5.6 - Production Planning (HL) Flashcards

1
Q

Stock Control Chart

A
  • A visual aid to maintaining suitable levels of inventory over a period of time

Predict future stock levels in order to ensure:

  • Do not run out of inventory
  • Minimize inventory levels
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2
Q

Supply Chain

A
  • A system of steps that convert raw materials into goods or services and then into the hands of customers
  • Production and delivery of goods or service
  • Might involve suppliers, producers, wholesalers, retailers and agents, etc…
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3
Q

A good supply chain can…

A
  • Reduce costs
  • Reduce waste
  • Reduce delivery time to customers
  • Improve quality
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4
Q

Inventory

A

When a business holds stock of:

  • Raw materials
  • Work-in-progress
  • Finished goods
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5
Q

Just-in-case (JIC)

A
  • Stock management strategy whereby firms hold higher levels of stock
  • High levels of stock mean that the business can easily deal with unexpected events
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6
Q

Just-in-Time (JIT)

A
  • Stock control method where inputs arrive just before they are used in the production process
  • Finished products are delivered to consumers as soon as they are produced
  • No or limited inventory is held
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7
Q

Pros of JIC

A
  • Less likely to run out of stock
  • More potential to bulk buy - higher economies of scale
  • Can deal with sudden increases in consumer demand
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8
Q

Cons of JIC

A
  • Higher storage costs
  • Products kept in stock for a long period of time may lose their freshness
  • High amounts of cash tied up in stock
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9
Q

Pros of JIT

A
  • Hold less stock - lower storage costs
  • Can respond to the market quickly
  • Stock doesn’t become outdated - e.g. food
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10
Q

Cons of JIT

A
  • Dependent on suppliers
  • Higher delivery costs and less bulk buying savings
  • Need to purchase and maintain more complex IT systems (predict consumer demand)
  • Loss of reputation it unable to meet
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11
Q

Maximum Level

A

Level of stock that a business can hold, as limited by space

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12
Q

Re-order level

A

Level of stock that triggers a new order

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13
Q

Re-order quantity

A

Amount of stock that is ordered

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14
Q

Lead Time

A

Time between order and delivery of the order

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15
Q

Buffer Stock

A

Minimum stock level held in case of emergencies (e.g. delay in delivery)

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16
Q

Capacity Utilization Rate

A
  • Measures how much a business produces in relation to the maximum possible
  • Current Output Level/Maximum Output Level x 100
17
Q

What if Capacity Utilization Rate is low?

A
  • Boost marketing efforts
  • Move to factory with lower capacity
  • Rent out the unused capacity to another business
18
Q

What if Capacity Utilization Rate is too high?

A
  • Machinery and employees are used all the time = Increased possibility of breakdowns
  • Possibly reduce consumer service quality = Overworked employees
  • Can’t respond to increased demand = Lose potential sales
19
Q

Defect Rate

A
  • A defect product is one which is faulty or below the required quality
  • A lower defect rate is favorable
  • Number of Defects/Total output x 100
20
Q

Productivity Rate

A

Ratio of output to input

21
Q

Labor productivity

A

Total output/Number of workers

22
Q

Capital Productivity

A

Total output/Capital employed

23
Q

How to raise productivity?

A
  • Train workers
  • Raise employees motivation
  • Better management
24
Q

Operating Leverage

A

Q x (P - VC)/ Q x (P - VC) - FC

25
Q

Cost to Buy (CTB) Cost to Make (CTM)

A

Make it or buy it Decisions

Should you buy it or should you make it?

26
Q

Cost to buy

A

Price from the suppliers (P x Q)

27
Q

Cost to make

A
  • Look at costs of the business to make the product
    E.g. increases in Fixed and Variable Costs
28
Q

Why do business hold inventories?

A
  • need inputs for production - otherwise workers and machines are idle
  • work-in-progress is still in the production line - otherwise the production line stops
  • finished goods are waiting to be sold to customers - otherwise sales may be lost