2.4

Question 1

What is labour intensive production?

Answer 1

High levels of human input in the production process

• highly specialist, personal, service industry, high level of skill required

Question 2

What is capital intensive production?

Answer 2

High level of capital investment e.g. use of machinery

• mass production, standardisation, efficient production

The balance of labour intensive and capital intensive production depends on the nature of the product and the target market.

Question 3

Productivity?

Answer 3

Amount of output that can be produced with a given input of resources in a specified time period.

Maximising productivity means getting the most out of the resources available to the business.

Question 4

Labour productivity equation?

Answer 4

Total output (in a time period) / Number of employees

Question 5

Factors affecting productivity?

Answer 5

Specialisation - if an employee becomes a specialist in a specific role
Capital intensity - introducing automation to increase output
Working practices - may include the layout of production, team working, quality management
Motivating workers - happy workers work harder and faster
Education and training - to improve the skills of the workforce

Question 6

Difficulties when increasing labour productivity?

Answer 6

Sometimes a trade-off

✔️Increasing productivity can lead to increased competitiveness as cost per unit is reduced, allowing a business to increase it’s profit margin or offer customers a more competitive price.

❌ Although increasing output may improve productivity and unit costs in the short term, high levels of output can lead to stress and burnout. This leads to a compromise on quality, customer service and creativity as well as costly mistakes being more likely to occur leading to product returns and complaints.

Question 7

Benefits of improved efficiency?

Answer 7

• labour productivity rises
• unit costs fall
• resources such as labour,expertise and time can be reallocated
• resources such as labour,expertise and time can be reallocated
• profit margins increase
• improved flexibility across the business
• opportunity to explore new ventures - e.g. a new product line
• ability to charge lower prices and therefore improve competitiveness

Question 8

Ways that waste may happen in a business?

Answer 8

Motion - unnecessary movement of people
Overproduction- making products that cannot be sold easily
Overprocessing - adding features that do not add value
Waiting - for processes to finish before others can begin
Transport - unnecessary movement of the product or materials
Inventory - too much stock
Defects - faulty products

Question 9

Cost of poor stock management?

Answer 9

• Opportunity cost → over-stocking means tying up cash that can’t be used elsewhere
• Shrinkage → stock being stolen, damaged or lost
• Financial costs → storing stock and managing it can be time consuming and costly
• Too little stock → having too little stock means that orders cannot be met, which leads to unhappy customers and loss of sales

Question 10

How can wastage of stock be minimised?

Answer 10

• Store inventory appropriately e.g perishable goods in refrigeration
• Rotate stock - so old stock gets used/sold first
• Pricing strategies - adjust prices to clear stock through sales promotions
• Computerised stock management systems - to track all inventory
• Organising production so that workers work more effectively reduces waste in terms of time

Can lead to greater productivity and efficiency and reduce the average/unit costs of production

Question 11

Main focus of lean production?

Answer 11

reducing….
- defects
- time wasted
- inventory levels

Question 12

What is lean management?

Answer 12

Should remove anything that is not necessary
The following aspects of a business could be redesigned to be more efficient:
- meetings
- processes
- organisational structure

Question 13

What can effective lean production lead to?

Answer 13

Competitive advantage

This is because:
- waste is minimised along with average costs
- improve flexibility and reduce lead times
- leading to greater customer satisfaction
- in times of difficulty, e.g. economic instability, lean organisations are more able to survive and continue to make a profit

Question 14

Ways to improve capacity utilisation?

Answer 14

• Increase workforce hours - offer overtime pay
• Employ workers on temporary contracts
• Outsource some of production
• Rationalisation: redundancies or sale of assets
• Sub-contract in work from another business

Question 15

Why may a business want to hold stock?

Answer 15

• enable production to take place
• satisfy customer demand
• precaution against supplier delay
• allow efficient production
• allow for seasonal changes
• provide buffer between production processes and can be useful if machinery breaks

Question 16

Advantages of buffer stock?

Answer 16

• allows a business to meet sudden increases in demand/unexpected orders
• allows production to continue in the event of supplier delay
• holding buffer stock could result in placing fewer orders which can reduce delivery and supply costs

Question 17

Disadvantages of buffer stock?

