8.13 Key Terms
Key Terms
- Bottleneck: The slowest step in each process or the slowest process in a system.
- Break-Even Analysis: determines the point at which the total revenue from an alternative equals the total costs associated with implementing and operating that alternative.
- Capacity refers to a system’s inherent potential to produce goods or deliver services within a specified time frame.
- Design capacity: Refers to the maximum designed capacity or output rate.
- Economic considerations: Consider the cost, useful life, compatibility, and revenue for each alternative.
- Effective capacity: This is the design capacity minus personal and other allowances.
- Efficiency is a measure of how effectively the available effective capacity is being utilized.
- Following capacity: Where companies wait for demand increases before expanding capabilities.
- Leading capacity: Where capacity is increased to meet expected demand.
- Net Present Value (NPV): discounts the future cash flows of an alternative to their present value, accounting for the time value of money
- Non-economic considerations: Include public opinion, employee reactions, and community pressure.
- Payback Period: calculates the time required for the cumulative cash inflows from an alternative to equal the initial investment.
- Sequential process: Any process with several steps, one after another.
- Tracking capacity: This adds incremental capacity over time to meet demand.
- Utilization: quantifies the extent to which the maximum design capacity is being leveraged
“4.13 Key Terms” from Fundamentals of Operations Management by Azim Abbas and Seyed Goosheh is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.
