Theme 2, 2.3 Product Efficiency

Question 1

Define Efficiency

Answer 1

Involves using scarce resources in the most economically achievable way.

Question 2

Define Productivity

Answer 2

Measures efficiency in the use of resource inputs. Labour is usually calculated as output per hour worked; capital can be measured as output per unit of capital.

Question 3

Define Infastructure

Answer 3

Includes all the publicly available services such as transport, communications facilities, basic services such as water, drains, energy supplies and also telephone systems, bridges, ports and airports.

Question 4

Define Human capital

Answer 4

Refers to the skills, experience and knowledge acquired by individuals. (created through education, on-the-job training, apprenticeships, vocational training coursed and relevant experience).

Question 5

Define Globalisation

Answer 5

Arising from growing world markets and increasing international trade.

Question 6

Define GDP

Answer 6

Gross Domestic Product is the total value of output or income. The value of everything produced within the economy over one year.

Question 7

Define Capital intensive

Answer 7

This type of production uses large amounts of capital equipment and relatively little labour. Productivity will usually be high.

Question 8

Define Labour intensive

Answer 8

This type of production uses large amounts of labour and relatively little capital. Many services are labour intensive e.g. hairdressing

Question 9

Define Net intensive/ investment

Answer 9

Involves spending on new capital equipment over and above the level of spending on replacement of worn out equipment. This increases productivity capacity.

Question 10

Define Capacity utilisation

Answer 10

Measure the extent to which the capacity of the business is in use, taking actual output as a percentage of total capacity.

Question 11

Define Underutilised capacity

Answer 11

Raises unit costs because the fixed costs are spread across a lower level of production.

Question 12

Define over-utilised capacity

Answer 12

Means that the business is trying to produce more than its capacity will allow. It may encourage rising costs.

Question 13

Define Quality Control

Answer 13

Involves checking finished products for any sign of defect or poor quality.

Question 14

Define Quality Assurance

Answer 14

Involved designing the production process so as to eliminate waste and ensure that defects do not happen.

Question 15

Define Cell production

Answer 15

Involves small teams of employees taking responsibility for a significant part of the total production process.

Question 16

Define Lean Production

Answer 16

Refers to a number of strategies for minimising waste, reducing costs and saving time. It includes, just-in-time, Kaizen, cell production, emphasis on quality and shortened lead time.

Question 17

Define Lead times

Answer 17

The time it takes to go from a decision to produce to the arrival of the product, on the market.

Question 18

Define Kaizen

Answer 18

Is the Japanese term for continuous improvement, finding new and better ways of organising production and designing products.

Question 19

Define Just-In-Time

Answer 19

Relies upon raw materials being delivered as they are needed. It allows stock to be kept at a minimum, and so improves cash flow.

Question 20

Define Quality Circles

Answer 20

Meetings of relevant workers to discuss issues relating to maintenance and improvement of quality in the business- may also double as a form of empowerment and motivation.

Question 21

Define Statistical Process Control

Answer 21

Statistical data generated to inform the evaluation of processes within the business.

Question 22

Define Zero Defects

Answer 22

Systems in place to ensure that no product leaves the business with a defect- important in building supplier relationships, image and reputation.

Question 23

Define Benchmarking

Answer 23

Identifying the best practice of the leading firms and using that to measure your own success.

Question 24

Define Training

Answer 24

Staff must be trained to do their job effectively in terms of direct tasks (e.g. A Burger Flipper can flip well) and quality monitoring.

Question 25

Define Over-production

Answer 25

Making it more than is needed- leads to excess stocks.

Question 26

Define Waiting time

Answer 26

Equipment and people standing idle waiting for a production process to be completed or resources to arrive.

Question 27

Define Transport

Answer 27

Moving resources ( people, materials) around unnecesarily.

Question 28

Define stocks

Answer 28

Often held as an acceptable buffer, but should not be excessive.

Question 29

Define Motion

Answer 29

A worker who appears busy but not actually adding any value.

Question 30

Define Defects

Answer 30

Output that does not research the required quality standard- often a significant cost to an uncompetitive business.

Question 31

Define productivity

Answer 31

The output per unit of input per unit of time

Question 32

What are the implications of higher productivity for firms and the overall economy?

Answer 32

Lower average costs of production = lower prices = increase in higher demand = lower unemployment = higher GDP growth.

Question 33

How can a firm’s credit history determine how productive it can be?

Answer 33

Good credit scores increase the loans given to firms, which they can invest in R&D and become more productive through technological advancements.

Question 34

What is capital-intensive production?

Answer 34

This occurs when firms have access to cheap credit, whereby capital is cheaper to purchase than labour.

Question 35

Give the formula for capacity utilisation?

Answer 35

( actual level of output/ Maximum possible output ) times 10

Question 36

Why would a firm possibly be operating under maximum capacity?

Answer 36

A reduction in demand from consumers means there is no need to be producing extra units of output.

Question 37

How could operating at full capacity affect the quality of goods produced?

Answer 37

Operating at full capacity implies a rushed process where employees are demotivated, thereby diminishing the quality of goods.

Question 38

Give one benefit of under-utilised capacity.

Answer 38

Firms have the flexibility to change its level of output according to changes in the economic cycle ( e.g. an economic boom means firms are able to produce extra units of output without exhausting its capital.

Question 39

If a firm entered a new market, how would it affect its capacity utilisation?

Answer 39

It would improve capacity utilisation, as more labour and capital is required to produce the extra output now that the firm has entered a new market.

Question 40

What is lean production?

Answer 40

The process of minimising waste during the different stages of production

Question 41

Describe the difference between quality control and quality assurance

Answer 41

Quality control ensures the products meet the minimum standards, whereby quality assurance encourages collaboration between design and, production and marketing.

Question 42

How can small, continuous improvements (kaizen) reduce average costs of production?

Answer 42

Constantly making small ‘tweaks’ in a firm reduces the need for major capital investments.

Question 43

Describe JIT management of stock

Answer 43

Just In Time ensures stock arrives as and when it is needed, based on consumer demand, thereby reducing costs of storage.

Question 44

Give 2 disadvantages of JIT

Answer 44

1. The firm is dependent on the supplier for stock in a short timeframe.
2. The firm won’t be able to handle huge, unexpected surges in consumer demand.

Question 45

What is lead time?

Answer 45

The time between a decision being made and then carried out