Intellectual Capital. the Collective Knowledge of the Individuals Working in an Organisation

UNIT 4 Key Terms

Intellectual Capital. The collective knowledge of the individuals working in an organisation.

Effectiveness. How well the product or service offered by a business meets customers’ requirements.

Efficiency. A measure of the ratio of inputs to outputs. To improve efficiency, business’s must either produce the same output using less inputs, or produce more outputs using the same inputs.

Productivity. The rate at which products are produced in relation to the inputs. Labour Productivity is measured as output per time period/number of workers. Capital productivity is output per time period/amount of capital used.

Value added. The difference between the price of the final product and the cost of the inputs.

Capital Intensive. In production, businesses use relatively more machinery than labour. For example in car manufacturing companies.

Labour Intensive. In production, businesses use relatively more labour than machinery. For example, in job production enterprises.

Operations Management. The design and implementation of systems to transform inputs into outputs (i.e. manufacturing). Includes things such as choosing production methods, selecting suppliers etc.

Computer-Aided Design. The use of computer software to design products. Often used in fashion and car industries. CAD helps minimise wastage and improve efficiency of products.

Computer-Aided Manufacture. The use of computer hardware to assist in the manufacturing of products. Used in capital intensive businesses, such as car manufacturers (robotic arms). Helps reduce labour costs.

Volume flexibility. The ability of a business to increase or decrease the volume of products produced in response to changes in demand without losing efficiency or effectiveness.

Delivery Time flexibility. The ability of businesses to deliver products with a short lead time if required by customers.

Specificationflexibility. The ability of businesses to produce products to match different customer specifications (seen most in job production).

Process Innovation. The implementation of new or significantly improved delivery or production methods. For example changing to cell production to improve efficiency.

Job Production. Producing one-off goods which meet individual customer needs. One product is finished before the next one is started. For example, bespoke suits or wedding cakes.

Batch Production. Producing goods in batches (groups of identical products). Each batch goes through each stage of the production process together (e.g. bolillos). Batches can be made to different specifications (e.g. chocolate doughnuts, then strawberry doughnuts).

Flow Production. Items are made on a continuous production line. When one task is finished, the product moves directly onto the next stage. An example is a car production line.

Mass Customisation. A technique which combines the benefits of mass production with the ability to produce personalised products. Often requires advanced machinery.

Economies of Scale. Falling average costs associated with increases in the level of production. Can be internal or external. Examples include purchasing economies, technical economies and marketing economies.

Purchasing (bulk-buying) economies of scale. Falling average costs with higher production because businesses can buy raw materials in large quantities, thus gaining discounts.

Technical economies of scale. Businesses’s average costs fall with higher production because they are able to use machinery more efficiently, more purchase more efficient machinery/equipment.

Marketing economies of scale. When businesses increase in size, the marketing costs don’t increase at the same rate, thus businesses average costs fall.

Managerial economies of scale. Larger businesses can employ specialist managers in different departments, and these managers can drive costs down.

Internal economies of scale. Lower average costs resulting from increases in the size of the business (As opposed to the industry).

External economies of scale. Lower average costs resulting from increases in the size of the industry (as opposed to the business). These can be marketing, lower labour costs, proximity to suppliers, infrastructure.

Inventory. The raw materials, works-in-progress and finished products held by a business at any point in time.

Buffer Inventory. The minimum stock level held by business at any point in time.

Reorder level. The level of stock at which businesses place an order from a supplier to deliver more stock.

Lead time. The amount of time between a business placing an order and that order being delivered from suppliers.

JIT. Just in time production. A ‘pull’ system of production in which products are only produced once the order is placed. Buffer stock is kept to a minimum, and it relies on efficient production, good relations with suppliers and accurate forecasting of demand.

Industrial Inertia. When a business decides to stay in the same location despite the fact that the original factors that led to it locating there no longer apply.

Unit 4 Factors

I am able to name:

-3 advantages and 3 disadvantages of capital intensive production, labour intensive production, job production, batch production, flow production, CAD and CAM.

-2 problems of switching between each pair of production methods.

-A variety of a) geographical, b) demographic, c) legal, d) political, e) resource-related, f) infrastructure related, and g) marketing related factors that affect the location of a business.

-Differences between local, regional, national and international location decisions.

-3 benefits and 6 costs of holding large levels of inventory.

-3 benefits and 3 costs of JIT inventory.

-4 benefits and 4 costs of operating on a large scale (economies of scale only counts as 1).

-2 benefits and 2 costs of having flexible production (in terms of delivery, specification and quantity).

I can draw and interpret:

-An Inventory Control Chart

I can analyse everything in the World.