Production, Operations, Costs, and Location Revision Flashcards

Vocabulary flashcards covering production methods, efficiency, technology, sustainability, costs, economies of scale, break-even analysis, quality management, and location decisions.

Production

The process of combining inputs together to convert them into product outputs.

Level of production

The number of units produced in a given period of time.

Operations management

The management area involved in overseeing the production process, ensuring resources are used productively, producing output to meet consumer demand, and meeting expected quality standards.

Productivity

A measure of how efficiently a business changes inputs into outputs.

Labour productivity

The number of units of output produced for every unit of labour input in a given time period, calculated as $\text{Labour productivity} = \frac{\text{output per period}}{\text{number of employees}}$.

Average cost

The cost of producing a single unit of output, calculated as $\text{Average cost} = \frac{\text{total cost}}{\text{number of units}}$.

Inventory

The different items held by a business, including raw materials and components, work-in-progress, and finished goods.

Work-in-progress

Goods that are not yet finished in the production process.

Lean production

An approach to production focused on minimising waste to decrease costs and increase competitiveness.

Just-in-time (JIT)

An inventory control method where no inventories are held by the business; raw materials arrive just as needed and finished goods are delivered immediately after production.

Kaizen

A Japanese term meaning continuous improvement, where all employees are given the opportunity to suggest improvements to quality or processes.

Job production

A method of production where one item is produced at a time, typically used for unique or custom single items.

Batch production

A method of production where groups of items complete one stage of production together before moving to the next stage.

Flow production

A method of production where products move continuously along a production line to produce a large output of identical, standardised products; also known as mass production.

Automation

A setup where the entire production process uses technology.

Mechanisation

A setup where part of the production process uses technology.

Computer-aided manufacturing (CAM)

The technology where computers directly control machinery and equipment during the manufacturing process.

3D printing

Technology capable of quickly producing prototypes and finished products on demand using materials such as metals, plastic, and rubber.

Sustainability

Reducing the negative environmental impact of business operations.

Fixed costs

Costs that do not change with changes in output, such as rent and managerial salaries.

Variable costs

Costs that change directly with changes in output, such as raw materials.

Total cost

The sum of fixed costs and total variable costs ($\text{Total cost} = \text{fixed costs} + \text{total variable costs}$).

Economies of scale

The drop in average total costs that occurs as the scale of output increases.

Financial economies

A type of economy of scale where larger businesses borrow money more easily and at lower interest rates because banks view them as less risky.

Managerial economies

A type of economy of scale where larger businesses employ specialist managers to improve decision quality and reduce errors.

Marketing economies

A type of economy of scale where average marketing costs fall because total marketing costs rise slower than sales output.

Purchasing economies

A type of economy of scale where large orders result in supplier discounts, lowering cost per unit.

Technical economies

A type of economy of scale where large businesses invest in advanced technology (like CAM) to raise productivity and lower unit costs.

Diseconomies of scale

An increase in average total costs that occurs when output increases beyond optimal capacity ($Q^*$).

Break-even

The output level where total revenue equals total costs ($\text{Total revenue} = \text{total costs}$), resulting in zero profit or loss.

Break-even output

The required production quantity to break even, calculated as $\text{Break-even output} = \frac{\text{fixed costs}}{\text{contribution per unit}}$.

Contribution per unit

The amount each unit sold contributes towards fixed costs, calculated as $\text{Contribution per unit} = \text{selling price per unit} - \text{variable cost per unit}$.

Margin of safety

The difference between actual output and break-even output ($\text{Margin of safety} = \text{actual output} - \text{break-even level of output}$).

Quality

The extent to which a product meets customer expectations and remains free from defects.

Quality control

A method of quality management that involves inspecting samples of products at the end of the production process.

Quality assurance

A method of quality management where products and processes are checked by employees at every stage of production.