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Unit 4 -- Operations - Coggle Diagram

- - - - Time based management -- this is a form of management that recorginises the importance of time in production costs and therefore aims to cut the amount of time wasted within a business.
      - Benefits
        
        May enable faster customer responce time (this is because employees are not wasting and are dealing with customers requests).
        
        Lower labour costs.
        
        Reduction in waste = increase in effinency = reducation in costs.
      - Requirmenets for time based management to work
        
        Flexiable production methods.
        
        Trained employees.
    - - Simulateous egineering -- this is used to enable the faster release of new products. The process includes planning multiple new products at the same time.
      - Benefits
        
        Enables the release of new products quicker.
        
        Business may be able to charge higher prices for new products, this can help recoupe RnD costs.
        
        Greater involvement of staff = increased motivation.
        
        Can be a source of competive advnatage if a business can release new products reliaably (e.g Apple).
    - - Cell production -- this is where the production line is split into sections and each team just works on producing their one part.
      - Benefits
        
        Closeness of cell members should boost comunication.
        
        Workers can become multi-skilled if the teams are moved between cells.
        
        Greater employee motivation
        
        Hackman and Oldman
        
        Skill variety (number of skills used).
        
        Quality should improve as each cell becomes skilled within their area.
      - Drawbacks
        
        Culture has to be embranced.
        
        Business may need to invest in new machinary.
        
        May not work on small scale production lines.
        
        Allocation of cells needs to be done effectivly.
    - - Kaizen -- this is a culture where small, but continous imporvements to the production process are aimed for. All members of the workforce, no matter their role or rank, are inolved.
      - Requires a motivated workforce that is willing to contribute to the process.
    - - JIT -- this is a method of production that aims to have the inputs into the production process arrive only when they are needed.
      - Benefits
        
        Holding less stock means that the business can have more room dedicted to selling/production space instead of holding inventory.
        
        Less working capital is tied up in stock.
        
        Less chance of stock perishing, going out of date or becoming obselete.
      - Drawbacks
        
        Little room for mistakes.
        
        Highly relient on suppliers. If stock deos not arrive on time then there is no production.
        
        There is no spare finished product or spare supplys to increase production if their is increased demand.
  - - - The need for finance to invest in technology.
      - The need to have employees trained to use new technology.
      - The need to keep employees happy (are they going to support replacing jobs with robots?).
      - The need to judge the long term use of technology.
- - - - Advantages
        
        Quality is monitored.
        
        Stops some faulty products from reaching consumers.
        
        Beacuase checks occur at the end of production, faults may slip through the gaps.
        
        Common problems can be indentified.
        
        Inspectors have responsibility for quality.
        
        Is oftern a robust system.
      - Disadvantages
        
        Takes responsbility away from those who are producing.
        
        They may stop caring about quality.
        
        Requires specialist/adational personel (this increases labour costs).
        
        Faults are only identified at the end, can waste lots of products if a machine is faulty and this is not detected.
        
        Waste maybe high because faulty products aren't stoped at the start.
      - Quality control -- This is the process of checking goods and services before they are delievered to the consumer (at the end of production).
    - - Quality assurance -- this is the process where a product or service is checked at every stage of manufacturing to ensure quality.
      - Advantages
        
        Spots faults early on and reduces waste.
        
        Motivates workers as it enages them more with the manufacturing process as they must check the quality of their work.
        
        Aims to achive zero defects.
        
        Reduces the chance of defects and this can improve the image of the business.
      - Disadvantages
        
        Requires staff training and comitment.
        
        Can slow production down, making it less useful in low priced, mass produced products.
        
        May demotivate employees who feel underpressure.
    - - Total quality management -- this is a management philosophy comitted to focusing on improvements to the product and service at all levels of the business. This means that the all employees seek to ensure high quality.
      - Advantages
        
        Customers/quality is that the heart of production.
        
        Can help motivate employees who feel innvolved in improving quality.
        
        Less wasteful and therefore cheaper they destroying/throwing out waste products.
        
        Eliminates the cost of inspections.
      - Disadvantages
        
        Requires strong leadership to implement.
        
        Requires substanail investment in training.
        
        The business may become too buearcratic.
        
        Disruptions and costs of implementing TQM may eliminate cost savings.
  - - - Loss of customers.
      - May force a redesign of a product. This will lead to a reducation in sales and an increase in costs.
      - Expensive to refund.
      - Materials are wasted.
      - Poor quality is a source of competitive disadvantage.
    - - Returns.
      - Reviews.
      - Levels of repeat business.
    - - Costs money.
        
