Batch production
Producing a limited number of identical products – each item in the batch passes through one stage of production before passing on to the next stage
Benchmarking
Comparing the performance – including quality – of a business with performance standards throughout the industry
Break-even revenue
The amount of revenue needed to cover both fixed and variable costs so that the business breaks even
Break even point of production
The level of output at which total costs equal total revenue
Buffer stocks
The optimum or least-cost quantity of stock to re-order taking into account delivery costs and stock-holding costs
Business process outsourcing (BPO)
A form of outsourcing which uses a third party to take responsibility for certain business functions
Capacity shortage
When the demand for a business’s products exceeds production capacity
Capacity utilisation
The proportion of maximum output capacity currently being achieved
Cell production
Splitting flow production into self-contained groups that are responsible for whole work units
Contribution costing
Costing method that only allocates direct costs to cost/profit centres not overhead costs
Contribution per unit
Selling price of a product less variable costs per unit
Copyright
Legal right to protect and be the sole beneficiary from artistic and literary works
Cost centre
A section of a business, such as a department, to which costs can be allocated or charged
Critical path
The sequence of activities that must be completed on time for the whole project to be completed by the agreed date
Critical path analysis
Planning technique that identifies all tasks in a project, puts them in the correct sequence and allows for the identification of the critical path
Direct costs
These costs can be clearly identified with each unit of production and can be allocated to a cost centre
Economic order quantity (EOQ)
The optimum or least-cost quantity of stock to re-order taking into account delivery costs and stock-holding costs
Excess capacity (spare capacity)
Exists when the current levels of demand are less than the full capacity output of a business
Fixed costs
Costs that do not vary with output in the short run
Flow production
Producing items in a continually moving process
Full capacity
When a business produces at maximum output
Indirect costs (Overheads)
Costs which cannot be identified with a unit of production or allocated accurately to a cost centre
Innovation
The practical application of new inventions into marketable products
Intellectual property
Refers to creations of the mind such as inventions, literary and artistic works and symbols, names, images and designs used in business
Intellectual property rights
Legal property rights over the possession and use of intellectual property
Internal customers
People within the organisation who depend upon the quality of work being done by others
Invention
The formulation or discovery of new ideas for products or processes
ISO 9000
Internationally recognised certificate that acknowledges the existence of a quality procedure that meets certain conditions
Job production
Producing a one-off item specially designed for the customer
Just in Case (JIC)
Holding high stock levels ‘just in case’ there is a production problem or an unexpected upsurge in demand
Just in Time
Stock control method that aims to avoid holding stocks by requiring supplies to arrive just as they are needed in production and completed products are produced to order
Kaizen
Japanese term meaning continuous improvement
Lean production
Producing goods and services with the minimum of wasted resources while maintaining high quality
Lead time
The normal time taken between ordering new stocks and their delivery
Margin of safety
The amount by which the sales level exceeds the break-even level of output
Marginal costs
The extra cost of producing one more unit of output
Mass customisation
The use of flexible computer-aided production systems to produce items to meet individual customers’ requirements at mass production cost levels
Mass production
Producing large quantities of a standardised product
Multinational
A business with operations or production bases in more than one country
Network diagram
The diagram used in critical path analysis that shows the logical sequence of activities and the logical dependencies between them
Offshoring
The relocation of a business process done in one country to the same or another company in another country
Optimal location
A business location that gives the best combination of quantitative and qualitative factors
Outsourcing (or subcontracting)
Using another business to undertake a part of the production process rather than doing it within the business using the firm’s own employees.
Patent
Legal right to be the sole producer and seller of an invention for a certain period of time
Process innovation
New methods of manufacturing or service provision that offers important benefits,
Product innovation
New and marketable products
Profit centre
A section of a business to which both costs and revenues can be allocated
Project
A specific and temporary activity with a start and end date, clear goals, defined responsibilities and a budget
Project management
Using modern management techniques to carry out and complete a project from start to finish in order to achieve pre-set targets of quality, time and cost
Qualitative factors
Non-measurable factors that may influence business decisions
Quantitative factors
These are measurable in financial terms and will have a direct impact on either the costs of a site or the revenues from it and its profitability
Quality assurance
This is a system of agreeing and meeting quality standards at each stage of production to ensure consumer satisfaction
Quality control
This is based on inspection of the product or a sample of products
Quality product
A good or service that meets customers’ expectations and is therefore ‘fit for purpose’
Quality standards
The expectations of customers expressed in terms of the minimum acceptable production or service standards
Re-order quantity
The number of units ordered each time
Re-order stock level
The level of stocks that will trigger a new order to be sent to the supplier
Research and development
The scientific research and technical development of new products and processes
Revenue
The income received from the sale of a product
Semi-variable costs
Costs that have both a fixed cost and a variable cost element
Stock (inventory)
Materials and goods required to allow for the production of and supply of products to the customer
Total contribution
Total revenue from sale of a product less total variable costs of producing it
Total quality management
An approach to quality that aims to involve all employees in the quality improvement process
Total revenue
Total income from the sale of all units of the product = quantity × price
Trade barriers
Taxes (tariffs) or other limitations on the free international movement of goods and services
Trademark
A distinctive name, symbol, motto or design that identifies a business or its products
Variable costs
Costs that vary with output
Zero defects
The aim of achieving perfect products every time