Making Operational Decisions

AS Business Studies Unit 2

Aims and Objectives

Aim: Understand methods of increasing or decreasing production.
Objectives: Explain ways of increasing or decreasing production levels.

Level E-D

C-B
A-A*

Analyse the problems attached to changing production levels.

Evaluate the factors which affect a businesses decision to accept a new order

Starter
Define capacity Define capacity utilisation Explain why 100% capacity utilisation may not be a good idea for a business?

Starter
What three things should a business consider before accepting a new order?

Excess Capacity

When a business has greater production capacity than is likely to be used in the foreseeable future.

Capacity
If a business sees a surge in demand or a fall in demand for their product, how can a business increase or decrease capacity and production? Brainstorm in groups methods of increasing and decreasing productivity and capacity.

Increasing/Decreasing Productivity & Capacity

Overtime

Rationalisation

Temp Staff

Sub Contracting

Part-Time Staff

Increasing/Decreasing Productivity & Capacity

Overtime
Increase output using existing resources

Temporary Staff
Employed to cope with peaks in demand

Part-Time Staff
Only paid when needed

Sub-Contracting
Using a supplier to manufacture part or all of a firms product/service.

Increasing/Decreasing Productivity & Capacity

Rationalisation
Reorganising resources to cut costs often leading to a cut back in capacity.

Method Problems
Discuss in your groups the problems a business may face with each method .
Overtime

Rationalisation

Temp Staff

Sub Contracting

Part-Time Staff

Problems With Sub-Contracting

Sub-Contracting http://www.youtube.com/wat ch?v=OWio7NVOnaI Loss of control over supply chain. Ensuring quality becomes difficult. Managing supply chain is difficult.

Problems With Overtime

Over Time Will increase costs, possibly unit costs. Workers may slow down production to ensure overtime is offered!

Problems With Temporary Staff/Part-Time Staff

Temporary Staff & Part Time Staff Recruitment and training costs.

Workers may not be loyal and motivated.

Problems With Rationalisation

Rationalisation If staff are made redundant then motivation and morale be decrease. If capacity is cut permanently then the business may not be able to cope if demand increases again!

Plenary
What three things should a business consider before accepting a new order? 1) 2) 3) 4) Revenue gained from order compared to costs Whether future orders are likely to be received Importance of the customer to the firm Whether the business has the capacity to cope with demand 5) Whether other potential customers exist for this product.
Discuss in groups, a ranking for most important to least important. 1 being the most important thing to consider and 5 being the least important.