Glossary Unit 4

Question 1

Added value

Answer 1

(VALUE ADDED): Value added is the extra amount the customers pay over the cost of the materials and the value added gives a firm a surplus to pay wages, dividends and overheads.
ADDED VALUE = sales revenue – cost of bought in materials, components and services.

Question 2

Adding value

Answer 2

The amount of increased worth of resources by modifying them. Businesses aim to transform inputs into higher value outputs by branding, advertising, packaging combining materials etc. E.g. a potter adds value to a lump of clay by making it into a mug.

Question 3

Buffer level of inventory

Answer 3

The minimum level of stock targeted by a business. The buffer level should be sufficient to cover for sudden increases in demand or unexpected loss of supplies.

Question 4

Capacity

Answer 4

the maximum output a firm can produce using existing resources.

Question 5

Capacity utilisation

Answer 5

The percentage of maximum possible output that is being
produced. A firm producing at its maximum is said to be at full capacity.

Question 6

Capacity utilisation formula

Answer 6

CAPACITY UTILISATION (%) = (ACTUAL OUTPUT IN A SET TIME PERIOD / MAXIMUM POSSIBLE OUTPUT IN THAT TIME PERIOD ) x 100

Question 7

Capital Intensive process

Answer 7

A process where lots of machinery is used compared to labour

Question 8

Dependability

Answer 8

whether a business is punctual in delivering its promises, produces consistent, reliable quality and durable products. A highly dependable organisation is likely to have a better brand image.

Question 9

Efficiency

Answer 9

the extent to which output is maximised from a given quantity of inputs.

Question 10

Flexibility

Answer 10

the ability of an organisation to change its operations in some way.

Question 11

Inventory

Answer 11

stock of raw materials, work-in-progress and finished goods.

Question 12

INVENTORY
CONTROL CHART: ( STOCK CONTROL CHART)

Answer 12

A diagram that is used to register the levels of stock
/inventory over a set time span.

Question 13

JIT

Answer 13

Manufacturing system, which schedules the delivery of stocks immediately before it is needed. This minimises the raw material stock held

Question 14

Kaizen

Answer 14

Continuous improvement. A production philosophy involving small steps of incremental improvement.

Question 15

Labour intensive process

Answer 15

production which uses a high proportion of labour and a relatively small number of machines.

Question 16

Labour productivity

Answer 16

The average output produced by each worker in a given time period.
Output per employee = Total value of output / Total number of employees

Question 17

Lead time

Answer 17

The time taken for a customer request to be fulfilled or the amount of time that elapses between when a process starts and its completion.

Question 18

Lean productivity

Answer 18

Business philosophy to minimise use of resources to achieve a cost advantage. It includes a range of measures such as just-in-time, total quality management, team-working etc.

Question 19

Mass customisation

Answer 19

Offering individually tailored goods or services on a large scale. Large scale production methods are used but each item is tweaked to suit the individual customer. E.g. colour and features on Jaguar Land Rovers.

Question 20

Operational objectives

Answer 20

Specific focused short term targets of the operations department including quality levels, productivity & efficiency (e.g. units per week or employee) unit costs per item, number of items to produce per time period

Question 21

Optimal mix of resources

Answer 21

the best mix of labour and machines to produce the appropriate quality at the lowest cost.

Question 22

Outsourcing

Answer 22

the transfer of activities previously done in-house to be produced by a different business

Question 23

Part time workers

Answer 23

Employees who work for less than the full weekly hours e.g. students who do a Saturday job.

Question 24

Quality

Answer 24

those features of a product or service that allow it to meet the customer requirements e.g. durability, brand image.

Question 25

Quality assurance

Answer 25

A system of agreeing and meeting quality standards There is focus on designing systems that produce consistently good output.

Question 26

Quality control

Answer 26

system that uses inspection as a way of checking quality of products or services by inspecting a sample.

Question 27

Re-order level

Answer 27

the inventory level at which an order is placed for a more stock.

Question 28

Reorder quantity

Answer 28

the actual number of products purchased from a supplier in a
particular order.

Question 29

Supply chain

Answer 29

all the stages of the production process and all the firms that have a
part in producing the product. E.g. cocoa growers, dairy farmer, shippers, paper makers etc. for Cadbury chocolate makers.

Question 30

Temporary worker

Answer 30

Employees who have a fixed term work contract e.g. one year. They are likely to be full time workers.

Question 31

Unit cost

Answer 31

The mean cost of producing one unit. Reducing costs occur when efficiency is improved.

UNIT COST = TOTAL COST OF PRODUCTION / UNITS OF OUTPUT PRODUCED

Question 32

Boston Matrix

Answer 32

A method of analyzing brands in a firm’s product portfolio in
​terms of market share and market growth. Brands are classified as cash cows,
​dogs, question marks and stars