2.4 Flashcards
what is production?
the transformation of resources into finished goods or services
Assessing the Methods of Production : Job production
Explanation
Manufacturers produce one product at a time as ordered by the customer
Assessing the Methods of Production : Job production
advantages
- High quality product
- Motivated and highly skilled workers
- Customised products can be produced
Assessing the Methods of Production : Job production
disadvantages
Production is slow
Labour costs are high
Assessing the Methods of Production: Flow production
explanation
Continuous manufacturing of standardised products, usually on a production line
Assessing the Methods of Production: Flow production
advantages
Low unit costs due to economies of scale
Rapid production
Usually highly automated (capital intensive)
Assessing the Methods of Production: Flow production
disadvantages
Customisation is difficult
Capital equipment can be expensive to purchase
Assessing the Methods of Production: batch production
explanation
Groups of the same product are produced as a batch e.g. 1000 Blueberry muffins
Assessing the Methods of Production: batch production
advantages
Workers can specialise
Production can take place as the previous ‘batch’ starts running out
Assessing the Methods of Production: batch production
disadvantages
Requires careful coordination to avoid shortages
Money is tied up in stock as completed products need to be stored
Assessing the Methods of Production: Cell production
explanation
This involves workers being organised into multi-skilled teams, with each team responsible for a particular part of the production process
Assessing the Methods of Production: Cell production
advantages
- Cell production is often more efficient than other methods as workers share their skills and expertise
- Motivation is usually high as employees work as a team
Assessing the Methods of Production: Cell production
disadvantages
- Requires extensive reorganisation of production processes
- Teams efficiency may be reduced by weaker workers
what is productivity?
Productivity is the output per input (person or machine) per hour
what is the labour productivity
The labour productivity of a business is measure of the output per worker during a specified period of time
what is the formula for labour productivity?
output /number of workers
what is capital productivity?
Capital productivity is a measure of the output of capital employed (e.g. machinery) during a specified period of time
capital productivity formula
output / number of machines
what happens to the business cost when productivity increases?
business cost decreases
Factors that Influence Productivity explanation
employee motivation
- Motivated workers tend to be more productive
- Financial incentives linked to output may increase worker productivity
- Non-financial incentives may include workers in decision-making, increase their commitment and productivity
Factors that Influence Productivity explanation
Skills, education & training staff
- Well-trained and educated workers are likely to be able to make useful contributions to decisions that improve productivity
- Workers are more autonomous so the need for supervision is reduced
- Contributions from knowledgeable staff are likely to lead to improvements in productivity
Factors that Influence Productivity explanation
Business organisation & working practices
- Flexible and adaptable workplaces can improve the commitment of workers and allow a business to respond to changes in demand
- Hours and location of work can be adapted to better meet the needs of workers and demand
- Workstations may be used for various purposes with careful planning and training
Factors that Influence Productivity explanation
Investment in capital equipment
- Increased automation can improve levels of output and quality
- Well chosen machinery is less likely to make mistakes than humans
- Machinery and technology can operate for long periods without a break as long as it is properly maintained
what is competitiveness?
Competitiveness refers to the ability of a business to maintain or grow its sales and market share given the presence and actions of rivals
what is efficiency
- Efficiency refers to the ability of a business to use its production resources as cost-effectively as possible
- Efficiency is often measured in terms of the average cost per unit
efficiency formula
total costs/number of units
when is maximum efficiency achieved?
- when the cost per unit is at its lowest
- Economies of scale are maximised
- Total costs are spread across an optimum level of output
- Diseconomies of scale are minimised
The Factors that can Influence Business Efficiency : explanations
Standardisation of the production process
Occurs when all staff use the same components and techniques in the production process
Training of workers is minimised
Bulk-buying of components reduces variable costs
Production lead time is reduced
BUT customisation of products is not usually possible
The Factors that can Influence Business Efficiency : explanations
Relocation or downsizing
- Moving production to a cheaper or smaller location can reduce fixed costs
- Labour-intensive businesses may look for lower wage locations
- Capital-intensive locations may look for lower rents or land costs
-However, relocation is very disruptive and will incur significant short-term costs
The Factors that can Influence Business Efficiency : explanations
Investment in capital equipment
Purchasing or upgrading machinery and technology can increase the rate of output, lower costs and improve quality
The Factors that can Influence Business Efficiency : explanations
Organisational restructuring
- Delayering reduces labour costs as levels of management are removed
- Redeployment can motivate workers by providing opportunities for staff to take on a new role which will develop their skills and experience
The Factors that can Influence Business Efficiency : explanations
outsourcing
- Tasks may be given to other specialist businesses that can complete it at a lower cost
- Outsourcing allows a business to focus on improving the efficiency of its core competences
The Factors that can Influence Business Efficiency : explanations
Adoption of lean production techniques
An approach to production that involves the reduction of all types of wastage (time, resources and space)
Kaizen means that improvements are made continuously
Just in Time involves the holding little or no stock which minimises storage costs
pros of kaizen
Continuous Improvement: Kaizen encourages making small, gradual changes over time. This helps in steadily improving processes, products, or services.
Employee Involvement: It involves everyone in the organization in identifying problems and finding solutions. This boosts morale and teamwork.
Cost Reduction: By finding and fixing problems early, it can save money in the long run by preventing bigger issues from arising.
cons of kaizen
Time-Consuming: Implementing Kaizen requires time and effort, which can slow down regular work activities initially.
Resistance to Change: Some employees may resist changes to their routine or methods, which can make implementing Kaizen difficult.
cons of just in time
Bulk buying **economies of scale are not generally possible
**
The ability to respond to unexpected increases in demand is reduced
Administrative costs related to frequent ordering are increased
Unreliable suppliers (e.g. late or poor quality deliveries) can quickly halt production
Significant changes to organisational structure and production controls are required
pros of just in time
Stockholding costs including storage costs are minimised
Cash flow is improved as money is not tied up in stocks
Unused storage space is available for productive use
Teamwork is encouraged so employee motivation is likely to be improved
what is labour intensive production?
