Chapters 33-41 Operations

Question 1

Added Value

Answer 1

The difference between the cost of purchasing raw materials and the price for which the finished good is sold.

Question 2

Job production

Answer 2

Single, unique items are made one at a time.

Question 3

Batch production

Answer 3

Limited number of identical products are made in groups.

Question 4

Flow or mass production

Answer 4

A continuous process where large volumes of identical products flow from one stage of production to the next on a production line.

Question 5

Labour productivity definition

Answer 5

A continuous process where large volumes of identical products flow from one stage of production to the next on a production line.

Question 6

Labour productivity equation

Answer 6

Output ( Per Period)/ Number of employees (Per Period)

Question 7

Capital productivity definition

Answer 7

A measurement of how productive the capital invested in the business is.

Question 8

Capital productivity equation

Answer 8

Output / Capital employed

Question 9

Capacity utilisation definition

Answer 9

The percentage of a business’s total capacity that is being used at a given level of output.

Question 10

Capacity utilisation equation

Answer 10

Current level output/ Maximum level of output (capacity) x 100

Question 11

Capacity underutilisation

Answer 11

When the level of spare (unused) capacity is significant enough to be of concern.

Question 12

Subcontracting of production

Answer 12

Getting another business to produce the goods for you.

Question 13

Rationalisation

Answer 13

Concentrating on core products and disposing of those products/services/assets/employees that are not seen as profitable or necessary to the business’s long-term success.

Question 14

Full capacity

Answer 14

All employed factors of production are being used to their optimum level of efficiency – producing the maximum level of output.

Question 15

Computer modelling

Answer 15

Computers which are programmed to predict future outcomes by testing a range of ‘what-if’ scenarios in order to improve product safety, performance & efficiency.

Question 16

Computer-aided design (CAD)

Answer 16

An interactive computer system which is capable of generating, storing and using computer graphics to assist design engineers to create images of new products.

Question 17

Computer-aided manufacture (CAM)

Answer 17

Using programmed computers and robots to produce goods

Question 18

Robotics

Answer 18

Machines which can operate with a degree of autonomy in the production process, because they are controlled by cameras and sensors rather than being operated and controlled by human workers.

Question 19

Information technology (IT

Answer 19

The use of any computers, storage, networking and processes to create, process, store, secure and exchange all forms of electronic data

Question 20

Lean production

Answer 20

The reduction and removal of waste from the production process, which will result in increased productivity and reduced costs.

Question 21

Just-in-time

Answer 21

Parts, raw materials and components are received and products are made only when there is demand for the parts and demand for the products.

Question 22

Kaizen

Answer 22

Continuous improvement. Be continually making small incremental steps in the improvement of quality, design and waste reduction.

Question 23

Cell production

Answer 23

Groups of workers who are multi-skilled and can be self-managing, where each group is responsible for completing a task, and members are expected to play a role in improving quality and flexibility in the production process.

Question 24

Time-based management

Answer 24

Processes that focus on time as a key business resource, including concepts such as just-in-time, Computer Aided Design, Computer Aided Manufacture, Critical Path Analysis and Simultaneous Engineering.

Question 25

Simultaneous engineering

Answer 25

Carrying out, as near as possible at the same time, the functions involved in designing, producing and marketing a product.

Question 26

Quality assurance

Answer 26

A culture of ‘zero-defects’ where emphasis is placed on preventing the production of poor quality products, as opposed to checking quality at the end of the production line.

Question 27

Quality control

Answer 27

Checking quality at the end of the production line through inspections and sampling.

Question 28

Benchmarking

Answer 28

Setting standards of quality and output which are based on the best that competitors are achieving.

Question 29

Production control

Answer 29

Ensuring that standards set, and processes designed to meet targets, are actually being used in the workplace.

Question 30

Total quality management

Answer 30

TQM – A total process of creating quality through continuous improvement in all stages of production.

Question 31

Quality chains

Answer 31

Where the next person in the production process is treated as a customer and customer satisfaction is the objective.

Question 32

Zero-defects

Answer 32

Attempting to achieve perfect product quality, time after time.

Question 33

Inventory

Answer 33

Stock; whether it is of raw materials, work in progress or finished goods.

Question 34

Bar gate stock graph

Answer 34

A graph showing the changing levels of stock held by a business over a period of time.

Question 35

Maximum stock level

Answer 35

The highest amount of stock that a business has space to store.

Question 36

Reorder level

Answer 36

The level of stock at which a new order is placed.

Question 37

Minimum stock level

Answer 37

The lowest level of stock that a business wants to keep in case of problems with delivery or a rush of orders so that it does not run out of stock.

Question 38

Reorder quantity

Answer 38

The amount of stock that has been ordered. It is the difference between the maximum and minimum stock holding levels.

Question 39

Lead time

Answer 39

The amount of time taken from when the order is placed until the delivery arrives.

Question 40

Buffer stock

Answer 40

The amount of stock that will always be held in case of problems with delivery.

Question 41

Innovation

Answer 41

Bringing a new idea to the market or the workplace. The commercial exploitation of an invention.

Question 42

Research & development (R&D)

Answer 42

The inquiry into and discovery of new ideas which are then processed into commercially viable products or processes.

Question 43

Prototype

Answer 43

Early-stage models of new products which are not yet ready to be sold to consumers.

Question 44

Economies of scale

Answer 44

The reduction in average costs of production that occur as output increases.

Question 45

Internal economies of scale

Answer 45

Reductions in the average cost per unit of output as a result of increasing internal efficiencies within a business.

Question 46

Purchasing economies

Answer 46

As output increases, so can the size of orders for raw materials, which may result in bulk discounts being given which therefore reduces the average cost of production.

Question 47

Technical economies

Answer 47

As a business grows it can afford to purchase the latest equipment which will result in increased efficiency and productivity, reducing average costs of production.

Question 48

Financial economies (internal)

Answer 48

As a business grows it will have access to a wider range of finance, and they have more collateral to offer lenders as security – reducing the risk. As a result they can often negotiate more favourable rates of interest and thus lower the average cost of borrowing.

Question 49

Managerial economies

Answer 49

As a business grows it can employ specialists who can increase efficiency of production, marketing or purchasing thereby reducing the average costs of production.

Question 50

Marketing economies

Answer 50

As a business grows each pound spent on advertising will have greater benefit as the cost of the advert can be spread across a larger number of products thereby reducing the average cost of marketing.

Question 51

External economies of scale

Answer 51

The advantages of scale that benefit a whole industry and not just an individual business. E.g. Educational & supplier

Question 52

Supplier economies

Answer 52

A network of suppliers may be attracted to an area where a particular industry is growing. If the suppliers are in competition with each other this may reduce buying costs and improve services like Just-in-time.

Question 53

Educational economies

Answer 53

Local colleges will set up training schemes suited to the largest employer’s needs providing an available pool of skilled labour, thereby reducing recruitment and training costs for all businesses in the industry.

Question 54

Financial economies (external)

Answer 54

Financial services can improve, with financial institutions providing services that may be particularly geared towards a particular industry.

Question 55

Diseconomies of scale

Answer 55

The factors that cause higher costs per unit of output when the scale of a business continues to increase causing inefficiency in large organisations. E.g. Coordination, communication & motivation issues.