Topic 4 of 6 · Form 4
Operations management
Productivity (output per worker); improving efficiency (training, technology, motivation); inventory management (buffer inventory, reorder level, just-in-time); lean production (kaizen, JIT).
Notes for this topic 1 file, in order
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Production of goods and services
Productivity (output per worker); improving efficiency (training, technology, motivation); inventory management (buffer inventory, reorder level, just-in-time); lean production (kaizen, JIT).
Methods of production
Job, batch and flow production; automation and technology.
Costs and scale
Fixed and variable costs, total and average costs; economies and diseconomies of scale; break-even analysis.
Worked example: Fixed costs US$12 000; price US$20; variable cost US$12 per unit. Find the break-even output and the profit at 2 000 units.
Contribution = 8 → break-even = 1 500 units; profit = 2 000 × 8 − 12 000 = US$4 000
Margin of safety = actual output − break-even output.
Quality
Quality control, quality assurance, total quality management (TQM); importance of quality to customers and the business.
Location decisions
Factors affecting location for manufacturing, retail and service businesses (markets, costs, labour, infrastructure, government incentives); locating in other countries.
Check yourself
- What is labour productivity?
- Give one benefit and one risk of just-in-time production.
- Which production method makes bread in batches?
Show answers
- Output per worker in a period of time.
- Benefit: less storage cost and waste; risk: production stops if supplies are late.
- Batch production.
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