        Competitors can exploit these to gain a competitive advantage.
      - May cost customer loyalty.
      - Damage the businesses reputation.
- - - - Finance available to the business
      - Skills of the workforce
      - Target market
      - Geographical location of the business
    - - Ethics
      - Benchmarking (what is done well by other businesses and copying it)
      - PESTLE
  - - - Product innovation -- launching new or improved products into a market.
      - Process innovation -- finding better or more effiencent ways of producing existing products/delivering services.
- - - - Flexability can be improved by:
        
        Having good relations with suppliers.
        
        Just in Time operations.
        
        Use of technology.
        
        Spreading supplies across multiple countries meaning that if one country enters crisis the whole supply chain deos not collapse.
    - - Outsourcing
        
        Advantages
        
        Can provide flexability.
        
        Can increase capacity without high capital expenditure.
        
        A business can buy in expertise.
        
        Outsourcing -- this is the practise of using other businesses to help manufacture products.
        
        Disadvantages
        
        Can be hard to maintain quality.
        
        Sub-contractors will want to make a profit, increasing unit costs.
      - Use of tempory and part time staff
        
        Benefits
        
        Helps create a flexiable workforce.
        
        Better able to match supply to demand, as it enables you to increase/deacrease production.
        
        Tempory staff are only used when needed reducing labour costs.
        
        Negertives
        
        Recruitment and training costs may be high as there is a high turnover of labour.
        
        Only short term fixes.
        
        Tempory staff may lack commitement and may not strive for the highest quality.
    - - Suppleirs determine the cost of products.
      - A business needs a good supply chain to meet demand.
      - Suppliers are closely linked to quality.
      - Suppliers can be a source of finance for the business.
      - Good suppliers and good relations witb suppliers is key to lean production.
    - - Strategic suppliers -- These are suppliers that produce products that a business can't surivive without.
      - Commidity suppliers -- These are suppliers that produce products and services that are nor crucial to the business's operations.
  - - - Raw materials/components -- these are products that are bought from suppliers as part of the manufacturing process (e.g rubber for tire manufacturing).
      - Work in progress -- these are semi/partly finished products.
      - Finished products -- these are products that are ready to be sold.
    - - Businesses can't produce if there is nothing to produce with.
      - Enables constant statisfaction of customer demand.
      - Helps protect agains delays in the suplly chain.
      - Prices of some products such as commidities like oil fluctates and businesses may want to hold back selling products when prices are low.
      - Allows for seasonal changes in demand.
    - - Holding inventory ties working capital up in inventory and reduces cash stores.
      - Inventory can loose value, espically in fast changing markets.
      - Inventory levels will fulctuate with customer demand.
    - - The cost in storing (the building, keeping products protected etc).
      - Obselence risk.
      - Not holding enough stock can lead to a tock out where the business runs out of products to sell.
    - - Inventory control -- businesses will try and manage levels of invetory to ensure they do not stock out nor do they waste money storing stock.
      - Parts of a stock control chart:
        
        Maximum level -- this is the max level of stock a business can/wants to hold.
        
        Re-order level -- this is the point in which new inventory is ordered in by the business.
        
        Lead time -- this is the time it takes from an order for stock to be made to the business getting the stock.
        
        Minimum stock level -- this is the lowest amount of stock a business wants to hold, if this is above zero units then the difference between the minimum stock level and zero is called the buffer stock.
      - Advantages of high stock levels
        
        Production will be fully supplied.
        
        Can help lower unit costs by ordering in bulk.
        
        Better able to handle changes in demand.
        
        Reduces chances of stock out.
      - Advantages of low stock levels.
        
        Lower cost of holding stock.
        
        Lower risk of stock obselecence.
        
        Less working capital tied by in stock (more cash at hand).
        
        Helps the business with lean production.
  - - - Lower cost suppliers reduce unit costs.
      - Low cost suppliers could, however, mean a reduction in the quality of products.
        
        Opportunity cost
      - Bigger businesses can exert pressure on suppliers enabling them to gain reductions in the price of products.
    - - It is common for suppliers to offer credit to their customers enabling them to 'buy now and pay later'.
      - Businesses may wish to choose suppliers with generous payment terms so as to improve cashflow.
    - - The quality of the product supplied to a business with have a direct connection with the quality of end product.
    - - It is important that a supplier can produce enough products for the business.
      - Suppliers must be able to deliver products on time (very important for businesses that run JIT operations).
- - - - labour productivty = output per period/number of employees at work
      - Labour costs are normally a large amount of the costs for a business and in order to remain competive they must be kept low.
        
