HL Unit 2 Flashcards
What are Stock Control charts
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
- Minimise inventory levels
What is Supply chain
- All the steps necessary to get a finished good or service from the supplier to the customer.
- Might involve suppliers, producers, wholesalers, retailers, agents etc
A food supply chain can:
- Reduce costs
- Reduce delivery time to customers
- Improve quality (Can lead to less waste)
- Reduce waste
What is Inventory/stock
When a business holds stock of
- Raw materials
- Finished goods
- Work-in-progress
Why do businesses hold inventories
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
What is Just in time Production
- 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
What is Just in Case Production
A stock management strategy whereby the firms hold high levels of stock
Pros of JIC and JIT
Pros of JIC:
- Less likely to run our of stock
- More potential to buy bulk - higher economies of scale
- Can deal with a sudden increase with consumer demand
Pros of JIT:
- Lower costs from holding less stock. - Lower warehousing costs
- Lower insurance costs
- Factory space can be used for other profitable activities
- Can respond to the market quickly
- Stock does not become outdated
- Lower obsolescence costs
- Especially the case for items like food
capacity utilization rate calculation
current output level/maximum output level x 100
capacity utilization rate definition
Measures how much a business producers in relation to the maximum possible - Capacity utilization rate measures the percentage of an organization’s potential output that is actually being produced.
what should you do if capacity utilization rate is low?
- Boost marketing efforts
- Move to a factory with lower capacity
- Rent out the unused capacity to another business
is a high capacity utilization rate good or bad?
In general a high capacity utilization rate is desirable as higher production leads to higher revenue
what does it mean if capacity utilization rate is high?
Machinery and employees are used all the time
- Increased possibility of breakdowns
Possibly reduced consumer service quality
- Overworked employees
what is a defect product
A defect product is one which is faulty of below the required quality
what is a defect rate - what is the calculation
a measurement of how many units of production are defective, or unusable, out of a specific number of units
what is productivity rate
ratio of output to intput
what is labour productivity
output per worker or per hour worked
what is the calculation for labour productivity
what is capital productivity
the measure of how well physical capital is used in providing goods and services
what is the calculation for capital productivity
how do you raise productivity
- train workers
- raise employee motivation
- better management
what is operating leverage
a cost-accounting formula (a financial ratio) that measures the degree to which a firm or project can increase operating income by increasing revenue.
Quantity sold x (price - variable costs)/ Quantity sold x (price - variable costs) - Fixed costs
what is cost to buy
- when a product is bought from a supplier
- costs are the price from the suppliers
what is cost to make
- when a business makes the product themselves
- costs are from making the tires themselves, which increases fixed and variable costs
What are the benefits of Sales forecasting
Benefits
- Helps decide production numbers
- Less likely to have unsold stock
- Hr planning
- How many employees are needed
- Can help with loan applications
- Predictions may help persuade banks
- Cash flow management
- Ensure enough cash flow is on hand
What are the limitations of Sales forecasting
Just a prediction
- Things may change in the future
External factors may change everything
- E.g. recession
Some industries are changing very quickly
New businesses don’t have past sales numbers
Simple Linear regression
Simple linear regression:
- Quantitative tool that allows us to see whether two variables are related
- We will have a depend and independent variable and see that:
- If we change the independent variable, does the dependent variable also change?
- E.g. if a business increases its market budget, will their sales increase?
Draw a table of two variables
Draw a scatter diagram
Draw line of best fit
Describe the regression
What are the correlations
Strong positive correlation:
- If one variable increases, so does the other
- The data points are close to the line of best fit
Weak positive correlation:
- If the independent variable increases, so does the dependent variable
- The data points are not always super close to the line of best fit and more scatted away from eachother
Weak negative correlation:
- If one variable increases, the other variable decreases
Perfect positive is 1, strong positive is 0.9, weak positive is 0.5, no correlation is 0, weak negative is -0.5, strong negative is -0.9, perfect negative is -1
What is research and development
The scientific and technical development of new products and processes
The importance of research and development for a business
Advantage over competitors:
- More desirable products
- Can become future market leader
Higher customer loyalty:
- Improved brand image
- Higher prices (less price sensitivity)
- E.g. allows premium price
Creates property rights:
- Intagible assets e.g. patents
- Could potentially sell these
Lower costs of production:
- E.g. more efficient ways of production
The importance of developing goods and services that address customers’ unmet needs (of which the customers may or may not be aware)
- R&D is costly and doesn’t guarantee success
- Businesses who do not do it can save money in the short term
Intellectual property protection; copyrights, patents, trademarks
Intellectual property rights (IPR) is legal rights assigned to the owners of works related to human creativity.
Patent is IPR relating to inventions.
It stops anyone else making use of the invention.
A Trademark is an IPR related to brand, image, logos, name. It stops anyone using similar images.
Copyright is an IPR relating to artists, writers and musicians. It stops anyone using their work.
Incromental innovation and Disruptive innovation
Incromental innovation:
- When the innovations are relatively small, and the updated product is a small improvement on the previous version
- E.g. new version of the Iphone
Disruptive innovation:
- When the innovation is much larger and can create new product or market
- E.g. the original iphone
