouses.
+ Less staff needed to manage and control stock.
+ Improved relationship with suppliers.
+ Less risk/waste as stock will not perish or go out of date.
33
(Lean Production) Disadvantages of Just-in-time (4) :
- Production line could stop completely, leaving staff and machinery idle.
- Reliability of suppliers : could be problems with quality or delivery of items.
- Reliability of raw materials : could be problems with quality or availability.
- Reduced options for responding to customers demands.
34
Kaizen :
Means 'continuous improvement'.
- It is an approach to production that aims to achieve change from a series of small steps.
35
Benefits of Kaizen (7) :
+ Improve employee motivation (feel like they're being listened to/job is easier).
+ Higher capacity utilisation.
+ Less waste.
+ More energy efficient.
+ Reduced risk.
+ Better customer experience.
+ More accurate information.
36
Just-in-case :
Produce lots of buffer stock just in case.
37
Just-In-Time vs Just-In-Case :
JIT : Less waste, order only what's needed, lower cost, smaller warehouse, higher risk if delays, difficult to respond to increase in demand.
JIC : More waste, have buffer stock, higher cost, bigger warehouse, less risk, production precision.
38
Cell Production involves organising...
Organising production around teams instead of a production line.
- Production is divided into a series of different stages which are undertaken by teams or 'cells'.
39
Cell Production, + (3) :
+ Team or 'cell' members can divide the work among themselves ; can also share skills & expertise.
+ Motivating as employees feel they have more control.
+ Improved quality as one 'cell' can refuse work of previous 'cell' if poor quality (encourages workers to take responsibility0.
40
Cell Production, - (3) :
- Business may need to invest heavily in new machinery because each 'cell' may require the same capital items.
- Different 'cells' may work at different speeds, can lead to conflict & tension.
- Output may be lower than a 'flow' production system.
41
Technology and Operations :
Using technology helps businesses become more capital intensive, more efficient and can change the production process.
42
Benefits of Technology & Operations (7) :
+ Reduce costs.
+ Improve quality.
+ Reduce waste.
+ Financial monitoring.
+ Improve productivity.
+ New and better products and services.
+ Better working-conditions.
43
Using Technology includes (4) :
- Robotics.
- Automation.
- Communication.
- Design.
44
(Factors that lead to good quality product/service) INTANGIBLE (5) :
- Customer service.
- Interior design.
- Marketing/logo.
- Convenience.
- Reputation.
etc.
45
(Factors that lead to good quality product/service) TANGIBLE (5) :
- Raw materials.
- Durability.
- Design of product.
- Packaging.
- Technology.
46
Benefits of High Quality Products (7) :
- Creating USP.
- Impact on selling price.
- Pricing flexibility.
- Cost reductions.
- Improved reputation.
- Higher demand.
- High customer satisfaction.
47
Quality Control :
A system that uses inspectors to check the quality of work.
- Good for low-skilled workers.
48
(Quality Control) Advantages (2) & Disadvantages (3) :
+ Inspectors can spot problems and put them right.
+ Quality checks can stop faulty goods reaching customers (would damage reputation).
- Expensive to operate.
- Doesn't encourage team responsibility.
- Responsibility rests with inspectors, therefore staff take no responsibility, could reduce motivation.
49
Quality Assurance :
A system that improves quality by arranging every process to get products right the first time.
- Check at different stages.
- Everyone is responsible.
50
(Quality Assurance) Advantages (3) & Disadvantages (3) :
+ Reduced costs (less waste, rep too).
+ Greater consistency.
+ Motivates workforce due to increased responsibility.
- Needs a change in the company culture.
- Could increase short-term costs (e.g. staff training).
- Can take time to imbed the system,
51
Total. Quality Management :
An approach to quality in which everyone is focused on preventing errors occurring and ensuring quality at each stage of the production process.
52
Job Production :
Each product is bespoke to customer needs.
53
Flow Production :
Mass production, little to no variation.
54
Difficulties of improving quality (6) :
- Production costs.
- Staff training costs.
- Research & development costs.
- Resistance to change.
- Skills + availability of staff.
- Firm's reputation.
55
(Managing Inventory) Low Stock Levels + (4) :
+ Consistent with lean production.
