Unit 5.6: Production planning Flashcards
Buffer stock
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
Capacity utilisation
measures a firm’s existing level of output as a proportion of its potential output
Capital productivity
measures how well a firm uses its physical capital in order to produce goods and services.
Cost to buy (CTB)
Refers to the expenses or expenditure to purchase a product from a third-party or outsourced supplier
Cost to make (CTM)
refers to the expenses or expenditure required to manufacture a good or service in-house
Defect rate
Measures the proportion of output, per time period, that is substandard
Economic order quantity
the optimum stock level that ensures there are sufficient stocks for uninterrupted production, whilst minimising the costs of holding inventory
Global supply chains
refer to the networks that span multiple countries and regions for the purpose of sourcing and supplying goods and services
Just in case (JIC)
Is the traditional stock control system that maintains large amounts of stock in case there are supply or demand fluctuations
Just in time (JIT)
Is a stock control system based on stocks being delivered as and when the are needed in the production process.
Labour productivity
Is a measure of the efficiency of a firm’s workers by calculating the output per worker
Lead time
measures the duration between placing an order and receiving it. The longer the lead time, the high buffer stocks tend to be
Maximum stock level
Refers to the upper limit of inventories that a firm wishes to hold at any point in time, depending on its capacity and facilities
Minimum stock level
refers to the lowest amount of inventories that a business wishes to hold as a precautionary measure
Operating leverage
Measures a firm’s fixed costs as a percentage of variable costs. A firm with relatively high fixed costs is said to have high operating leverage
Production planning
refers to the management process of ensuring sufficient resources (inputs) are available for use to create finished products (outputs in a timely manner) to meet the needs of customers.
Productive capacity
refers to a firm’s maximum (potential) output if all of its resources are used fully and efficiently
Productivity
refers to how well resources, such as labour or capital are used in the production process
The productivity rate
measures the degree of efficiency in the use of resources in the production process. It uses an average measure. e.g output per workers, or output per machine hour
Reorder level
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
Reorder quantity
refers to the amount of new stock ordered. This can be seen on a stock control chart by calculating the difference between the maximum and minimum stock levels
Stock control charts
Are visual tools used to graphically illustrate a simplistic system of stock control in a business
A stock-out
occurs if a business does not hold enough stocks to meet orders for production
Stockpiling
occurs when a business over-produces so holds too much stock, so it is detrimental to the firm’s cash flow position.
Stocks (or inventories)
Are the materials, components and products used in the production process. i.e raw materials, semi-finished goods and finished goods
Supply chain
refers to the different stages of activities from the production of a good or service to it being distributed to the end consumer
Supply chain management (SCM)
is the art of managing and controlling these activities, which must be efficient and cost effective for a business to be profitable
Usage rate
Refers to the speed at which stocks are depleted. The higher the usage rate, the more frequent reordering of stocks needs to be
