Section 5 - 5.5 production planning

Question 1

Buffer stock

Answer 1

Refers to the minimum stock level held by a business in case there are unexpected events e.g. late deliveries of components or a sudden increase in demand for the firm’s product

Question 2

Capacity utilization

Answer 2

Measures of firms existing level of output as a proportion of its potential output. High capacity utilization means that the firm is producing close to its productive capacity

Question 3

Just in case(JIC)

Answer 3

is the traditional stop management system that maintains buffer stocks in case there are unexpected fluctuations in supply or sudden changes in demand

Question 4

Just in time

Answer 4

Is a stock control system whereby materials and components are scheduled to arrive precisely when they are needed in the production process

Question 5

Labor productivity

Answer 5

it’s a measure of the efficiency of affirms workers by calculating the output per worker. It is an indicator of the current level of skills and motivation of the workforce

Question 6

Lead time

Answer 6

measures the duration between placing an order and receiving it. The longer the lead time, the higher buffer stocks tend to be

Question 7

Make or buy decisions

Answer 7

refer to situations where a firm has to decide between manufacturing a product and purchasing it from a supplier, based on comparing the cost to make with the cost to buy

Question 8

Maximum stock level

Answer 8

Refers to the upper limit of inventories that a firm wishes a hold of any point in time

Question 9

Minimum stock levels

Answer 9

Refers to the smallest amount of inventories that a firm wishes to hold at any point in time, This minimum is above zero as a precautionary measure

Question 10

The optimum stock level

Answer 10

Refers to the best inventory level for a firm which ensures that there are sufficient stocks for production while incurring minimal costs

Question 11

Productive capacity

Answer 11

refers to a firms maximum (potential) output if all its resources are used fully and efficiently

Question 12

Productivity rate

Answer 12

measures the degree of efficiency in the use of resources in the production process. It uses an average measure e.g. output per worker, revenue per salesperson or output per machine hour

Question 13

Re-order levels

Answer 13

refers to the level of stock when a new order is placed. Lead times mean that the reorder level helps to prevent production problems arising from a lack of stock

Question 14

Re-order quantity

Answer 14

refers to the amount of new stock ordered. It can be seen from a stock control chart by calculating the difference between the maximum and minimum stock levels

Question 15

A stock out

Answer 15

Occurs if a business does not hold enough stock to meet orders for production

Question 16

Stockpiling

Answer 16

When a business overproduces so hold too much stock. This is detrimental to the firms cash flow position

Question 17

Stock /inventory

Answer 17

are the materials, components and products used in the production process i.e. raw materials semi finished goods and finished goods