Define unit costs
the average cost of producing a unit of the product
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Why would a business with low unit costs be at an advantage?
it is able to compete at the lowest price, or can make the highest profit margin compared to competitors
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What are the ways used to measure the quality of something?
scrap rates, reliability(how often does something go wrong), customer satisfaction(measured by c retention), number of complaints, customer loyalty
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What are some objectives relating to speed of response and flexibility?
labour productivity, output pee time period, capacity utilisation and order lead times
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Environmental targets
use of energy, amount of recyclable materials, sustainable resources
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Added value
the increase in value that a business creates by undertaking the production process
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Adding value
the difference between the price of the finished product and the cost of the inputs involved in making it
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What internal influences affect operations management?
corporate objectives, finance, Human Resources, marketing
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External influences affecting operations
economic environment, competitors, technological changes, legal and environmental changes
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What is labour productivity and the calculation?
its how productive a business is by employing workers. total output / number of employees
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Why is labour productivity important?
a business thats more productive will have lower unit costs. a business can make a higher profit margin or lower the price compared to competitors
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Define unit cost and give the calculation
describes how efficient a business is when using assets to produce output. total cost / number of units produced
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Why is minimising unit costs so important?
can have higher profit margins, can lower the price compared to competitors
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Economies of scale
purchasing - bulk buying etc, managerial, technical, financial
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When does diseconomies of scale occur?
when the cost per unit increases when the scale of the business increases. eg purchasing, more materials are being used so you will have to purchase more.
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the maximum output that a business can produce in a given period with the amiable resources
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Capacity utilisation
the % of total capacity that is actually being achieved in a given period. (actual level of output / maximum possible output) X 100
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Why is capacity utilisation important?
measures product efficiency, can reduce unit costs
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How can business cope with an increase in demand?
extra shifts, temporary workers, increase lead time, overtime
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What are the factors of production?
land, labour, capital (use of machines), enterprise (risk and reward undertaken by an entrepreneur)
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Capital intensive v labour intensive
capital is the use of machinery and labour is mainly using workers
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What is the productivity calculation?
output / number of workers = output per worker
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capacity utilisation calculation
actual output / capacity X 100
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Efficiency calculation
total costs / actual output = cost per unit
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What is labour productivity?
measures the efficiency of labour and is measured as output per worker
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What is efficiency?
takes into account all factors of production and is measured through unit costs
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How can a business improve efficiency?
look at different suppliers, train and motivate employees, reduce waste
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What is lean production?
focuses on cutting out waste, whilst ensuring quality.
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Gives some examples of waste in a business
over production, moving resources unnecessarily, holding excessive stock.
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What is time based management?
recognises the importance of time and seeks to reduce the level of wasted time in the production process.
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Advantages of time based management
quicker response times to meet changing market needs, faster new product development, waste reduction so greater efficiency
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What are the requirements needed for time based management?
flexible production methods, trained employees
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Simultaneous engineering
helps firms to develop and launch new products more quickly. all parts of the project are planned together, everything is considered simultaneously rather than separately
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Cell production
form of team working where production processes are split into cells, each cell responsible for a complete unit of work.
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Just in time
ensures that inputs into the production process only arrive when they are needed. its a pull system that requires complex production, suppliers only delivered when needed.
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Advantages of just in time production
minimises waiting time, minimises transport costs, don't need storage space so cheaper
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Disadvantages of just in time production
not prepared for changes in demand, little room for mistakes and little stock is kept, production reliant on suppliers so if not delivered then production can be stopped
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constantly introducing small changes in a business to improve quality and efficiency. small improvements are cheaper, ideas come from employees so encourages motivation.
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How can you measure quality?
materials of the product, how long it lasts before it breaks, customer reviews, price, reputation, brand image, exclusiveness
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How does a business know if quality is becoming an issue?
failure of reject rates, product return rates increase, more complaints
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Quality circles
a group of employees who meet regularly to consider ways of resolving problems and improving production
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Quality control
system of maintain standards in manufactured products by testing a sample of the output against the specification
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Quality assurance
maintenance of a desired level of quality in a service or product
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Importance of quality for a business
gain a competitive advantage, increase in sales, can charge higher or lower price, brand loyalty, good reputation
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Benefits of quality assurance
costs reduced as less waste as products are checked at every stage
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Other cards in this set

Card 2


Why would a business with low unit costs be at an advantage?


it is able to compete at the lowest price, or can make the highest profit margin compared to competitors

Card 3


What are the ways used to measure the quality of something?


Preview of the front of card 3

Card 4


What are some objectives relating to speed of response and flexibility?


Preview of the front of card 4

Card 5


Environmental targets


Preview of the front of card 5
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