Unit 5.1 Glossary of key terms - Introduction to operations management

Adding value

Adding value

This is the purpose of operations management, namely, to ensure through the production process that the price that customers pay for a product is greater than the costs of producing it.

Capital

As a factor of production, this refers to non-natural (or manufactured) resources used in the production process.

Capital-intensive

Describes an organization that relies on more machinery and equipment to produce its output, rather than labour.

Entrepreneurship

As a factor of production, this refers to the knowledge, skills, and experiences of individuals who have the capability to manage the overall production process.

Factors of production

These are the human, physical, and financial resources needed to produce any good or service. They comprise of land, labour, capital, and enterprise.

Labour

As a factor of production, this refers to human effort used to produce goods and services.

Labour-intensive

Describes an organization that relies more on labour to produce its output, rather than machinery and capital equipment.

Land

As a factor of production, this refers to the natural resources needed to produce goods and services.

Operations management

This is a key function of a business that deals with the management process of creating goods and services that people want to purchase, using the resources that are available.

Production process

Also known as the transformation process, this refers to the operations method of turning inputs into outputs by adding value.

Productivity

This is a measure of a firm’s efficiency level, i.e., how well things are done in the organization. It calculates the rate at which inputs (factors of production) are transformed into outputs (good and services).

Sustainability

This key concept refers to the production methods used to provide goods and services for today’s customers without compromising the provision of products for customers in the future.