Operations Management

Question 1

What is adding value?

Answer 1

Process of production by which a product becomes of higher value to the purchaser

Question 2

What is chain of production?

Answer 2

Different stages of production through which a good or service surpasses before being sold

Clear way of making products with added value

Question 3

What is unique selling point?

Answer 3

Product/service has a feature/s that can be used to separate it from competitors

Can be as a result of a technological advancement or design features

Question 4

What is labour productivity?

Answer 4

The ratio of a volume measure of output to a given volume measure of input

Question 5

How is productivity measured?

Answer 5

The level of output achieved against a fixed input

Question 6

Determinants of productivity

Answer 6

• Quality of human capital - workers have the necessary skills and knowledge
• Investment in physical capital (machinery, infrastructure etc)
• Business environment - firms need a stable macroeconomic environment (low inflation, steady growth, predictable exchange rates etc)

Question 7

What is full capacity?

Answer 7

All employed factors of production are being used to their optimum level of efficiency
- producing the maximum output for the given level of investment

Question 8

Problems of spare capacity

Answer 8

• Demotivation of staff - overtime not available, threat of redundancy
• Increased costs to firm
• Reduced profits - limit capital for investment and R&D
• Lack of return on investment capital - technology and goods will depreciate

Question 9

Resolving capacity under-utilisation

Answer 9

• Sub-contracting of production - getting someone else to produce the goods for you, reduces risk to the firm
- however, lack of control over production, can increase prices