Value Added Concepts in Economics
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Questions and Answers

What are the major managerial decisions throughout the life cycle of a production system?

Major managerial decisions include product design, process selection, location and layout planning, and production planning.

Why is demand forecasting important in operations management?

Demand forecasting helps businesses anticipate customer needs, optimize inventory levels, and improve production planning.

Describe the impact of location and layout on production systems.

The location affects logistics, costs, and accessibility, while layout influences workflow efficiency and worker productivity.

What is the purpose of Aggregate Production Planning (APP)?

<p>The purpose of APP is to develop a production schedule that aligns production output with anticipated demand over a specific period.</p> Signup and view all the answers

Explain the concept of Inventory and Material Requirements Planning (MRP).

<p>Inventory and MRP is a system that helps manage inventory levels and schedule production to meet demand accurately.</p> Signup and view all the answers

What are the primary inputs in a production system?

<p>Land, Labor, and Capital.</p> Signup and view all the answers

Define the transformation process in the context of a production system.

<p>The transformation process involves converting inputs into outputs, which include goods and services.</p> Signup and view all the answers

What role does feedback play in a production system?

<p>Feedback is used to control and improve the production process, ensuring goals are met.</p> Signup and view all the answers

List three types of design issues that arise in production systems.

<p>Business Design, Product Design, and Schedule Design.</p> Signup and view all the answers

What is the importance of production objectives in a production system?

<p>Production objectives guide the system toward profitability, cost efficiency, and quality of output.</p> Signup and view all the answers

What is a production system?

<p>A production system is a deliberately designed and organized arrangement of material, energy, and information used by humans to manufacture certain products or services for consumer needs.</p> Signup and view all the answers

How does production management differ from operations management?

<p>Production management focuses on the administration of activities concerning the creation of goods, while operations management involves managing both production of goods and provision of services.</p> Signup and view all the answers

How does low inventory relate to production efficiency?

<p>Low inventory can lead to high efficiency by reducing carrying costs and minimizing waste.</p> Signup and view all the answers

What are the five basic elements of a production system?

<p>The five basic elements are input vector, output vector, processing, management system, and feedback.</p> Signup and view all the answers

Explain the concept of throughput in relation to production systems.

<p>Throughput refers to the rate at which products are produced and processed in a system.</p> Signup and view all the answers

What is the basic objective of production management?

<p>The basic objective of production management is to provide the right quality goods in the right quantity at the right time and best price.</p> Signup and view all the answers

What does high customer service imply in a production context?

<p>High customer service implies the ability to meet customer needs promptly and satisfactorily.</p> Signup and view all the answers

Identify two factors that can lead to variability in production systems.

<p>Unpredictable demand and machine breakdowns.</p> Signup and view all the answers

What does the term 'Value-Added-Process' refer to?

<p>'Value-Added-Process' refers to the difference between the cost of inputs and the value or price of outputs.</p> Signup and view all the answers

In what types of firms would you typically find production management?

<p>Production management is typically found in firms where the production of goods is undertaken, such as manufacturing companies.</p> Signup and view all the answers

What is meant by 'cycle times' in production systems?

<p>Cycle times refer to the time taken to complete one cycle of production from start to finish.</p> Signup and view all the answers

What type of decisions does a production manager have to make?

<p>A production manager has to make decisions regarding product design, quality, quantity, and cost of the product manufactured.</p> Signup and view all the answers

Which areas comprise a company's operation?

<p>A company's operations comprise production and technical area, organizational and administrative area, financial and economic area, and legal area.</p> Signup and view all the answers

What is Operations Management (OM) and what are its primary responsibilities?

<p>OM is the business function responsible for planning, coordinating, and controlling resources to produce products and services.</p> Signup and view all the answers

Identify two primary roles of Operations Management in a business.

<p>The two primary roles are transforming inputs into outputs and adding value to the production process.</p> Signup and view all the answers

What are the main differences between service operations and manufacturing operations?

<p>Manufacturing operations produce tangible products and involve higher customer contact, while service operations produce intangible products and typically have longer response times.</p> Signup and view all the answers

How do organizations ensure alignment between strategic and tactical decisions in Operations Management?

