Operations Management
4.1 Production of Goods & Services
●​ Production is the act of adding value to resources to create goods or
services.
●​ Productivity is a measure of efficiency that shows how much output is
produced per unit of input.
●​ Labour productivity measures the output produced per worker.
●​ Efficiency is the ability of a business to use its resources in the most
cost-effective way.
●​ Lean production is a production method that minimises waste while
maintaining quality.
●​ Just-in-Time is an inventory system where materials arrive exactly when
they are needed in production.
●​ Kaizen means continuous improvement through small ongoing changes in
production.
●​ Inventory is the stock of goods and materials that a business holds.
●​ Job production is when a product is made individually to meet the specific
requirements of a customer.
●​ Batch production is when groups of identical products are produced
together before moving to the next batch.
●​ Flow production is when products are continuously produced on a
production line.
4.2 Technology and Production of Goods & Services
●​ Technology refers to the use of machines, computers and digital systems
to produce goods and services more efficiently.
●​ Automation is when machines or computers do tasks that would normally
be done by people.
●​ Computer-Aided Manufacture (CAM) is the use of computers to control
and assist production processes.
●​ 3D Printing is a process where digital designs are used to create physical
objects layer by layer using a printer.
●​ Service Sector includes businesses that provide services instead of
physical goods.
●​ Chatbots are computer programs that automatically answer customer
questions online.
4.3 Sustainable Production of Goods and Services
●​ Sustainable production occurs when a business produces goods and
services in ways that do not harm the environment, society, or future
generations.
●​ Renewable energy is energy that comes from natural sources that will not
run out and are constantly replenished by nature.
●​ Recycling means processing waste materials to create new products.
●​ Reusing means using materials again instead of throwing them away.
●​ Environmentally friendly products are products designed to reduce
harm to the environment.
●​ Environmentally friendly packaging is packaging made from materials
that are recyclable, biodegradable, reusable, or compostable.
●​ Greenwashing is when a company pretends to be environmentally friendly
but does not actually follow sustainable practices.
4.4 Costs, Scale of Production & Break-Even Analysis
●​ Fixed costs (FC) are costs that do not change when output changes.
●​ Variable costs (VC) are costs that change directly with the level of output.
●​ Total costs (TC) are the sum of all fixed costs and variable costs.
●​ Average costs (AC) is the cost of producing one unit of output.
●​ Economies of scale occur when increasing production leads to lower
average costs per unit.
●​ Diseconomies of scale occur when increasing production causes
average costs to rise.
●​ Break-even point is the level of sales where total costs equal total
revenue.
●​ Margin of safety is the difference between actual sales and the
break-even level of sales.
●​ Sales revenue is the money received from selling products.