Flashcards · 8132 · Topic 3

Business operations flashcards

17 cards on Topic 3, subtopics 3.3.1 to 3.3.4. Pick a subtopic or study them all.

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Job production versus flow production: Job: one item at a time, made to order; flexible and personal but slow, needs skilled labour, high unit cost. Flow: large volumes of identical items made continuously; low unit cost but costly machinery, inflexible, needs large demand.
Fixed costs £18,000 a month, variable cost £6 per unit. Find the unit cost at 3,000 and at 6,000 units.: 3,000: (18,000 + 18,000) ÷ 3,000 = £12. 6,000: (18,000 + 36,000) ÷ 6,000 = £9. Fixed costs are spread over more units, which is why flow production lowers unit cost.
Lean production: Producing with as little waste as possible: of time, materials, space, effort and money. Techniques include removing unnecessary steps, keeping stock low, fixing faults where they occur and involving workers in improvements.
Just in time (JIT): A lean technique: materials arrive just before they are needed and finished goods go out quickly, so little stock is held.

JIT versus just in case (JIC) stock management: JIT: minimal stock; lower holding costs and less cash tied up, but more frequent deliveries, lost bulk discounts, and a late delivery stops production. JIC: buffer stock meets sudden demand, but costs money to hold and may go out of date.
Procurement and logistics: Procurement: obtaining the goods and services a business needs from suppliers. Logistics: moving and storing those goods (transport, warehousing, delivery).
The three factors in choosing a supplier: Price (lower cuts costs but may mean lower quality), quality (poor materials cause faults and complaints) and reliability (late deliveries disrupt production, especially under JIT).
Supply chain, and what effective supply chain management means: The series of businesses and activities that take a product from raw materials to the final customer. Managing it well means working with suppliers efficiently, getting the best price and value, and cutting waste for fast production.

Total quality management (TQM): Quality is the responsibility of every employee in every department, aiming to get things right first time rather than checking at the end. Gives fewer defects, less waste and higher customer satisfaction.
Costs and benefits of maintaining quality: Costs: inspection, staff training, time and effort in providing services. Benefits: additional sales, a better image and reputation, the ability to charge a higher price, fewer costly product recalls.
Defect rate: formula and example: Defect rate = faulty items ÷ items produced × 100. Example: 45 faulty out of 1,500: 45 ÷ 1,500 × 100 = 3%.
Why can outsourcing and franchising cause quality problems as a business grows?: Another business does the work, so the firm has less direct control over standards. A poor supplier or franchisee can damage the whole brand, so it needs clear standards, agreements and checks.

Methods of good customer service, and the dangers of poor service: Methods: product knowledge, customer engagement, post-sales services (user training, help lines, servicing). Dangers of poor service: dissatisfied customers, a poor reputation through word of mouth, lower revenue.
The sales process: The customer finds out about the product, is helped to choose, buys, and is supported afterwards.
Benefits of good customer service: Greater customer satisfaction, customer loyalty, increased spend and so higher profitability.
How have advances in ICT changed customer service?: Websites give information and support at any hour; e-commerce lets customers order online; social media allows quick two-way contact and public replies to complaints, so poor service also becomes visible quickly.
A shop has 1,500 customers a month spending £12 each. Poor service loses 4% of them. What revenue is lost?: 1,500 × 0.04 = 60 customers; 60 × £12 = £720 a month, or £8,640 a year.