operational performance definitions

Question 1

value added

Answer 1

extra cost customers pay over the cost of the materials , this gives the firm a surplus to pay wages, dividends and overheads

Question 2

added value equation

Answer 2

added value = sales revenue - cost of bought in material, components and services

Question 3

adding value

Answer 3

amount of increased worth of resources by modifying them. aim to transform inputs into higher value by branding, advertising, packaging combining materials etc.

Question 4

buffer level of inventory

Answer 4

minimum level of stock targeted by a business, should be sufficient to cover for sudden increase in demand or unexpected loss of supplies

Question 5

capacity

Answer 5

maximum output a firm can produce using existing resources

Question 6

capacity utilisation

Answer 6

there percentage of maximum possible output that is being produced

Question 7

capacity utilisation equation

Answer 7

capacity utilisation (%) = (actual output in a set time period / maximum possible output in that time period) X100

Question 8

capital intensive process

Answer 8

production that uses a high proportion of machines compared to labour

Question 9

dependability

Answer 9

wether a business is punctual in delivering it’s promises, produces consistent, reliable, quality, durable products

Question 10

efficiency

Answer 10

the extent to which output is maximised from a given quantity of inputs
higher efficiency reduces average costs

Question 11

flexibility

Answer 11

the ability of an organisation to change its operations in some way

Question 12

inventory

Answer 12

stock of raw materials , work in progress and finished goods

Question 13

just in time

Answer 13

manufacturing system which schedules the delivery of stocks immediately before it is needed. minimises the raw material stock held

Question 14

kaizen

Answer 14

a production philosophy that involves small steps of continuous improvement

Question 15

kanban

Answer 15

lean production incorporates kanban, meaning nothing is produced unless an order has been received

Question 16

labour intensive process

Answer 16

production which uses a high proportion of labour and a relatively small number of machines

Question 17

labour productivity

Answer 17

average output produced by each worker in a given time period

Question 18

labour productivity equation

Answer 18

output per employee = total output / total number of employees

Question 19

lead time

Answer 19

time taken for a customers request to be fulfilled or the amount of time that elapses between when a process starts and its completion

Question 20

lean production

Answer 20

business philosophy that aims to minimise use of resources to achieve a cost advantage. includes just in time, total quality management, kanban and kaizen

Question 21

mass customisation

Answer 21

offering individually tailored goods or services on a large scale. large scale production methods used but each item is tweaked to suit individual

Question 22

operational objectives

Answer 22

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

Question 23

optimal mix of resources

Answer 23

the best mix of labour and machines to produce the appropriate quality at the lowest cost

Question 24

outsourcing

Answer 24

transfer of activities previously done in house to be produced by a different business

Question 25

quality assurance

Answer 25

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

Question 26

quality control

Answer 26

system that uses a separate team of inspectors to inspect and check quality of products or services by inspecting a sample

Question 27

re-order level

Answer 27

the inventory level at which an order is placed for more stock

Question 28

re-order quantity

Answer 28

actual number of products purchased from a supplier in a particular order

Question 29

supply chain

Answer 29

all the stages if the production process and all the firms have a part in producing the product

Question 30

unit cost (average cost)

Answer 30

the mean cost of producing one unit. reducing costs occur when efficiency is improved

Question 31

unit cost equation

Answer 31

unit cost = total cost of production / units of output produced