operations management

Question 1

production def`

Answer 1

the process of converting inputs such as land, labour, and capital into saleable goods

Question 2

primary sector def

Answer 2

firms whose business activity involves the extraction of natural resources.

Question 3

secondary sector def

Answer 3

firms that process and manufacture goods from natural resources

Question 4

tertiary sector def

Answer 4

firms that supply a service to consumers and other businesses

Question 5

what is operations management

Answer 5

mangaging business resources throughout the production process so as to produce finished goods

Question 6

productivity def

Answer 6

a measure of the efficency of inputs used in the production process, especially labour and capital.

Question 7

labour productivity =

Answer 7

total output / number of production workers

Question 8

what must operations management do

Answer 8

use resources in the most cost-effective way
produce the required output to meet consumer demand
meet the quality standard expected by consumers

Question 9

how do you increase productivity of workers

Answer 9

improving the skill level of workers
improving the motivation of workers
introducing more automation/technology
improving quality of managment decisions

Question 10

inventories def

Answer 10

the stock of raw materials, work -in-progress and finished goods held by a business

Question 11

what do businesses hold stock of

Answer 11

raw materials and components
work in progress
finished goods

Question 12

how does holding inventories add to a businesses costs

Answer 12

warehousing costs 
handling costs 
shrinkage costs
insurance costs
obsolescence

Question 13

what is obsolescence

Answer 13

the business may not be able to sell out of date goods.

Question 14

why do businesses hold inventories

Answer 14

1. the production process needs raw materials or components. if these are not available when they’re needed production will stop and ouput will decrease
2. if the business does not have finished goods in stock, then orders cannot be met and the business will lose sales. this could result in the loss of current and future sales.
3. purchasing economies (bulk buying)

Question 15

lean production def

Answer 15

the production of goods and services with the minimum waste of resources.

Question 16

examples of lean production

Answer 16

Just in time inventory control

Kaizen

Question 17

benfits of lean production

Answer 17

new products can be brought to the market more quickly
quality is improved
wastage of time and other resources is reduced or eliminated
the costs of holding inventories is eliminated
unit costs are reduced

Question 18

what is Just in time inventory control

Answer 18

raw materials and components arrive from suppliers just as they are needed by the production process. as soon as finished goods leave the production process, they are delivered to the customer.

Question 19

what is Kaizen

Answer 19

the approach gives all workers the opportunity to make suggestions about how to improve quality or productivity.

Question 20

job production

Answer 20

the production of items one at a time

Question 21

batch production

Answer 21

the production of goods in batches. each batch passes through one stage of production before then moving onto the next stage.

Question 22

flow production

Answer 22

the production of very large quantities of identical goods using a continuously moving process.

Question 23

capital intensive def

Answer 23

production process uses a high quantity of capital equipment compared with labour input.

Question 24

what is CAD

Answer 24

computer aided design

Question 25

what is CAM

Answer 25

computer aided manufacturing

Question 26

fixed costs

Answer 26

costs that do not change with output

Question 27

variable costs

Answer 27

costs that change in direct proportion to output

Question 28

total cost

Answer 28

all the variable and fixed costs of producing the total output

Question 29

total costs =

Answer 29

fixed costs + total variable costs

Question 30

average costs

Answer 30

the cost of producing a single unit of output

Question 31

example of fixed costs

Answer 31

rent, salaries, telephone bill - contract

Question 32

example of variable costs

Answer 32

electricity, transport, wages - part time workers

Question 33

average costs =

Answer 33

total cost / quantity produced

Question 34

economies of scale

Answer 34

the reduction in average costs as a result of increasing the scale of operations

Question 35

marketing economies

Answer 35

these economies exist because certain costs such as producing an advert can be spread over more units of output for a larger firm

Question 36

purchasing economies

Answer 36

big multinational firms can get cheaper rates from suppliers as they buy in bulk at discounted prices

Question 37

risk bearing economies

Answer 37

wider product ranges and more markets help to reduce the business risk; larher firms can invest in research an development projects

Question 38

managerial economies

Answer 38

specialists such as accoutants can be employed to improve efficency through specialisation

Question 39

financial economies

Answer 39

larger companies have easier access when raising money, banks are happy to lend at low interest rates because of the huge sums involved.

Question 40

technical economies

Answer 40

larger factories invest more into machinery; this improved efficency and enables specialisation

Question 41

diseconomies of scale

Answer 41

factors that cause average costs to rise as the scale of operations increases

Question 42

problems for a business that has become too large

Answer 42

poor communication
demotivation of workers
poor control

Question 43

reasons for breakeven charts

Answer 43

helps business decide how much to sell in order to make profit
helps business decide what the selling price should be
helps business gain loans from banks

Question 44

limitations of break even charts

Answer 44

difficult to predict number of customers who will buy the firms products
changes in economy could cause demand for products/services to decrease
new competitors entering the market can lead to firms reducing the selling price to maintain market share.

Question 45

break-even def

Answer 45

the level of output where revenue equals total costs, the business is making neither profit nor loss.

Question 46

what is margin of safety

Answer 46

the difference between actual output and breakeven level of output

Question 47

start up capital def

Answer 47

the capital needed by an entrepreneur when first starting a business

Question 48

working capital def

Answer 48

the capital needed to finance the day to day running of the business

Question 49

non-current fixed assets def

Answer 49

resources owned by a business which will be used for a period longer than a year, for example buildings or machinery

Question 50

capital expenditure def

Answer 50

spending by a business on non-current assets such as machinery or buildings

Question 51

long term fianance def

Answer 51

debt or equity used to finance the purchase of non-current assets or finance expansion plans. long-term debt is borrowing a business does not expect to repay in less than five years

Question 52

short term finance def

Answer 52

loans or debt that a business expects to pay back within one year

Question 53

quality def

Answer 53

ensuring a good or service that meets the needs and requirements of its consumer

Question 54

quality standards def

Answer 54

the minimum acceptable standard of production or service acceptable to consumers

Question 55

why is quality important

Answer 55

brand image
keep customers and attact new ones
reduce customer complaints and returns
charge a premium price
encourage wholesalers and retailers to stock the product
lengthen product life cycles

Question 56

quality control def

Answer 56

checking the quality of goods through inspection

Question 57

quality assurance def

Answer 57

a sysem of setting agreed standards for every stage of production

Question 58

infrastructure def

Answer 58

the basic facilities, services and installations needed for a business to function, e.g. water, power, transport links

Question 59

quantative factors examples

Answer 59

cost of site
availability and cost of labour
transport costs
market potential
issues

Question 60

qualitative factors examples

Answer 60

site
legal controls
infrastructure
ethical concerns

Question 61

government incentives def

Answer 61

usually finance such as interest-free loans, or grants provided to a business to help when locating in a country or area of a country

Question 62

why would businesses locate their operations to anothr country

/continent

Answer 62

growth
reduce production costs
locate production closer to market

lower labour costs
access to global makrets
avoid legal barriers and tarriffs
gov incentives

Question 63

problems of locating operations in another continent

Answer 63

cultural differences
communication problems
ethical concerns
quality issues