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gcse business > section 4: operations management > Flashcards

section 4: operations management Flashcards

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1
Q

production

A

the process of converting inputs such as land, labour and capital into saleable goods, for example shoes and cellphones

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2
Q

productivity

A

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

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3
Q

labour productivity formula

A

labour productivity= total output/number of production employees

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4
Q

level of production

A

number of units produced in a given period of time

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5
Q

how to improve labour productivity

A
  1. increasing output with the same number of employees:
    - improving the skill level of employees
    - improving the motivation of employees
    - introducing more automation and more or better technology
    - improving quality of management decisions
  2. keeping output at the same level but with fewer employees
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6
Q

inventories

A

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

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7
Q

why businesses hold inventories

A
  • raw materials are needed as inputs for the production process
  • always have enough supplies
  • protected against instability
  • can respond to rise in demand
  • if the business does not have finished goods in stock then customers’ orders cannot be met and the business will lose sales
  • businesses often benefit from economies of scale when they buy inventories in large quantities because they receive a discount from the supplier
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8
Q

holding inventories adds to a business’s costs such as:

A
  • warehousing costs
  • handling costs
  • shrinkage costs
  • insurance costs
  • obsolescence
  • opportunity cost
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9
Q

lean production

A

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

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10
Q

target of lean production

A

reduce waste, lower costs per unit, increase competitiveness, increase profits

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11
Q

main sources of waste

A
  • production defects
  • high levels of inventories
  • overproduction
  • idle resources
  • transporting goods
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12
Q

just-in-time inventory control

A

raw materials and components arrive from suppliers just as they are needed by the production process

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13
Q

kaizen

A

continuous improvement through the elimination of waste; small improvements leading to significant benefits

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14
Q

main methods of production

A

job production, batch production, flow production

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15
Q

job production

A

the production of items one at a time, most suitable for one-off products & personal services

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16
Q

job production pros

A

▪ the product meets the exact requirement of the customer
▪ workers will have more varied jobs as each order is different, improving morale
▪ very flexible method of production

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17
Q

job production cons

A

▪ Costs are higher, as it is usually labour-intensive
▪ Production often takes a long time
▪ Since they are made to order, any errors may be expensive to fix
▪ Materials may have to be specially purchased for different orders, which is expensive

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18
Q

batch production

A

the production of similar goods in batches. Each batch passes from one stage before moving to the next

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19
Q

batch production pros

A

▪ Variety for consumers & choice
▪ Cost saving can be achieved if materials bought in bulk
▪ A firm can handle unexpected orders better

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20
Q

batch production cons

A

▪ Take time for machines to be reset between production batches which delays production
▪ Finished goods will need to be stored which increases costs
▪ Less motivated employees, work become repetitive

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21
Q

flow production

A

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

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22
Q

flow production pros

A

▪ Costs are low in the long run and so prices can be kept low
▪ Can benefit from economies of scale in purchasing
▪ Automated production lines can run 24/7, and produced quickly and cheaply
▪ Capital-intensive production

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23
Q

flow production cons

A

▪ Large investment in technology (high capital cost)
▪ High levels of raw materials and finished goods need to be held in inventory- this is expensive
▪ If one machinery breaks down, entire production will be affected
▪ Very repetitive job, employees not motivated

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24
Q

capital intensive

A

production process that uses a high quantity of capital equipment comparers with labour input

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25
Q

how tech has changed production methods

A
  • computer-aided design (CAD)
  • computer-aided manufacturing (CAM)
  • computer-integrated manufacturing (CIM)
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26
Q

technology pros

A

business:
- reduces costs and time taken to design new products
- increases productivity
- reduces costs of production
- improves quality and reduces waste

consumers:
- better quality products
- lower prices
- products with more features are easier to develop and produce

employees:
- technology completes simple and repetitive tasks that employees find boring
- the work is easier with the aid of technology
- a business that uses the latest technology is likely to be more successful so provides job security