- Labour-intensive production predominantly uses physical labour in the production of goods/services
- The delivery of services is usually more labour-intensive than manufacturing
- In countries where labour costs are low (e.g. Bangladesh) labour-intensive production is common
Small-scale production is likely to be labour-intensive
what are capital intensive production
Capital-intensive production predominately uses machinery and technology in the production of goods/services
Large-scale production of standardised products is likely to be capital-intensive
Manufacturing in developed countries where labour costs are relatively high is likely to be capital intensive
The Advantages & Disadvantages of Labour Intensive
capital Intensive Advantages
- Low-cost production where output is high
- Machines are usually consistent and precise
- Machines can run without breaks
The Advantages & Disadvantages of Labour Intensive
Capital Intensive Disadvantages
- Significant set-up and** maintenance costs**
- Breakdowns can severely delay production
- May not provide flexibility in production
The Advantages & Disadvantages of Labour Intensive
Labour Intensive advantages
- Low-cost production where labour costs are low
- Provides opportunities for workers to be creative
- Workers are flexible (e.g. they can be retrained)
The Advantages & Disadvantages of Labour Intensive
labour intensive disadvantages
- Workers may be unreliable and need regular breaks
- Incentives may be needed to motivate staff
- Training costs can be significant
what is capacity utilisation
the measure of the level to which a business assets are being used to produce output
It compares current output to the maximum possible output
capacity utilisation formula
(current output / maximum possible output) x 100
cons of under utilisation
- if a business has a low level of capacity utilisation it will not be making the most of its resources and is likely to have increased unit costs
- Workers may be under-deployed leading to fears of redundancy
-** Decreased Productivity:** When resources are underutilized, productivity may suffer as employees or equipment are not fully engaged, leading to inefficiencies and lower output.
pros of under-utilisation
- Flexibility: It can provide flexibility in managing resources, allowing the business to scale up or down more easily in response to changes in demand or market conditions.
-The business can respond to sudden increases in demand
pros of utilisation?
minimise average total costs and increase business competitiveness
If workers are busy they are likely to feel secure in their employment
A business that is busy is likely to be well thought-of and is likely to attract customers who are willing to wait for products to be delivered
ways to improve Capacity utilisation:
outsourcing
+ business can increase level of output
- profit margin may reduce
ways to improve Capacity utilisation:
reduce capacity
- sell fixed assets or reduce staffing to reduce capacity
- flexibility may be necessary to respont to increased demand
ways to improve Capacity utilisation:
increase sales
- increase sales
- promotional stuff may be needed and that costs money
what is buffer stock
- a quantity of goods/raw materials kept in case of stock shortages
- This can provide a competitive edge over rivals unable to meet demand
- This approach is commonly called ‘just in case’ stock control
advantages of holding buffer stock
Stability in supply
Buffer stocks ensure a stable supply of goods which is able to respond to unexpected customer demand
Raw materials security
Businesses that are dependent on particular raw materials avoid disruption to their supply
Competitive advantage
By having a reliable supply of goods businesses can gain a reputation for always being able to meet the needs of their customers
disadvantages to buffer stock
Cost
Holding buffer stocks can be expensive, as it requires storage facilities and inventory management systems
Risk of obsolescence
Buffer stocks can become obsolete if the demand for a particular product or input declines
Opportunity cost
Holding buffer stocks ties up capital that could be invested in other areas of the business
what is lean production
involves the minimisation of the resources used in production
Pros of lean production
Less time is required as the production process is organised in the most efficient way
Less labour is used as lean production is typically capital intensive
Lower unit costs are achieved due to minimal wastage so prices may be lower than those offered by competitors
Better quality of output is likely as a result of supplier reliability and carefully managed production processes
Methods of Quality Control : Quality Control
explanation
Inspecting the quality of output at the end of the production process
Methods of Quality Control : Quality Control
benefits
Quality specialists are employed to check standards
An inexpensive and simple way to check that output is fit for purpose
Methods of Quality Control : Quality Control
drawbacks
The rejection of finished goods is a significant **waste of resources **
There is little focus on the cause of defects
Methods of Quality Control: Quality assurance
explanation
Inspecting the quality of production throughout the process
Methods of Quality Control: quality assurance
benefit
Quality issues are identified early so products may be reworked rather than rejected
The cause of defects is the focus so future quality issues may be prevented
Methods of Quality Control: quality assurance
drawbacks
Staff training and a skilled workforce is required so labour costs may be increased
Reworking may lengthen the production process
Methods of Quality Control: Quality Circles
explanation
Groups of workers meet regularly to solve quality problems identified in the production process
Methods of Quality Control: Quality Circles
benefits
- workers may be motivated as they are involved in decision making
- Relevant and focused solutions are likely as workers are familiar with processes
Methods of Quality Control: Quality Circles
drawbacks
- management need to have trust in the workers
- meetings and structures must be organised regularly
Methods of Quality Control: Total Quality Management (TQM)
explanation
Organisation of the business with quality at its core and with every worker responsible for quality
Methods of Quality Control: Total Quality Management (TQM)
benefits
Quality in all aspects of the business improves efficiency
A culture of constant improvement exists within the business
Methods of Quality Control: Total Quality Management (TQM)
drawbacks
All workers must be committed and receive significant continued training
Careful monitoring and control is required
what are the competitive advantages of quality management?
Unit costs are likely to be low if a business takes a preventative approach through the use of quality assurance or TQM
Low costs may allow a business to reduce its selling price to better compete with or undercut its rivals
