Glossary Unit 4 Flashcards
Added value
(VALUE ADDED): Value added is the extra amount the customers pay over the cost of the materials and the value added gives a firm a surplus to pay wages, dividends and overheads.
ADDED VALUE = sales revenue – cost of bought in materials, components and services.
Adding value
The amount of increased worth of resources by modifying them. Businesses aim to transform inputs into higher value outputs by branding, advertising, packaging combining materials etc. E.g. a potter adds value to a lump of clay by making it into a mug.
Buffer level of inventory
The minimum level of stock targeted by a business. The buffer level should be sufficient to cover for sudden increases in demand or unexpected loss of supplies.
Capacity
the maximum output a firm can produce using existing resources.
Capacity utilisation
The percentage of maximum possible output that is being
produced. A firm producing at its maximum is said to be at full capacity.
Capacity utilisation formula
CAPACITY UTILISATION (%) = (ACTUAL OUTPUT IN A SET TIME PERIOD / MAXIMUM POSSIBLE OUTPUT IN THAT TIME PERIOD ) x 100
Capital Intensive process
A process where lots of machinery is used compared to labour
Dependability
whether a business is punctual in delivering its promises, produces consistent, reliable quality and durable products. A highly dependable organisation is likely to have a better brand image.
Efficiency
the extent to which output is maximised from a given quantity of inputs.
Flexibility
the ability of an organisation to change its operations in some way.
Inventory
stock of raw materials, work-in-progress and finished goods.
INVENTORY
CONTROL CHART: ( STOCK CONTROL CHART)
A diagram that is used to register the levels of stock
/inventory over a set time span.
JIT
Manufacturing system, which schedules the delivery of stocks immediately before it is needed. This minimises the raw material stock held
Kaizen
Continuous improvement. A production philosophy involving small steps of incremental improvement.
Labour intensive process
production which uses a high proportion of labour and a relatively small number of machines.
Labour productivity
The average output produced by each worker in a given time period.
Output per employee = Total value of output / Total number of employees
Lead time
The time taken for a customer request to be fulfilled or the amount of time that elapses between when a process starts and its completion.
Lean productivity
Business philosophy to minimise use of resources to achieve a cost advantage. It includes a range of measures such as just-in-time, total quality management, team-working etc.
Mass customisation
Offering individually tailored goods or services on a large scale. Large scale production methods are used but each item is tweaked to suit the individual customer. E.g. colour and features on Jaguar Land Rovers.
Operational objectives
Specific focused short term targets of the operations department including quality levels, productivity & efficiency (e.g. units per week or employee) unit costs per item, number of items to produce per time period
Optimal mix of resources
the best mix of labour and machines to produce the appropriate quality at the lowest cost.
Outsourcing
the transfer of activities previously done in-house to be produced by a different business
Part time workers
Employees who work for less than the full weekly hours e.g. students who do a Saturday job.
Quality
those features of a product or service that allow it to meet the customer requirements e.g. durability, brand image.
Quality assurance
A system of agreeing and meeting quality standards There is focus on designing systems that produce consistently good output.
Quality control
system that uses inspection as a way of checking quality of products or services by inspecting a sample.
Re-order level
the inventory level at which an order is placed for a more stock.
Reorder quantity
the actual number of products purchased from a supplier in a
particular order.
Supply chain
all the stages of the production process and all the firms that have a
part in producing the product. E.g. cocoa growers, dairy farmer, shippers, paper makers etc. for Cadbury chocolate makers.
Temporary worker
Employees who have a fixed term work contract e.g. one year. They are likely to be full time workers.
Unit cost
The mean cost of producing one unit. Reducing costs occur when efficiency is improved.
UNIT COST = TOTAL COST OF PRODUCTION / UNITS OF OUTPUT PRODUCED
Boston Matrix
A method of analyzing brands in a firm’s product portfolio in
terms of market share and market growth. Brands are classified as cash cows,
dogs, question marks and stars
