Section 4 - Operations management - Coggle Diagram
Section 4 - Operations management
: a measure of how effeciently the inputs are changed into output.
Can be measured by : Labour productivity = Total output / number of production workers
The labour productivity may be improved first by making workers' skill better so they will produce more outputs. Second, the company can imporve the management for making any decision.
: the process of making raw materials into finishing goods. (Changing input into output).
: all raw materials that held by business to be sold.
Holding inventories may reduce the possibility to loss sales, reduce costs such as: Warehousing, handling, shrinkage, insurance, obsolescence, opportunity cost.
the production of goods and services with the minimum waste of resources.
Advantages of using lean production : Increases the productivity of workers, reduces waste and increases the competition with other business.
Disadvantages of using lean production : Workers may feel unhappy which can lead to demotivated.
3 main methods of production
: the production of group of items that are made together.
Advantages: unit cost are lower, more variety of products and cheap material.
Disadvantages: Employees get bored due to the same job that is repeated and expensive goods.
: the production of a large quantities of identical goods during the process.
Advantages: lowerlabour cost than Batch production and largeamount of goods that are made.
Disadvantages: High investment for the technology that is used, repetitive work which makes workers less motivated and it increases business costs (raw materials)
: the production of an individual item which finished before the next one started.
Advantage: high quality products, mostly employees are more motivated.
Disadvantage:High cost, it needs more time to make the product and expensive.
Cost,scale of production and break-even analysis
Classification of costs
: costs that do not cahnge with output.
: costs that change in direct proportion to output.
: all the variable and fixed costs of producing the total output.
: the cost of producing an individual unit of output.
Economies and diseconomies of scale
Economies of scale
: is when the production become efficient due to the reduction in average costs.
Types of economies of scale: Financial, managerial, marketing,purchasing and technical economies.
Diseconomies of scale
: Increases of average costs because the business grows.
Main causes are because of poor communication, demotivation of workers and poor control (managing).
Simple break-even charts
: is when the point of cost and income are equal (maybe there is profit)
It is used for the business to track on their revenue, costs and volume of output/sales.
Before every businesses create break-even chart, they need to make sure th revenue at zero output and at its maximum outpupt (capacity). The total costs at zero output and at capacity output. Also, fixed costs at zero output and at capacity output.
Margin of safety
: the amount of which actual sales exceed the break-even level of output.
Margin of safety = actual sales - break-even output
Achieving quality production
: is making sure that goods and services that are produced meets the needs of its customer.
Quality is important for business so they will develop their brand image, maintain the realtionship with the customers, to get new customers, may reduce costs and encourage wholesalers and retailers to stock its product.
Method that is used to check the quality of product it is called
And the next method it will be used to set an agreement if the business standard is good for every stage of production.
Factors before choosing the right location for business may divide into:
- cost of site, availability and costs of labour, transport costs, market potential and issues.
- site of site, legal controls, infrastructure and ethcial.
Business need to find the right location and sometimes they want to locate their business
outside the country
. Because it gives advantage such as to grow the business (acsess to global markets), to reduce production costs (they need to find low labour costs in some specific country such as India or China) and to locate production closer to the market.
Limitation of internationsl location are cultural differences, communication problems (language) and it will not be easy to control the quality of each product.