27
Q

fixed costs

A

costs that do not change with output

28
Q

variable costs

A

costs that change in direct proportion to output

29
Q

total cost

A

all the variable and fixed costs of producing the total output

30
Q

average costs

A

the cost of producing a single unit of output

31
Q

revenue formula

A

selling price x quantity

32
Q

variable costs formula

A

variable cost per unit x quantity

33
Q

total costs formula

A

fixed costs + variable costs

34
Q

average costs formula

A

total costs/total output

35
Q

economies of scale

A

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

36
Q

different economies of scale

A

financial economies: better lending terms (lower interest rates)

managerial economies: greater specialisation ( more roles, bigger hierarchy)

marketing economies: market spending spreads over more products

purchasing economies: negotiate better prices

technical economies: specialist equipment to boost productivity

37
Q

diseconomies of scale

A

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

38
Q

causes of diseconomies of scale

A

poor communication, lack of commitment from employees, weak coordination

39
Q

break-even

A

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

40
Q

break-even analysis

A

a business technique that shows the relationship between revenue, costs and volume of output/sales

41
Q

break-even analysis is used to calculate

A
  • how many units it needs to sell before it starts to make profit
  • the effect on profit of increasing or decreasing the price of a product
  • the effect on profits of an increase or decrease in business costs
42
Q

break-even analysis pros

A
  • Easy to construct and interpret
    ▪ Useful information about the output that must be sold to cover all costs
    ▪ Can show the effect of a decision to change costs or revenues
    ▪ Can help with other important business decisions such as the location and relocation of a business
43
Q

break-even analysis cons

A

▪ it is assumed that all costs and revenues can be represented by straight lines
▪ It is not easy to separate costs into fixed and variable
▪ The charts assume that all output is sold – they do not allow for inventories and the costs of holding these

44
Q

margin of safety

A

the difference between the current level of output and break-even output

a measure of the amount by which sales can fall before losses are made

45
Q

break-even point formula

A

fixed costs/ (selling price per unit - variable costs per unit)

46
Q

margin of safety formula

A

actual output- break-even output

47
Q

quality

A

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

48
Q

quality standards

A

the minimum standard of production or service acceptable to consumers

49
Q

importance of quality

A
  • develops strong brand image
  • gain and retain customers= customer loyalty
  • reduces costs, customer complaints and returns
  • premium pricing
  • attracts more middlemen
  • lengthens the product life cycle
50
Q

quality control

A

checking the quality of goods through inspection

51
Q

problems of quality control by inspection

A

▪ The cost of the inspectors
▪ The work may be repetitive = de-motivated inspectors
▪ Usually at the end of the production
process, so it is potentially too late
▪ May take responsibility for quality away
from workers

52
Q

benefits of quality control

A

▪ Prevents faulty goods and services being sold
▪ Not disruptive to production-workers, given that inspectors do the checking
▪ Improved reputation for quality (improved brand image) may increase sales

53
Q

quality assurance

A

a system of setting agreed standards for every stage of production

54
Q

quality assurance makes sure that

A

▪ Quality standards are set for each stage of the production process
▪ Raw materials, components and other resources meet required standard
▪ Use of technology, minimising quality issues e.g., using CAD/CAM to reduce human error
▪ Employees know they have responsibility for ensuring quality of their own work

55
Q

benefits of quality assurance

A

▪ Team-work
▪ Early detection minimises wastage & defected products
▪ Less time spent by inspectors= decreasing this cost
▪ Businesses with quality assurance systems can easier obtain industry quality awards such as ISO 9000

56
Q

cons of quality assurance

A

▪ Time consuming to run & train staff
▪ Cost training staff

57
Q

infrastructure

A

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

58
Q

quantitative factors of location decisions

A
  • cost of site
  • availability and cost of labour
  • transport costs
  • gov. incentives
59
Q

qualitative factors of location decisions

A
  • size of site
  • legal controls
  • quality of infrastructure
  • ethics
60
Q

government incentives

A

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

61
Q

why business relocate operations

A
  • growth
  • locate production closer to market
  • reduce production costs
62
Q

pros of relocating

A
  • lower labour costs
  • access to global markets
  • avoiding barriers to trade
63
Q

cons of relocating

A
  • cultural differences
  • communication problems
  • different legal controls
64
Q
A

gcse business (3 decks)

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