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5 Minute Test (Starter)

5 Minute Test (Starter). Define Operations Management (2) What is flow production? (2) State one advantage of flow production (2) What are two terms used when workers perform small tasks that they become expert at? (2) What is lean production? (2) Name two lean production techniques (2).

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5 Minute Test (Starter)

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  1. 5 Minute Test (Starter) • Define Operations Management (2) • What is flow production? (2) • State one advantage of flow production (2) • What are two terms used when workers perform small tasks that they become expert at? (2) • What is lean production? (2) • Name two lean production techniques (2) End

  2. 5. Operations Management 5.2 Recognising Challenges of Growth 5.2 Recognising Challenges of Growth Where is the logic in that? Subway 6” costs £3.49 Foot long subway costs £5.49

  3. 5.2 Recognising Challenges of Growth Revisiting Unit 1 • In unit 1 you looked at how small businesses could try and improve their operational efficiency • This included: • Efficient M _ _ _ _ _ _ _ _ _ • M _ _ _ _ _ _ _ _ workers • Efficient M _ _ _ _ _ _ _ _ • M _ _ _ _ _ _ _ _ _ wastage • It also included using technology such as: • ? • ? • ? • In unit 2 you are going to look at how operational efficiency changes as a business grows

  4. 5.2 Recognising Challenges of Growth Revisiting Unit 1 • In unit 1 you looked at how small businesses could try and improve their operational efficiency • This included: • Efficient M anagement • M otivated workers • Efficient M achinery • M inimising wastage • It also included using technology such as: • robots • Communications technology • Design technology • In unit 2 you are going to look at how operational efficiency changes as a business grows

  5. 5.2 Recognising Challenges of Growth 5.2 Recognising Challenges of Growth • In this topic you will learn about: • Advantages of growth • Disadvantages of growth

  6. 5.2 Recognising Challenges of Growth Challenges of growth • As a business grows in size it is likely to enjoy some benefits in relation to each of the four functional areas: • Marketing • Finance • Human resources • Operations management • However it might also experience some growing pains! Can you think of an example of one benefit a growing firm may enjoy in relation to each functional area?

  7. 5.2 Recognising Challenges of Growth Advantages of growth • As a business grows it will benefit from Economies of Scale • These are the advantages of producing on a large scale that lead to a fall in average cost • Each item is cheaper to make • The chart below shows the effect of economies of scale Average cost Output

  8. 5.2 Recognising Challenges of Growth Prove it! • A firm has FC of £200,000 • If it produces 1000 units the VC per unit is £10 • If it produces 2000 units the VC per unit is £9.80 • If it produces 3000 units the VC per unit is £9.50 • What is the AC per unit • Complete the table above and then plot on graph paper the average cost curve

  9. 5.2 Recognising Challenges of Growth Economies of scale • Purchasing • Able to buy in bulk • Financial • Negotiate better deals with banks • Specialist • Employ specialists to increase efficiency e.g. an accountant, designer etc • Technical • Bigger and better machinery and equipment • c In each example above explain how this would lead to a fall in costs.

  10. 5.2 Recognising Challenges of Growth Ciao Bella is a chain of 6 Italian restaurants. It has an excellent reputation for its pizzas cooked fresh to order in its wood burning ovens and delicious range of specialist coffees. Manager and owner Izzie is however concerned that it struggles to compete on price with its larger competitors such as Pizza Express who often run special promotions including vouchers for buy one get one free. Question Time • What is meant by economies of scale? (2 marks) • Explain two ways in which larger firms such as Pizza Express can use its size as an advantage over smaller firms such as Ciao Bella. (5 marks)

  11. 5.2 Recognising Challenges of Growth Disadvantages of growth • As a firm grows in size it can suffer from diseconomies of scale • These are the disadvantages of producing on a large scale leading to a rise in unit cost • Each item becomes more expensive to make • The chart below shows the effect of diseconomies of scale Average cost Output

  12. 5.2 Recognising Challenges of Growth Diseconomies of Scale • Coordination • More resources, including materials and workers, make it harder to control all aspects of the production process • Communication • Longer chain of command • Wider span of control • Motivation • May feel less important and involved • Not known individually Can you remember what these terms mean? When you were at Primary school did you know the head teacher? Did he or she know you? Now you are at secondary school do you know the head teacher? Does he or she know you?

  13. 5.2 Recognising Challenges of Growth Is it an economy or diseconomy? • Lactic Hen • Spinach Rug • Coma count mini • Laps cities • Vitamin too • Action indoor • A clan if in Solve each of these anagrams and state whether they are an economy or diseconomy of scale Could decentralisation help reduce diseconomies of scale?

  14. 5 Minute Test • What is an economy of scale? • Name 2 economies of scale? • What is a diseconomy of scale? • Name 2 diseconomies of scale? • What is meant by average cost? End

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