Operations: key terms, formulas and examples
Operations turn inputs into outputs. Find the bottleneck, cut waste with lean methods, outsource non-core work and use economies of scale as volume grows.
Example
If packing handles 50 orders an hour and other steps 80, output is 50.
Takeaway
Improve the slowest step first; speeding up others changes nothing.
Key terms
- Bottleneck
- The step that limits a whole process's speed.
- Outsourcing
- Hiring outside firms to do part of the work.
- Economies of scale
- Average cost per unit falls as output grows.
- Lean manufacturing
- Cutting waste in production while keeping quality and value.
- Capacity planning
- Deciding how much output a business can handle.
- Standard operating procedure
- A step-by-step guide for routine tasks.
- Process mapping
- Drawing the steps of a workflow.
- Waste reduction
- Cutting activities that add no value.
Formulas
Inventory turnoverCOGS ÷ I
Economic order quantity (EOQ)√(2 × D × S ÷ H)
Reorder pointd × L + SS
Safety stock(Max − Avg) × L
Capacity utilizationA ÷ C × 100
Production yieldG ÷ T × 100
Throughput (Little's law)WIP ÷ CT
Cost per hireC ÷ N
Absenteeism rateA ÷ (E × W) × 100
ProductivityO ÷ H
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