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Flashcards · A Level Business · AS Topic 3
Operational performance (AS Level) flashcards
19 cards on AS Topic 3, subtopics 3.2.1.1 to 3.2.1.3. Pick a subtopic or study them all.
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3.2.1.1 Operations management
- Unit cost: formula and example (fixed costs £6,000, variable cost £2.50 per unit, output 4,000)
- Unit cost = total costs ÷ output, where total costs = fixed costs + variable costs. Total costs = 6,000 + (2.50 × 4,000) = £16,000. 16,000 ÷ 4,000 = £4.00 per unit.
- Capacity and capacity utilisation: definitions and formula
- Capacity: the maximum potential output in a period. Capacity utilisation (%) = actual output ÷ maximum potential output × 100. Example: 4,200 ÷ 6,000 × 100 = 70%.
- Labour productivity: formula and example (18 employees produce 7,560 units in a month)
- Labour productivity = output ÷ average number of employees. 7,560 ÷ 18 = 420 units per employee per month.
- Defects (%) and returned items (%): formulas
- Defects (%) = defective items ÷ items produced × 100 (for example 84 ÷ 3,500 × 100 = 2.4%). Returned items (%) = returned items ÷ items sold × 100.
- Job, batch, flow and mass customisation
- Job: one-off, made-to-order; exactly what the customer wants, but high unit cost. Batch: moderate volumes in several varieties; downtime between batches. Flow: high volumes of a standard product; lowest unit cost but inflexible. Mass customisation: personalised items at volume; complex, costly systems.
- Labour-intensive vs capital-intensive production
- Labour-intensive: flexible, low capital, but higher labour cost per unit and variable quality. Capital-intensive: low unit cost and consistent quality at volume, but expensive and inflexible.
3.2.1.2 Operations competitiveness
- High vs low capacity utilisation
- High: lower unit cost because fixed costs are spread, but no spare room, no time for maintenance and stressed staff. Low: flexibility and room to grow, but high unit cost and a sign of weak demand.
- Make or buy?
- Make: control, quality and protects know-how. Buy: cheaper or specialist, needs no capital, but brings dependence and less control.
- Ways of matching supply to demand
- Change output (overtime or idle staff), change inventory (build stock in quiet periods), outsourcing (extra capacity without investment), flexible labour (cost follows demand) and change capacity (long-term fit, but slow and costly).
- The four elements of lean production in the specification
- Just in Time (supplies arrive as needed), Kaizen (continuous small improvements), standardised processes (one best way) and teamwork (shared problem-solving). Needs reliable suppliers and a culture change.
- Quality control vs quality assurance vs TQM
- Quality control: inspect finished output to find faults. Quality assurance: build checks into each stage to prevent faults. TQM: every employee is responsible for quality.
- Costs of poor quality
- Scrap, rework, refunds, lost customers, damaged reputation and legal claims.
- Ways to improve customer service
- Understand customer needs, improve the customer experience, benchmark, train staff, reward loyalty, and monitor and act on feedback and satisfaction. Good service brings loyalty, repeat business, recommendations and premium prices.
3.2.1.3 Inventory and supply chain management
- Lead time, buffer stock, re-order level and re-order quantity
- Lead time: from order placed to order received. Buffer stock: the safety minimum. Re-order level: the inventory level that triggers an order. Re-order quantity: the amount ordered.
- Re-order level: formula and example (buffer 300 units, usage 250 a week, lead time 2 weeks)
- Re-order level = buffer stock + (usage per period × lead time) = 300 + (250 × 2) = 800 units.
- Reading an inventory control chart
- The falling line is usage (its slope is the usage rate). The vertical jump is a delivery, equal to the re-order quantity. The horizontal gap between the re-order point and the jump is the lead time.
- JIT vs JIC inventory
- Just in Time: minimal inventory and low storage cost, but risky if a delivery fails. Just in Case: large safety stock, so protected, but costly and with a risk of waste.
- Influences on the amount of inventory held
- Predictability of demand, lead time, storage cost, perishability, cash available, and whether the firm uses a JIT or JIC approach.
- Supply chain transparency and third-party accreditation
- Transparency: knowing where inputs come from. Third-party accreditation: independent certification of suppliers. Both support ethical claims and protect reputation.