2.3 Flashcards
Define production
Combining factors of production to produce goods and services
Define productivity
How efficiently resources are being used
Formula for labour productivity
Output / number of employees
Factors influencing productivity
Capital (machinery)
Humans
Competition
Wages
Productivity impacts
Economic growth positively as it:
Increases goods
Cuts costs
High standard of living
Employment negatively as it:
Causes structural u/e
Capital intensive
Higher proportion of capital to labour
Labour intensive
Higher proportion of labour to machinery
Issues with capital intensive
Tools become obsolete
No personal touch
Machine error
Expensive
Issues with labour intensive
Skills limited Cost of training Absenteeism/turnover Human error L/T more expensive Less production output
Capacity
The output a firm can produce with given resources
Capacity utilisation
What proportion of the theoretical maximum output is actually being created
Formula for capacity utilisation
Current output / max possible output x100
Under utilisation of capacity : affect on average costs
Ac rise because output is lower and so costs are spread over a lower number of products
Over utilisation of capacity: affect on average costs
Higher due to defects and breakages from over working
Ways to improve capacity utilisation
Extend product range
Marketing
Rent excess capacity to other businesses
Outsource production
Recruit more workers
Define efficiency
Organising production so waste and costs are low
What is lean production
A system of production that tries to minimise waste and cut costs at each stage of production
Positives of quality
Competitive advantage Higher prices Less waste Reduced costs Brand image
What’s tqm
Total quality management
Every employee is involved in ensuring quality is high, waste is low.
Ads and disads of tqm
Ads: improved products, customer loyalty, competitive advantage, reduced costs
Disads: takes time, money for training, inefficient if everyone isn’t on board
Kaizen - what is it
Japanese for continuous improvement
At every stage an improvement can be made
What’s jit
Just in time
A stock control system that sees raw materials arrive just in time for manufacture
Ads and disads of jit
Ads: no warehouse costs, no perished goods, flexible In a change to demand
Disads: reliability on supplier, no purchasing economies of scale
How does lean production cause a competitive advantage
More customer satisfaction –> reduced costs of production —> lower waste