+ Less cash tied up in working capital, can be used elsewhere in the business.
+ Lower stock holding costs (e.g. storage).
+ Lower risk of stock becoming obsolete.
56
(Managing Inventory) High Stock Levels + (4) :
+ Better able to hand unexpected changes in demand.
+ Production fully supplied - no delays.
+ Potential lower unit costs ordering in bulk.
+ Less likelihood of going out of stock.
57
Supply Chain :
All the businesses, people and activities that take part in the production processes from the start until it gets to the customer.
- e.g. effective supply chain is Amazon.
58
Inventory :
Otherwise known as "stock", inventories are the raw materials, work-in-progress and finished goods held by a business to enable production to take place and to meet customer demand.
e.g. restaurant has low levels, retailer has high.
59
What factors influence amount of Inventory held by a business? (3)
- The need to...
- The need to manage...
- Risk of...
- The need to satisfy customer goods.
- The need to manage working capital.
- Risk of losing value.
60
(Stock Control Chart) Maximum Stock Level :
The highest amount of stock that a company is able to hold.
61
(Stock Control Chart) Re-order Level :
Acts as a trigger point, so that when stock falls to this level, the next supplier order should be placed.
62
(Stock Control Chart) Lead Time :
Amount of time between placing the order and receiving the stock.
63
(Stock Control Chart) Minimum Stock Level :
Minimum amount of product the business would want to hold in stock.
64
(Stock Control Chart) Buffer Stock :
An amount of stock held as a contingency in case of unexpected orders so that such orders can be met and in case of any delays from suppliers.
65
Outsourcing is the delegation of...
The delegation of one or more business processes to an external provider, who then owns, manages and administers the selected processes to an agreed standard.
- Entire business functions.
66
Subcontracting :
The practice of outsourcing specific tasks or projects to other companies or individuals who specialise in those tasks.
- Element of production, e.g. cake maker.
67
Factors to consider when Outsourcing (7) :
- If there are Language barriers.
- If there's an Educated workforce.
- If there's Political stability.
- If they're Close to large markets.
- If it has Established Infastructure.
- Culture of place.
- Ethics of place.
68
Advantages of Outsourcing/Subcontracting (4) :
+ Access of specialist suppliers with greater capabilities and higher quality.
+ Reduce costs (through economies of scale).
+ Business can focus on its core activities - where it can "add value".
+ Makes operations more flexible - e.g. easier to change capacity when needed.
69
Disadvantages of Outsourcing/Subcontracting (4) :
- Risk that outsourcing supplier will fail to meet quality standards or otherwise not deliver.
- Potential loss of expertise from the business.
- No guarantee that costs will be lower.
- Could cause bad reputation (ethics & quality).
70
Economies of Scale vs Diseconomies of Scale :
Economies of Scale : Arise when unit costs fall as output rises.
Diseconomies of Scale : Occur when a business grows so large that the costs per unit increase, usually due to difficulties of managing a larger workforce.
71
Mass Customisation involves... :
A production process involving mass production techniques where the output is tailored (to some extent) to the requirements of the customer.
72
Mass Customisation Production, ADVANTAGES (4) :
+ Lower unit costs combined with personalised product = higher added value.
+ Can change a premium price.
+ Builds brand strength and loyalty.
+ Lower inventory (cash flow benefit).
73
Mass Customisation Production, DISADVANTAGES :
- More time consuming.
- If faulty, may not be able to sell on.
74
Advantagesof Capacity Utilisation:
- example for Ford…
- Fixed costs of Ford, e.g. factory rent and paying for the production robots, will be spread out over more cars, reducing unit cost per car.
- Ford can then lower price.
BUSINESS
flashcards
Decks in class (11)
# Cards
-
What is a Business? (3.1)82
-
Managers, Leadership and Decision Making (3.2)49
-
Human Resource Management (3.6)157
-
Marketing Management (3.3)138
-
Decision making to improve Financial Performance (3.5)80
-
Operational Management74
-
Strategic Methods : How to Pursue Strategies (3.9)49
-
Analysing the Strategic Position of a Business (3.7)135
-
Choosing Strategic Direction (3.8)26
-
Managing Strategic Change (3.10)55
-
FORMULA54
