Chapter review

week 1 (chapter 15)

• All businesses in the private sector provide goods and services to
customers with the primary objective of earning profit. These goods and
services are the output of a production process.

• PRODUCTION
• It is the process of converting inputs such as land, labour and capital
into saleable goods, for example shoes and cell phones

• PRODUCTIVITY
• is a measure of how efficiently the inputs are changed into output,
• The productivity of labour (workers) is measured as follows

Labour productivity= Total output / number of production workers

• Ways to improving productivity can include :

• training programs
• introducing schemes to motivate workers or
• purchasing new machinery

• The main reason for improving productivity is to reduce unit costs.

Operations management is responsible for the production of goods and
services.
• Functions of Operations management must:

a) use resources in the most cost-effective way

b) produce the required output to meet consumer demand
c) meet the quality standard expected by consumers
INVENTORIES Include

• raw materials and components - these are needed as inputs for

the production process
• work-in-progress- that is part-finished goods that have not yet
completed the production process
• finished goods -ready to be sold or sent out to customers
• Holding inventories adds to a business’s costs, such as:
• Warehousing costs
• Handling costs
• Shrinkage costs
• Obsolescence
• Opportunity cost
• Lean production:
• the production of goods and services with the minimum waste of
resources
• Many businesses use lean production methods in order to
improve their competitiveness
• REASONS OF WASTE:
• Overproduction
• Idle resources
• Transporting goods
• Businesses can use the following lean production techniques:
• Just-in-time inventory control
• Raw materials and components arrive from suppliers just as they are needed by the
production process.

• Kaizen
• Kaizen ls a Japanese term meaning 'continuous improvement`.
• The Kaizen approach gives all workers the opportunity to make suggestions about
how to improve quality or productivity.