Transformation: the conversion of inputs (resources) into outputs (goods or services), both physical (goods) and intellectual (intangible).

Value can be added through:

• Physical altering of the physical inputs
• Changes to a service
• Transportation of goods or services
• Giving customers a better understanding of the good or service

Volume: quantity (how much to make). Typically, the higher the volume means the lower the costs as economies of scale allows goods to be produced more cheaply.

Lead times: the time it takes for an order to be fulfilled from the moment it is made.

Variety: the range of products to be produced. An iIncrease in variety can lead to increased costs.

Variation in demand:

• Can the production process respond to changes in demand?
• Accurate prediction of demand is important and taking influences like seasonal demand into account.
• Increased demand may be hard to meet if suppliers cannot supply quickly, labour is not flexible, skilled or available and adopted machinery cannot adjust to increased capacity quickly.

Visibility: how much customer contact should there be? For example, service businesses will require a higher level of customer interaction.

Extract from Business Studies Stage 6 Syllabus. © 2010 Board of Studies NSW.