2.3 Making Operational Decisions (Edexcel GCSE Business): Flashcards
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Define production.
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Define production.
Production is the transformation of resources (raw materials, components) into finished goods or services.
What are the three main methods of production?
Job, batch and flow production.
Define job production.
Job production is making one product at a time, as ordered by the customer.
Define flow production.
Flow production is the continuous manufacturing of standardised products, usually on a production line.
Define batch production.
Batch production is making groups of the same product together as a batch (e.g. 1,000 muffins).
Give one advantage of flow production.
Low unit costs from economies of scale, rapid production, and high automation.
True or False?
Job production is well suited to producing large volumes of identical products cheaply.
False.
Flow production suits high-volume identical products; job production is slow with high labour costs.
Job production makes one product at a time, so it tends to have high costs.
Job production makes one product at a time, so it tends to have high labour costs.
Name two factors that influence the method of production a business chooses.
The level of output, the nature of the product, whether it is standardised or customised, and the level of automation.
What is meant by 'flexibility' in production?
How easily a business can switch machinery to make different products, known as retooling.
How has 3D printing improved flexibility in production?
A digital design is uploaded and printed with minimal labour costs, allowing customised products and small runs.
3D printing reduces manufacturing costs because there is no need for expensive .
3D printing reduces manufacturing costs because there is no need for expensive tooling.
True or False?
3D printing usually results in longer lead times than traditional manufacturing.
False.
3D printing has minimal lead times, letting businesses bring products to market faster.
Define buffer stock.
Buffer stock is the minimum stock level — the lowest level to which a business will let its stock fall.
Define lead time.
Lead time is the length of time between stock being ordered from a supplier and it being delivered.
Define reorder level.
The reorder level is the stock level at which a business places a new order with its supplier.
On a bar gate stock graph, what does the maximum stock level show?
The most stock a business is able to hold in normal circumstances.
How is the reorder quantity calculated?
Reorder quantity = maximum stock level − minimum stock level.
True or False?
On a bar gate stock graph, a delivery of new stock is shown by a sharp upward line.
True.
As stock is used up the line slopes down; when an order is delivered it shoots up.
On a bar gate stock graph, as stock is used up the stock line slopes .
On a bar gate stock graph, as stock is used up the stock line slopes downwards.
Name three factors that influence how a business sources raw materials.
Quality, delivery, availability, cost, and trust (supplier reliability).
Define just-in-time (JIT) stock management.
JIT is when raw materials are not stored onsite but ordered and delivered just in time to be used.
Give one advantage of JIT stock management.
It minimises stockholding costs, improves cash flow, and frees up storage space.
Give one disadvantage of JIT stock management.
No bulk-buying economies, higher admin costs, and unreliable suppliers can halt production.
With JIT, an supplier who delivers late can quickly halt production.
With JIT, an unreliable supplier who delivers late can quickly halt production.
True or False?
JIT stock management ties up a lot of money in stock held onsite.
False.
JIT improves cash flow because materials are not stored onsite, so money is not tied up in stock.
Why is trust in a supplier important in procurement?
Businesses need reliable suppliers who deliver quality materials on time at a reasonable cost.
What is meant by 'quality' in business?
The characteristics and features of a product that satisfy the needs of customers.
Define quality control.
Quality control is inspecting the quality of output at the end of the production process.
Define quality assurance.
Quality assurance is inspecting quality throughout the production process.
What is the main difference between quality control and quality assurance?
Quality control checks output at the end; quality assurance checks quality throughout the process.
Give one advantage of quality control.
Quality specialists check standards, and it is an inexpensive and simple way to check output is fit for purpose.
Give one disadvantage of quality control.
Rejecting finished goods wastes resources, and there is little focus on the cause of defects.
With quality assurance, defects can be spotted early so products can be rather than rejected.
With quality assurance, defects can be spotted early so products can be reworked rather than rejected.
True or False?
Quality assurance focuses on finding the cause of defects to prevent them in future.
True.
Quality assurance focuses on the cause of defects, so future quality issues can be prevented.
How can high quality give a business a competitive advantage?
It can be a USP in promotion, help undercut rivals on price, and ease expansion into new markets.
A preventative approach using quality assurance is likely to lower a business's costs.
A preventative approach using quality assurance is likely to lower a business's unit costs.
True or False?
Low unit costs from good quality management can let a business reduce its selling price.
True.
Low costs may allow a business to reduce its selling price to compete with or undercut rivals.
How can a strong quality reputation help a business expand?
A quality USP creates a positive reputation, which can ease expansion into new markets.
Define the sales process.
The sales process is the set of steps a company takes to deliver its product to customers.
Name the five steps in the sales process.
1) Gain customer interest, 2) speedy, efficient service, 3) engage the customer, 4) post-sales service, 5) achieve customer loyalty.
How can a business gain customer interest?
Through marketing (advertising, branding, sponsorship) and good product knowledge from salespeople.
What is post-sales service?
Support given after purchase, such as handling complaints, repairs, returns, and warranties.
The Cambridge Satchel Company offers a lifetime repair on its leather products as post-sales service.
The Cambridge Satchel Company offers a lifetime repair guarantee on its leather products as post-sales service.
Why is achieving customer loyalty important?
It leads to repeat sales and valuable word-of-mouth reviews.
True or False?
Engaging the customer only matters before a sale, never during it.
False.
Engaging the customer during the transaction matters too — e.g. estate agents give regular updates while customers wait.
Why is good customer service important to a business?
It builds customer loyalty, which drives repeat purchases and helps reduce marketing costs.
Define a loyalty card.
A loyalty card rewards customers with discounts or points for frequent purchases.
The online retailer is well known for its customer service, offering free shipping and 24/7 support.
The online retailer Zappos is well known for its customer service, offering free shipping and 24/7 support.
True or False?
A positive customer service experience makes customers more likely to return and recommend a business.
True.
Customers with a positive experience are more likely to return and recommend the business.
Give a real example of a loyalty scheme.
Sephora's 'Beauty Insider' lets members earn points on purchases to redeem for products.
How does a saver scheme encourage customer loyalty?
It offers discounts or special pricing for customers who save with the business — e.g. Sainsbury's Christmas savings scheme.
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