4. Operations Management

Business Terms

Productivity

is a way of measuring a businesses’ efficiency

→ production is making of product

→ productivity is how efficiently product is made

→ quantity of output/ quantity of input

Buffer inventory level

is inventory held to deal with uncertainty in customer demand and delivers of supplies

Lean production

various techniques to cut down waste and raise efficiency

→ example: reducing time it takes for product to be developed and become available for sale

Types of waste in Lean production

1. unnecessary transportation

2. unnecessary inventory

3. overproduction of products

4. overprocessing

5. waiting

6. motion

7. defect

Kaizen

is a Japanese term meaning continuous improvement through the elimination of waste

Just-in-time

is a production method that involves reducing or virtually eliminating need to hold inventories of raw materials or unsold inventories of finished product

Flow production

is where large quantities of a product are produced in continuous process.

→ also referred to mass production

Job production

is where a single product is made at a time

Batch production

is where quantity of one product is made and then quantity of another item will be produced

Fixed costs

are costs which do not vary in short run with number of items sold or produced.

→ have to be paid doesn’t matter if business making sales or not.

→ also known as overhead costs

Variable costs

costs which vary directly with number of items sold or produced

Total costs

are fixed costs and variable costs combined

→ fixed + variable costs

Average cost per unit (unit cost)

is total cost of production divided by total output

Economies of scale

are the factors that lead to a reduction in average costs as a business increase in size

Diseconomies of scale

factors that lead to an increase in average costs as a business grows beyond certain size

Break-even point

is level of sales at which total costs = total revenue

→ tot. costs = tot. revenue

Revenue

of a business is the income during a period of time from sale of goods and services

Quality

means to produce a good or service, which meets customer expectations

Quality control

is checking for quality at end of production process

→ uses quality inspectors to find faulty

Quality assurance

is checking for quality standards by employees through production process