OPERATIONS MANAGEMENT KEY TERMS

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  • Created by: tella1204
  • Created on: 16-11-19 04:27
Value Added
The difference between the cost of inputs and the final selling price
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Labour-Intensive
When many workers and few machines are used to produce goods, often used in developing countries where labour costs are low
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Capital-Intensive
Many machines and few workers are used to produce goods; often in developed countries where labour costs are high
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Productivity
How a business can measure efficiency; output measured against the inputs used to create it
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Buffer Inventory Level
Inventory held to deal with uncertainty in customer demand and deliveries of supplies
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Lean Production
Techniques used by a business to cut down on waste and increase efficiency; aims to reduce the time it takes for a product to be developed - eg Kaizen, JIT, Cell Production
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Kaizen
Japanese term meaning 'continuous improvement' through the elimination of waste; idea that improvement comes from ideas of the workers rather than new technology
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JIT
Just-In-Time Inventory Control. Involves reducing the need to hold inventories of raw materials or unsold inventories; thy are delivered just in time to be used in the production process
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Cell Production
Where the production line is divided into separate, self-contained units each making a part of the finished product
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Job Production
Where a single product is made at a time, specifically to order, eg ships
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Batch Production
Where a quantity of one product is made, then a quantity of another, in blocks or batches eg one size of jeans and then another
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Flow Production
Where large quantities of a product are produced in a continuous process; product moves along conveyor line and parts keep being added
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Automation
Where the equipment used in the factory is controlled by a computer to carry out mechanical processes; production line mainly machines
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Mechanisation
Where the production process is done by machines but operated by people
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CAD
Computer Aided Design. Software that draws items being designed and allows them to be rotated and seen from all angles
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CAM
Computer Aided Manufacture. Computers monitor the production process and control machines on the factory floor
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CIM
Computer Integrated Manufacturing. Total Integration of CAD and CAM ; the computers that design products are linked with the ones that manufacture them
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EPOS
Electric Point of Transfer. Used at checkouts when barcode is scanned, automatically changes the inventory of that product to show one has been sold and will reorder if inventory gets low
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EFTPOS
Electric Funds Transfer At Point Of Sale. Cash Register connected to banks; when shopper's card is swiped their bank information is read and money is directly debited from account after PIN is entered
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Contactless Payment
Can use debit, credit, phones eg to make contactless payments; as long as they have an antenna, hen it is touched against a contactless terminal, it transmits information about the purchase
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Fixed Costs
Costs which do not vary with the number if items sold / produced. They have to be paid whether the business is making sales or not eg rent
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Variable Costs
Costs which vary directly with the number of items sold or produced eg material costs
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Total Costs
Fixed and Variable costs combined. Average cost per unit x output
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Average Cost Per Unit
Total cost of production divided by the total output of a product. Total costs of production / total output
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Economies Of Scale
Factors that lead to a reduction in average costs as a business increases in size
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Purchasing Economies
When businesses buy large numbers of components [bulk] they get discounts; reducing the unit cost of each item bought
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Marketing Economies
Bigger businesses can afford their own vehicles to distribute goods; they do not need as many sale staff to advertise
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Financial Economies
Bank Managers consider lending to large organisations less risky; therefore a low interest rate is charged
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Managerial Economies
Large businesses can afford to pay for specialist managers with increased efficiency
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Technical Economies
Can use flow production with the latest technology; can use machinery with large output in mind
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Diseconomies Of Scale
Factors that lead to an increase in average costs as a business grows beyond a certain size
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Poor Communication [Diseconomy of Scale]
The larger the organisation the more difficult it is to send and receive accurate messages, which can lead to mistakes
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Lack of Commitment from Employees [Diseconomy of Scale]
Workers may feel unimportant and not valued by management; lack of relationships between workers and top managers leads to lack of commitment
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Weak Coordination [Diseconomy of Scale]
Takes longer for decision by managers to reach all parts of the business; difficult to coordinate the work of all workers; employees take a long time to react when a decision has been made
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Break Even Level Of Output
The quantity that must be sold/produced for total revenue to equal total costs; neither a profit or a loss is being made at this point
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Break Even Chart
Graphs which show how costs and revenues of a business change with sales; show the level of sales the business must make to break even
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Revenue
Income during a period of time from the sale of goods / services. Total revenue = quantity sold x price
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Margin Of Safety
The amount by which sales exceed the break even point ; total amount of units - the break even point
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Contribution
Selling price - variable price for one product
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Quality
Means to produce a good or service that meets customer expectations
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Quality Control
The checking for quality at the end of the production process; quality inspectors are employed
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Quality Assurance
The checking for quality standards throughout the production process by the employees
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Total Quality Management
The continuous improvement of products and processes by focusing on quality at every stage of production
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Quality Mark
Will be on the product; businesses apply to have it on their product and have to follow certain rules to keep it; ensures the customer of quality
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Factors affecting the location of MANUFACTURING businesses
Production Methods (Job or Flow), Location of Raw Materials, Availability of Labour, Government Influence; Transport
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Factors affecting the location of SERVICE businesses
Location of customers, technology, Availability of Labour, location of other businesses, rent
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Factors affecting the location of RETAILING businesses
Location of shoppers, nearby shops, customer parking, rent, security
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Factors when deciding which country to locate to
New Markets Overseas, Cheaper sources of raw materials, Difficulties with labour and wage costs; availability of government grants; trade and tariff barriers
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Role of Legal Controls
Encourage businesses to set up in areas of high unemployment, discourage firms from locating in overcrowded areas or in areas of natural beauty
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Other cards in this set

Card 2

Front

When many workers and few machines are used to produce goods, often used in developing countries where labour costs are low

Back

Labour-Intensive

Card 3

Front

Many machines and few workers are used to produce goods; often in developed countries where labour costs are high

Back

Preview of the back of card 3

Card 4

Front

How a business can measure efficiency; output measured against the inputs used to create it

Back

Preview of the back of card 4

Card 5

Front

Inventory held to deal with uncertainty in customer demand and deliveries of supplies

Back

Preview of the back of card 5
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