<p>Strategic decisions set the long-term direction of the organization, while tactical decisions focus on day-to-day operations, requiring both to align for effective management.</p> Signup and view all the answers

What is the significance of efficiency in the transformation process of OM?

<p>Efficiency refers to performing activities well at the least possible cost, which is crucial for maximizing resources in the transformation process.</p> Signup and view all the answers

Explain what is meant by 'value added' in operations management.

<p>Value added is the net increase in value between the output product and the input materials used in production.</p> Signup and view all the answers

What trends contribute to the growth of the service sector in the economy?

<p>Trends include global competitiveness, demands for higher quality, and significant technological changes.</p> Signup and view all the answers

Describe the characteristics of quasi-manufacturing organizations.

<p>Quasi-manufacturing organizations have low customer contact and are capital intensive, blending attributes of both service and manufacturing sectors.</p> Signup and view all the answers

What types of decisions do operations managers make, and how do they differ?

<p>Operations managers make strategic decisions that are broad and long-term, and tactical decisions that are specific and daily operational in nature.</p> Signup and view all the answers

In what ways do manufacturers and service providers share similarities?

<p>Both industries utilize technology, face quality and productivity issues, and must forecast demand.</p> Signup and view all the answers

Study Notes

Value Added Concept

  • Value added refers to the difference between the cost of inputs and the value or price of outputs in a production system.

Inputs and Outputs

  • Inputs include land, labor, and capital, which are transformed through processes to produce goods (tangible products) and services (intangible products).
  • Outputs can be goods or services depending on the production system's nature.

Production System Components

  • Both manufacturing and service systems operate under a production system framework.
  • A production system consists of five basic elements: input vector, output vector, processing, management system, and feedback.

Transformation Process

  • Operations Management (OM) focuses on transforming inputs into outputs while enhancing value at each stage of the production process.
  • Efficiency is crucial in the transformation process, aiming to perform activities well at the lowest possible cost.

Objectives of Production

  • High profitability and sales are primary objectives, balanced with low costs and enhanced product quality.
  • Additional objectives include maintaining high utilization and throughput, along with managing inventory levels and response times.

Types of Production Systems

  • Operations Management encompasses various systems impacting product design, scheduling, distribution, and service delivery.
  • Complex design issues arise in the production system affecting efficiency and effectiveness.

Manufacturing vs. Service Operations

  • Manufacturers produce tangible products, which can be inventoried, whereas services involve intangible products with low inventory capabilities.
  • Service operations typically have longer response times and high customer contact compared to manufacturing.

Similarities Between Service and Manufacturing

  • Both sectors utilize technology and face quality, productivity, and demand forecasting challenges.
  • They must manage capacity, layout, location issues, and address scheduling and staffing.

Growth of the Service Sector

  • The service sector is rapidly growing, accounting for 50-80% of non-farm jobs.
  • Global competitiveness and technological advancements are driving this growth alongside demands for higher quality services.

Decision-Making in Operations Management

  • OM decisions can be categorized into strategic (broad, long-term) and tactical (specific, day-to-day).
  • Both types of decisions must align to optimally direct resources and meet organizational goals.

Defining Operations Management

  • Operations Management is responsible for planning, coordinating, and controlling resources necessary for producing goods and services.
  • It applies to all organizations, whether profit-oriented or not-for-profit, emphasizing its foundational role in business.

Production Systems Overview

  • A production system is a structured arrangement designed to manufacture goods or provide services to meet consumer needs.
  • It incorporates economic decision-making tailored to several operational areas such as marketing, production, sales, and technical processes.

Key Differences: Production vs. Operations Management

  • Production management focuses on the creation and transformation of goods, while operations management encompasses both goods production and services delivery.
  • Objectives differ; production management aims for quality at an optimal cost, while operations management seeks to utilize resources effectively to satisfy customer demands.

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Description

Explore the fundamental concepts of value addition in economics with this quiz. Understand how inputs are transformed into outputs through the production process, including land, labor, and capital. Dive into the feedback mechanisms that control this transformation.

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