PRODUCTION REVISION QUESTIONS PART 3

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Business must keep stock so that they can what?
make their products
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State the main purpose of holding stock
to have enough materials to cover production
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State one thing that stock includes
Raw materials bought from suppliers
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State one thing that stock includes
Work in progress
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State one thing that stock includes
finished goods
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State another main purpose of holding stock
to cover shortages of supply i.e. buy in enough stock just in case it becomes difficult to buy in the future
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State what it means if Businesses are holding too much stock
Stock is expensive to keep: Storage, insurance, deterioration, handling costs, can get damaged, go out of date
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State what it means if Businesses are holding too much stock
Occupies space in the premises
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State what it means if Businesses are holding too much stock
It ties up the businesses money which could be spent elsewhere
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State what it means if Businesses are holding too much stock
May not sell all of the stock
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State what it means if Businesses are holding too much stock
Take advantage of bulk purchases
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State what it means if Businesses are holding too much stock
Some stock might get stolen from the warehouse
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State what it means if Businesses are holding too little stock
Business may run out of stock so it can't make any more products
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State what it means if Businesses are holding too little stock
Business may not be able to cope with unexpected increases in demand
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State what it means if Businesses are holding too little stock
If deliveries are late the firm may need to halt production
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State what it means if Businesses are holding too little stock
Will not gain discount for bulk purchase
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State what it means if Businesses are holding too little stock
Higher admin costs, as business needs to place more orders
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On a traditional stock control diagram What is the re-order level?
the level of stock where new supplies are ordered
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On a traditional stock control diagram What is the re-order quantity?
amount re-ordered
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On a traditional stock control diagram What is the buffer stock?
safety stock in case of a sudden increase in demand or supply failure
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On a traditional stock control diagram What is the lead time?
the time between ordering supplies and the supplies arriving. Depends on: number and quality og suppliers and the nature of the product
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On a traditional stock control diagram What is the stock out?
the firm runs out of stock e.g.due to an unexpected increase in demand or failure of suppliers to deliver
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State one reason why the traditional stock control diagram is a good method
It makes sure that you keep some stock in reserve so that the business shouldn't run out
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State one reason why the traditional stock control diagram is a good method
It sets a limit on how much stock you hold so you shouldn't have too many of the problems from holding too much stock
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State one reason why the traditional stock control diagram is a good method
sensible and easy for a business to follow
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State one reason why the traditional stock control diagram is flawed
the business still needs to keep lots of stock on the premises and this is expensive
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What is the name of a new method of stock control?
Just In Time (JIT)
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State a feature of Just in Time
J.I.T stock control aims to minimise stock levels by ordering stocks at short notice only when they are needed
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State a feature of Just in Time
this involves a very close links with suppliers
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State a feature of Just in Time
Suppliers often relocate so they are closer for deliveries
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State a feature of Just in Time
Suppliers must see themselves as part of the production team
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How does Just in Time work?
Customer places order with business
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How does Just in Time work?
Business orders in parts from suppliers
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How does Just in Time work?
Product is produced to meet customer order
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How does Just in Time work?
Product is ready for customer within the time frame
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State an advantage of Just in Time
No need to hold large amounts of stock
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State an advantage of Just in Time
Reduction in warehousing costs
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State an advantage of Just in Time
Reduction in other costs: handling, insurance, ordering, deterioration and theft
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State an advantage of Just in Time
Little wastage as orders can be matched with demand
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State an advantage of Just in Time
Increased quality- suppliers agree that materials have no defects
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State an advantage of Just in Time
Suppliers guarantee that materials will be delivered quickly
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State an advantage of Just in Time
Suppliers can be charged if they fail to meet a standard
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State a disadvantage of Just in Time
Rely too heavily on the supplier
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State a disadvantage of Just in Time
Company not wholly in control of its production
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State a disadvantage of Just in Time
If the supplier is late or fails to deliver then the business has real problems as it will run out of stock and production may have to stop
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State a disadvantage of Just in Time
Vulnerable if quality is not there
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What is lean production for a business?
Lean production tries to make the business "fitter"
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What is the aim of lean production?
is to produce more by using less, by reducing all forms of waste
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How does a business become more lean?
Lean production uses JIT stock control so the business doesn't need to keep lots of stock on the premises
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How does a business become more lean?
Lean production uses Kaizen. Lean production businesses are constantly looking for ways to increase production levels and efficiency
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How does a business become more lean?
Managers will look at how space is being used in the factory
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How does a business become more lean?
Managers will look at how many employees they need in each section
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What does Kaizen mean?
Kaizen is a japanese word meaning continuous improvement
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State a benefit of lean production
the business becomes more efficient
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State a benefit of lean production
production levels increase
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State a benefit of lean production
reduces the businesses costs
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What is economies of scale?
is a business way of saying the benefits of being big
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What is the Technical Economies?
A business saves on production costs by being able to afford better machinery e.g. Robotics to make the goods faster and cheaper
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What is the Managerial Economies?
A business can employ specialist managers who will improve efficiency by finding better ways of doing things
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What is the Financial Economies?
A large business is more likely to be able to borrow larger sums of money and negotiate a lower rate of interest
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What is the Risk-bearing Economies?
A large business will have a range of products so that it doesn't put all its eggs in one basket
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What is the Purchasing Economies?
A large business will get discounts from its suppliers for buying in bulk
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What is the Marketing Economies?
A large business can afford large scale advertising but also will be able to negotiate cheaper rates
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What is the benefit of economies of scale?
By reducing its average costs the business is able to sell its product cheaper than its competitors. If it chooses to it could leave its selling price alone and enjoy higher profit margins
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What is the diseconomies of scale?
If the business grows too fast or becomes too big to be managed efficiently average costs begin to increase
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State one reason why diseconomies of scale happen
More difficult to control: as the business grows it's harder for the management to supervise staff and to make sure that everyone is working together
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State one reason why diseconomies of scale happen
Poor communication: as the business expands the chain of command gets longer. There are more layers in the hierarchy and messages can become distorted
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State one reason why diseconomies of scale happen
Staff motivation falls: workers often feel more isolated and less appreciated in a larger business and so their loyality and motivation diminishes. It's harder for managers to stay in day to day contact with workers builds up a good team environment
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State a factor to decide the size for the business
The size of the market: a small market is likely to be supplied by small firms but a large market gives the business the opportunity to become a large business
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State a factor to decide the size for the business
The amount of capital needed: some businesses need lots of money to set up
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State a factor to decide the size for the business
The motives of the owners: growing bigger might mean taking on a partner or becoming a company. The owners might not want to do this
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Card 2

Front

State the main purpose of holding stock

Back

to have enough materials to cover production

Card 3

Front

State one thing that stock includes

Back

Preview of the front of card 3

Card 4

Front

State one thing that stock includes

Back

Preview of the front of card 4

Card 5

Front

State one thing that stock includes

Back

Preview of the front of card 5
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