AICE Business AS Level Unit 4

Transformational process

Inputs- Enterprise, land, capital, and labor

Outputs-finished goods, services, and components for other firms

Intellectual Capital

well- trained and skilled employees, databases and info systems, and relational capital

How can operations managers increase added value?

Efficiency of productions-keeping costs as low as possible to give competitive advantage

Quality- goods and services must be suitable for need

Flexibility and innovation-need to develop and adapt to new processes and new products

What determines the amount of value added to the inputs?

design of product

efficiency of operations(reducing waste increases value)

Branding

Productivity

ratio of output to input.

labor productivity=total output in a given time period/total workers employed

Level of production

the number of units produced during a time period

production

the process that transforms inputs into outputs

Raising productivity

Improve employee training

Improve worker motivation

Purchase technologically advanced equipment

More effective management

Efficiency

producing output at the highest ratio of output to input

Effectiveness

Meeting the objectives of the business by using inputs productively to meet customers needs'

Sustainability of operations

business operations that can be maintained in the long term, for example, by protecting the environment and not damaging the quality of life for future generations

(reducing energy consumption and recycling waste)

Labor intensive

high level of labor input compared with capital equipment

(low machine costs, low output levels)

Capital intensive

high level of capital equipment compared to labor input

(high fixe costs, ability to supply mass market)

Job production

Producing a one-off item specially designed for the customer (wedding ring)

-adv: specialists jobs =high added value

-dis: time consuming

Batch production

producing a limited number of identical products - each item in the batch passes through one stage of production before passing on to the next stage (baker making batch of rolls)

-adv: faster w/ low costs

-dis: high level of inventory

flow production

producing items in a continually moving process (coca- cola plant)

-adv: low cost

-dis: inflexible

Mass customization

the use of flexible computer-aided production systems to produce items to meet individual customers' requirements at mass production cost levels

-adv: combines low costs w/ flexibility

-dis: expensive product redesign

Choosing between operations methods

-size of market

-capital available

-skills required

-customers demands and specific requirements

Inventory

materials and goods held by a business and required to allow production

Inventory management

The process of buying and storing materials and products while controlling costs for ordering, shipping, handling, and storage.

Costs and benefits of holding inventory

costs- opportunity cost, storage cost, and risk of wastage obsolescence

benefits- reduces risk of lost sales, allows for continuous production, and large orders reduce costs

economic order quantity

the optimum or least-cost quantity of stock to re-order taking into account delivery costs and stock-holding costs

Buffer inventory

minimum inventory level to ensure continuous production

Re-order quantity

number of units ordered each time

lead time

the time between ordering supplies and receiving it

re-order level

the level of inventory that triggers a new order to be sent to suppliers

Supply Chain

a network of multiple businesses and individuals that are connected through the flow of products or services

Supply Chain Management

handling the entire production flow of a product to minimize costs and improve customer service

Just- in-time (JIT) inventory management

aims to avoid holding inventories by requiring supplies to arrive right before they are needed

Just in case inventory managment

aims to reduce the risk of running out of inventory to the minimum by holding higher buffer inventory

Conditions for JIT to operate successfully

-excellent supplier relationships

-production employees are multiskilled and flexible

-equipment and machinery must be flexible

-accurate demand forecasts

-IT equipment

-Excellent employee- employer relationships

-Quality must be everyone's priority

Maximum Capacity

the highest level of sustained output that can be achieved

Capacity Utilization

The proportion of maximum output capacity currently being achieved.

Outsourcing

using another business to undertake a part of the production process

Excess Capacity

exists when the current levels of output are less than the full capacity of output

Rationalization

reducing capacity by closing factories/ production units

Capacity Shortage

When the demand for a business's products exceeds production capacity.

Reasons for outsourcing

-Reduction and control of operating costs

-Increased flexibility

-Improved company focus

-Access to quality service or resources

-Freed-up internal resources

Drawbacks of outsourcing

- loss of jobs within the business

- quality issues

- customer resistance

- security

-corporate social responsibility (good working conditions)

Business process outsourcing

a form of outsourcing that uses specialist contractors to take responsibility for certain business functions