operational performance definitions Flashcards
value added
extra cost customers pay over the cost of the materials , this gives the firm a surplus to pay wages, dividends and overheads
added value equation
added value = sales revenue - cost of bought in material, components and services
adding value
amount of increased worth of resources by modifying them. aim to transform inputs into higher value by branding, advertising, packaging combining materials etc.
buffer level of inventory
minimum level of stock targeted by a business, should be sufficient to cover for sudden increase in demand or unexpected loss of supplies
capacity
maximum output a firm can produce using existing resources
capacity utilisation
there percentage of maximum possible output that is being produced
capacity utilisation equation
capacity utilisation (%) = (actual output in a set time period / maximum possible output in that time period) X100
capital intensive process
production that uses a high proportion of machines compared to labour
dependability
wether a business is punctual in delivering it’s promises, produces consistent, reliable, quality, durable products
efficiency
the extent to which output is maximised from a given quantity of inputs
higher efficiency reduces average costs
flexibility
the ability of an organisation to change its operations in some way
inventory
stock of raw materials , work in progress and finished goods
just in time
manufacturing system which schedules the delivery of stocks immediately before it is needed. minimises the raw material stock held
kaizen
a production philosophy that involves small steps of continuous improvement
kanban
lean production incorporates kanban, meaning nothing is produced unless an order has been received
labour intensive process
production which uses a high proportion of labour and a relatively small number of machines
labour productivity
average output produced by each worker in a given time period
labour productivity equation
output per employee = total output / total number of employees
lead time
time taken for a customers request to be fulfilled or the amount of time that elapses between when a process starts and its completion
lean production
business philosophy that aims to minimise use of resources to achieve a cost advantage. includes just in time, total quality management, kanban and kaizen
mass customisation
offering individually tailored goods or services on a large scale. large scale production methods used but each item is tweaked to suit individual
operational objectives
specific focused short term targets of the operations department including quality levels, productivity and efficiency, 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
transfer of activities previously done in house to be produced by a different business
quality assurance
a system of agreeing and meeting quality standards. there is a focus on designing systems that produce consistently good output
each worker responsible for checking their own work
quality control
system that uses a separate team of inspectors to inspect and check quality of products or services by inspecting a sample
re-order level
the inventory level at which an order is placed for more stock
re-order quantity
actual number of products purchased from a supplier in a particular order
supply chain
all the stages if the production process and all the firms have a part in producing the product
unit cost (average cost)
the mean cost of producing one unit. reducing costs occur when efficiency is improved
unit cost equation
unit cost = total cost of production / units of output produced
