Practise Operations Management through transformation, inventory, capacity, lean production, projects, quality, location and sustainability, applying decisions to case constraints.
Analyse one possible impact on a business of operating over maximum capacity.
Analyse one possible impact on a business of operating over maximum capacity.
Indicative content
Responses may include:
AO1 Knowledge and understanding
1 mark for identifying one possible impact of operating at over maximum capacity
- Stress on employees
- Impact quality
- Business inflexibility
- Unable to maintain machinery
- Strain on business resources - inventory
- Sell more
- Economies of scale
4
AO2 Application
2 marks for a developed explanation of one possible impact of operating at over maximum capacity
1 mark for limited explanation of one possible impact of operating at over maximum capacity
- The impact could affect staff - who are likely to be put under excessive stress.
- Could impact on quality - if staff rush work and make mistakes/increase waste
- Business becomes inflexible - as has no room to increase output for new orders/opportunity cost of not responding to new product demand.
- Might not be able to maintain machinery - which could break down.
- Can put a strain on business resources - staff may need extra training
- More products produced and available to sell
- Costs fall due to increased output
AO3 Analysis
2 marks for developed analysis of one possible impact of operating at over maximum capacity
1 mark - for limited analysis of one possible impact of operating at over maximum capacity
- Overworked staff could make more mistakes - a reduction in quality could impact brand image and lost sales.
- Could lead to high absenteeism and high staff turnover - increase recruitment costs - don't have enough staff to meet orders.
- May have to increase amount of overtime to meet orders - raise business costs.
- If operating over maximum capacity then new orders might not be possible - lose potential customers and sales.
- If demand reduces stock will remain unsold therefore wastage/opportunity cost
- If machines break down due to lack of maintenance - production stops - lose or delay orders - gives a bad reputation for being unreliable.
- Average costs can rise - due to falling levels of efficiency such as machines breaking down.
Accept all valid responses.
Analyse one way a business might improve the efficiency of its operations.
Analyse one way a business might improve the efficiency of its
operations.
Indicative content
Responses may include:
AO1 Knowledge and understanding
Efficiency is the ratio between an output gained from an input during business
operations - seeking to produce a product with minimum resources - ways to
improve efficiency of operations may include:
- Improve production process
- More capital investment
- Motivation of employees
- Waste reduction measures
- Improve productivity of employees
- Cheaper supplies
- More efficient inventory
- More efficient HRM/skilled managers
- Better training of employees
- Workforce planning
AO2 Application
- Business aims to have cost-efficient operations - reducing waste while
retaining quality and service
- Business can improve efficiency - with more cost - efficient operations, -use new and better equipment, waste reduction, use more machines,
training for workers, worker involvement, review inventory cost.
AO3 Analysis
- Invest in new or improve machines/technology
- Cost efficient operations-reduce costs while retaining quality and service
levels
- Invest in new and improved machines - improve productivity using
robotic process operations
- Focus on waste - waste reduction methods, audit waste costs, measure
the impact of waste on the business
- Become a more capital - intensive business - more consistent production
- save on employee costs
- Invest in training for operational employees - increase skills, productivity
and employee confidence
- Involve workers in the business - consultation, worker directors,
empowerment, more engagement, ownership
- Examine inventory costs - change system to JIT - fit for purpose
Accept all valid responses.
Analyse one possible impact on a business of operating at below maximum capacity.
Analyse one possible impact on a business of operating at below maximum capacity.
Indicative content
Responses may include:
AO1 Knowledge and understanding - 1 mark for identifying one impact on a business of operating at below maximum capacity
Impacts of operating at below maximum capacity include:
- low output
- wasted resources
- not competitive
- adaptability
- reduced costs
AO2 Application - 2 marks № for a developed application of one impact on a business of operating at below maximum capacity. 1 mark sape for limited application of one impact on a business of operating at below maximum capacity.
- could produce more output with current resources but isn't doing so
- available resources are not being used fully e.g. workers and machines idle
- paying fixed costs in areas which are not being fully used
4
- business is inefficient as resources not fully utilised
- able to respond to unexpected increase in demand
- buying less inventory
AO3 Analysis- 2 marks Δv for developed analysis of one impact on a business of operating at below maximum capacity. 1 mark AN for limited analysis of one impact on a business of operating at below maximum capacity
- if demand exists the business could be earning more revenue and profit
- fixed costs are spread over lower level of products so cost advantages are lost
- discounts from bulk purchases may not be available so prices may need to increase
- payment on fixed costs, resources not being fully used will increase the average costs of production
- business will be less competitive in the market than its rivals
- business could fail if high costs are not covered by sales of few outputs
- take advantage of opportunities with resources which are not being used
- need less storage space, might use JIT to reduce costs and waste
Accept all valid responses.
Analyse one reason why labour productivity is important to a business.
Analyse one reason why labour productivity is important to a business.
4
AO2 Application
- Increased output - as workers producing goods quicker
- Lower operational costs - of day-to-day operations - charge lower prices
- Improved customer service - customer satisfaction/happier customer
- Improved staff morale - staff are generally happier - fewer staff leave
- Reduced waste/environmental impact
- Developed application -enables a business to set lower prices - attract more customers. (2 marks ± ± 2)
- Limited application - enables a business to set lower prices (1 mark ± ×1 )
AO3 Analysis
- Labour productivity can lead to increased profitability - when it becomes less expensive to produce goods and services.
- Lowering operational costs - due to more products being produced in less time either by more efficient staff or an investment in machinery.
- Ability to charge a lower price than competitors or deliver your service more quickly - which give the business a competitive advantage - increased sales and revenue.
- Enables a business to optimise its resources - which can reduce costs and increase efficiency - greater profit margin.
- Improved customer service when customers are given more time and attention - therefore customer loyalty
- Improved productivity can lead to business growth - which can encourage further investment.
- Reduced waste and environmental impact - which could save costs but also have a positive effect on the business image.
- Improved staff morale when they know how to do a job more efficiently and feel more in control - hence lower staff turnover/absenteeism - lower recruitment costs.
- Developed analysis - Ability to charge a lower price than competitors or deliver your service more quickly - which gives the business a competitive advantage - increased sales and revenue. (2 marks ± 2)
- Limited analysis - Ability to charge a lower price than competitors or deliver your service more quickly - which gives the business a competitive advantage. (1 mark ± 1)
Accept all valid responses.