3.4 Operational management Flashcards
Added value
The increase in worth of a product or service because of the production process or additional
features, measured by the difference between the selling price and the cost of inputs.
Labour productivity
The measure of output produced per unit of labor input.
Unit costs (average costs)
The average cost per unit of output, calculated by dividing total production costs by the
number of units produced.
Capacity
The maximum level of output or production that a business can sustain over a given period
with its existing resources.
Capacity utilization
The extent to which a business utilises its production capacity to meet demand, calculated as
actual output divided by maximum possible output multiplied by 100.
Efficiency
The ratio of output to input, measuring how well resources are utilised to achieve desired
outcomes.
Just in time (JIT)
An inventory management approach that aims to minimise inventory levels by receiving
goods only as they are needed in the production process.
Just in case (JIC)
An inventory management approach where businesses maintain higher inventory levels as a
precaution to meet unexpected increases in demand or supply chain disruptions.
Lean production
A production philosophy that emphasises minimising waste, improving efficiency and
maximising value for customers through continuous improvement.
Labour intensive
A production process or industry that requires a significant amount of labour relative to
capital inputs.
Capital intensive
A production process or industry that relies heavily on machinery, equipment or capital
investment relative to labour inputs.
Quality assurance
The systematic process of ensuring that products or services meet specified standards and
conform to established quality criteria.
Quality control
The process of inspecting, testing and monitoring products or services during and after
production to ensure they meet predetermined quality standards.
Outsourcing
The practice of contracting out certain business functions or processes to external third-party
service providers.
Temporary employees
Workers who are hired for a limited period to fulfill specific roles or tasks.
Part-time employees
Workers who are employed for fewer hours than full-time employees, typically working on a
regular schedule.
Producing to order
A production strategy where goods are manufactured only after receiving customer orders,
reducing the need for inventory storage and minimising waste.
Lead time
The amount of time it takes for an order to be fulfilled from the moment it is placed until it is
delivered to the customer.
Re-order levels
The predetermined inventory level at which new orders should be placed to replenish stock
and maintain sufficient inventory levels.
Buffer level
An additional inventory stock kept as a reserve to account for unexpected fluctuations in
demand, supply chain disruptions or production delays.
Re-order quantity
The quantity of goods that should be reordered when inventory levels reach the re-order
point, ensuring continuity of supply