        Higher output per employee = lower unit costs
      - Factors infleuncing labour productivity
        
        Extent and quality of fixed assets.
        
        Skills, ability and motivation of workforce.
        
        Methods of production organisastion.
        
        How well trained the workforce is.
        
        External factors such as the relaibility of suppliers.
      - Ways to improve labour productivity
        
        Measure performance and set targets.
        
        Streamline production process.
        
        Invest in capital equipment (automation and computeraistion).
        
        Invest in employee training.
        
        Improving working conditions (this will increase motivation).
      - Problems with trying to increase labour productivity
        
        Potential trade off with quality (increasing production may come at a reducation in quality).
        
        Potential employee resitence
        
        They may oppose changes to their work.
        
        May have to make workers redudant (if you are investing in machinary).
        
        Employees may demand higher pay if they are increasing production.
    - - Capacity -- this is a measure of how much output can be achieved ina given time period.
      - Capacity can change throughout the year and is stronglky linked to labour and automation.
      - Capacity needs to take into account seasonal changes, a chocolate business is going to see an increase in demand and therefore require a higher capacity around Easter.
      - Capacity utilisation
        
        Capacity utilistion -- this is the proportion of a business's capacity that is being used up at one time.
        
        Capacity utilistation = (actual output level/maximum output level)100*
        
        Importance
        
        Shows how much of the business is 'sitting idle'.
        
        Higher capacity utilistation = lower unit costs
        
        Businesses should aim to achieve a high capacity utilisation.
        
        Most businesses operate below 100% capacity utilisation because:
        
        Lower then expected demand.
        
        Loss of market share.
        
        Seasonal variations in demand.
        
        Business has increased capacity.
        
        Business will want to maintian running maintance and repairs on equipment.
        
        Problems operating below 100% utilistation
        
        Higher unit costs.
        
        Less likely to reach breakeven output.
        
        Capital is tied up in unproductive assets.
        
        Businesses are able to work at above 100% capacity utilisation for short periods of time, this achieved by:
        
        Increasing workforce hours.
        
        Sub-contract some production (outsourcing).
        
        Reduce time spent mainting equipment.
        
        Problems with working at high capacity
        
        Can have a negetive impact on quality and this could lead to a drop in sales.
        
        Can have a negertive impact on employees.
    - - unit costs = total production costs in a period/total ouput of units in a period
      - There are two types of production
        
        Labour intensive
        
        Labour intensive -- this is where production relies heavily on people.
        
        Impacts of labour intensive
        
        Higher labour costs.
        
        Costs are mainly variable costs, lowering breakeven output.
        
        The business can benefit from access to low cost labour.
        
        Pros and cons
        
        Pros
        
        Unit costs can be low in low age areas.
        
        Labour is a flexiable resource.
        
        Can enable continous improvement through the training of staff.
        
        Cons
        
        Greater risk of problems with the employee-employer relationship.
        
        High labour turnover will prove expensive as yhe business needs to expended money hireing.
        
        Business must invest in training all the time.
        
        Capital intensive
        
        Capital intensive -- this is where production relies heavily on capital resources such as machinary.
        
        Impacts
        
        High capital costs.
        
        Costs are mainly fixed and this makes breakeven output higher.
        
        Businesses can benefit from accesing lower cost, long term finance to fund capital expansion.
        
        Pros and cons
        
        Pros
        
        Better for economies of scale.
        
        Can improve productivity.
        
        Can improve quality.
        
        Lower labour costs.
        
        Cons
        
        Requires significant investment.
        
        Business may become less competitive if machinary becomes obselete.
        
        May generate resistance to change from the labour force.
  - - - Internal (increased production)
        
        Buying economines -- it is cheaper to buy in bulk.
        
        Technical -- specialist equipment can be used.
        
        Marketing -- multiple products can be advertised by advertising the brand.
        
        Financial -- bigger businesses can access cheaper sources of finance.
        
        Networks -- adding existing customers to networks that already exist such as mailing lists.
      - External
        
        Multiple businesses being near by will mean that specialist supplies will be near by.
        
        Multiple businesses being nearby will mean their is a better research and development enviroment.
        
        Multiple businesses being nearby will mean their is a pool of skilled labour nearby.