Answer 17

• cost of storing and securing buffer stock
• stock could deteriorate, especially if perishable
• cash flow implications of having money tied up in stock

Question 18

Advantages of just in time?

Answer 18

• Less storage space required which saves rent and insurance costs and allows more production/selling space
• Reduces chances of stock going out of date/obsolete and can therefore help with waste minimisation
• Better cash flow as less money is tied up in unused stock

It’s success depends on the reliability of a business’s suppliers

Question 19

Disadvantages of just in time?

Answer 19

• Increased delivery and supply costs as orders are placed more often
• May result in reduced cost savings from bulk buying as orders may be smaller, but more frequent
• Little room for mistakes due to minimal stock holding
• Supplier delay could result in production slowing down or stopping

Question 20

Methods of lean production? (And advantages of lean production)

Answer 20

Just in time management of stock
Quality assurance and total quality management
Continuous improvement (kaizen)

:)
- improved productivity
- greater efficiency
- lower average/unit costs
- better quality and reliability
- helps to gain competitive advantage (e.g. better reputation)

Question 21

Key aspects of quality for the consumer?

Answer 21

• good design
• good functionality
• reliability and consistency
• durability
• good after sales service
• value for money

Question 22

Benefits to a business of having quality products? (How competitive advantage can be gained?)

Answer 22

• customer loyalty
• added value
• differentiation (especially products which are deemed to be of “high quality”)
• reduced price elasticity of demand + the ability to charge a higher price
• reduced defects and returns

Question 23

Methods of achieving quality

Answer 23

• have clear understanding of customer needs
• achieve a quality award/mark from external organisation
• involve all employees in managing quality
• work with high quality suppliers
• invest in technology
• train employees in quality procedures

Question 24

Why is quality difficult to improve?

Answer 24

• customers’ perception of quality is constantly changing
• a successful business could let quality slip if there is no incentive to outperform rival businesses
• improving quality can add more work so might be naturally opposed by the workforce
• measuring quality can be difficult and expensive

Question 25

Consequences of poor quality?

Answer 25

• if products need recalling - can be extremely expensive
• poor quality can damage brand reputation
• may be legal costs
• correcting poor quality can be expensive

Question 26

What is total quality management (TQM) and eval?

Answer 26

Goes beyond assurance and the production process is a philosophy which considers quality as an organisational concern, and not just the production/function department.
TQM is about creating a culture of quality throughout the entire organisation + putting quality at the heart of everything the business does.

:) - increased efficiency
- better customer satisfaction
- reduced costs
:( - requires cultural change
- may take several years before results are realised
- time and money on training

Question 27

What is a quality circle? (And eval)

Answer 27

→ A small team of about 6-12 people who voluntarily form to work on a specific issue or problem where quality is a concern
→ Should have representation from across the organisation and all parties have an equal voice in the development process
→ Ensure all aspects of the supply chain are considered and give people the opportunity to work closely as a team
→ Usually meet once a month - depends on business

:) - improved quality
- improved worker motivation as employees within circle feel trusted and empowered
- increased teamwork

:( - employees may feel left out if not included in quality circle
- possible disruption of production and productivity whilst the quality circle meets
- suggestions made by the circle may not be implemented, causing dissatisfaction amongst employees in circle

Question 28

What is Kaizen?

Answer 28

A Japenese concept meaning continuous improvement
Aims to create a culture of continuous improvement within the organisation, with everyone constantly looking for small ways in which to improve the business and therefore leading to an overall improvement in quality

:) - small improvements less likely to require major capital investments
- helps encourage workers to take ownership for their work, and can help reinforce team working, thereby improving worker motivation

Question 29

Factors influencing efficiency?

Answer 29

• Training - training employees can lead to greater productivity, which in turn can lead to increased efficiency
• New technology - new technology and production processes
• Relocation of production capacity - number of manufacturing businesses have moved their production capacity overseas in order to take advantage of lower labour costs and also to reduce their fixed costs
• Method of production - moving from batch to flow for example