inventory

• what is capacity

  maximum total level of output or production.
• what does capacity do

  predict future sales and profit levels, maximise productivity and how much waste you have
• what is capacity utilisation

  % of a firms total possible production level that is being reached
• What is "Labour productivity" a measure of?

  Labor needed to produce output
• How is labor productivity calculated?

  Output divided by number of employees
• What does "Efficiency" refer to in a business?

  How effectively a company generates products
• What is "Outsourcing" in business?

  Using external businesses for production
• what is added value used for

  used to describe the difference between the cost of purchasing raw materials and the prices theyre sold at
• what is added value

  the value added to raw materials to increase its worth and selling price
• 2 factors that can impact capacity utilisation

  • demand

  • efficiency of operating
• why is reducing waste important

  less waste means lower costs which is essential for any business
• what is over production

  making more than needed- leads to excess stock
• what is JIT

  just in time production: stock is ordered once order is made by customer, stock levels kept to a minimum
• what is capital intensive production

  production that relies on using capital resources
• what is labour intensive production

  production that relies on using labour resources
• a benefit and drawback of capital intensive

  • better quality and more speed as well as low labour costs

  • significant investment plus any repair costs
• a benefit and drawback of labour intensive

  • labour at the heart of production can help continuous improvement

  • higher costs and greater risk of problems with employees
• what are inventories

  raw materials, work in progress and finished goods help by a firm to enable production and meet customer demand
• why do businesses hold inventory

  pre caution against delays from suppliers, allow efficient production, provide a buffer between production processes
• elements in an inventory control chart

  • maximum level

  • re order level

  • lead time

  • minimum inventory level

  • buffer stock
• what is buffer inventory

  amount of inventory held as a contingency incase of unexpected orders and no delays caused by running out
• What is buffer inventory?

  An amount of inventory held as a contingency
• Why is buffer inventory important for a business?

  It covers unexpected orders and delays
• How does buffer inventory help during last-minute orders?

  It ensures enough stock is available
• What happens if a business does not maintain buffer inventory?

  They may run out of stock during demand spikes
• What are non-current assets?

  Assets not easily converted to cash
• Why are non-current assets important for a company?

  They represent long-term investments for the company
• What does the re-order level indicate for a business?

  It triggers re-ordering inventory at a specific point
• What are the implications of not managing non-current assets effectively?

  • Reduced long-term profitability
  • Increased operational inefficiencies
  • Potential cash flow issues