2.4 Resource management Flashcards
1
Q
What is Batch production?
A
a method that involves completing one operating at a time on all units before performing the next
-bread production and furniture making
2
Q
What is Capital intensive?
A
production methods that make more use of machinery relative to labour
3
Q
What is the definition of Capital productivity?
A
the amount of output each unit of capital (e.g. one machine) produces
4
Q
What is Cell production?
A
involves producing a family of products in a small self-contained unit (a cell ) within a factory
- furniture manufacture
5
Q
What is division of labour?
A
specialization in specific tasks or skills by an individual
6
Q
What is downsizing?
A
the process of reducing capacity, usually by laying off staff
7
Q
What is efficiency?
A
producing a level of output where average cost is minimised
8
Q
What is Flow production?
A
large-scale production of a standard product, where each operation on a unit is performed continuously one after the other, usually on a production line
- e.g. car manufacture
9
Q
What is job production?
A
a method of production that involves employing all factors to complete one unit of output at a time
e.g. ship building and construction to making birthday cakes
10
Q
What is Kaizen?
A
a Japanese term that means continuous improvement
11
Q
What is Labour intensive?
A
production methods that make more use of labour relative to machinery
12
Q
What is meant by labour productivity?
A
the amount of output each unit of labour (e.g. one worker) produces
13
Q
What is lean production?
A
an approach to operations that focuses on the reduction of resources use
14
Q
What is outsourcing?
A
giving work to subcontractors to reduce costs
15
Q
What is production?
A
the transformation of resources into goods or services
16
Q
What is the definition of productivity?
A
the output per unit of input per time period
17
Q
What is Specialisation?
A
in business, the production of a limited range of goods
18
Q
What is standardisation?
A
using uniform resources and activities or producing a uniform product
19
Q
What is production?
A
- Production takes place when resources, raw materials or components, are changed into finished products.
- Land, labour, capital and enterprise are used in the production process.
- The use of land, and a tractor, to grow crops is an example of primary production.
- Secondary production would be the assembly of parts to make a car in a factory.
- A large part of our economy operates in the tertiary industry. This is defined as ‘bringing a product into being’, ie retail sales and the sales of services such as banking and hair dressing.
20
Q
What are the advantages of job production?
A
- quality is high because workers are skilled
- Workers are well motivated because work is varied
- What is Products can be custom made
- Production is easy to organise
21
Q
What is the disadvantages of job production?
A
- high labour costs due to skilled workers
- production may be slow - long lead times
- a wide range of specialist tools may be needed
- generally an expensive method production
22
Q
What is advantages of batch production?
A
- workers are likely to specialise in one process
- Unit costs are lower because output is higher
- Production is flexible since different orders can be met
- more use of machinery is made
23
Q
What is disadvantages of batch production?
A
- more complex machinery may be needed
- Careful planning and co-ordination is needed
- Less motivation because workers specialize
- If batches are small, costs will still be high
- Money may be tied up in work-in-progress
24
Q
What is the advantages of flow production?
A
- Very low unit costs due to economies of scale
- output can be produced very quickly
- modern plant and machines can allow some flexibility
- production speed can vary according to demand
25
What are the disadvantages of flow production?
- products may be too standardised
- huge set-up costs before production can begin
- worker motivation can be very low -repetitive tasks
- Breaks in production can be very expensive
26
What are the advantages of cell production?
- Less space needed as no need for linear production lines
- Product flexibility improved as areas can adapt their production to meet customization requests
- Team working encouraged as the cell productivity will improve
- Allows pooling of skills workers with particular skill sets can be put to work in areas suiting them
27
What are the disadvantages of cell production?
- limiting aspirations people may feel they are 'locked in their cell' and cant move to other, particularly in low skilled cells
- Loss of awareness workers may feel isolated from other teams and as such not feel part of the organisation
- Waiting on other cells there will be times where production from one cell is required for another to work, delays affect whole business
28
What is productivity?
- Productivity measures the output, per unit of input, per time period.
- Therefore, output can be increased if productivity is raised. If more can be produced in the same period, or with the same raw materials, then this will make the business more efficient.
- Productivity is measured in 2 ways:
- Labour Productivity
- Capital Productivity
29
How do you calculate labour productivity?
labour productivity = number of units produced/ number of workers
30
What can labour productivity calculation tell you?
- By monitoring this measure you can assess the ongoing efficiency of your workforce.
- Whilst this is helpful as a measure of productivity, there are drawbacks. Unless each worker is producing units individually, with no external input, how do you identify the more efficient workers in a group?
- How do you know which workers to include? All staff, or just the ones involved in the process?
31
How do you calculate capital productivity?
capital productivity = number of units produced/ units of capital
32
What can the capital productivity calculation tell you?
- It can be easier to identify the productivity of each unit as usually machines can have built in counters that we collate information on production as it goes. Scrap would need to be deducted from this total.
- It would be expected that newer machines would be more efficient, but the business would have to weigh up the cost of the machinery versus the increased output levels
33
How is productivity linked to competitiveness?
If a business can raise productivity, then this means it can produce more output with the same levels of resources. ie workers can produce more in the same time or you can produce more units from the same raw materials, or both.
The UK has a very poor record on productivity, this is being said to influence our overall competitiveness, particularly in a post Brexit market.
34
What factors influence productivity?
-Specialization and division of labour
- Education and training
-Motivation of workforce
working practices
-Labour flexibility
-Capital productivity
35
How does specialisation and division of labour influence productivity?
- focusing on certain products/markets
| - better in that area and more productive
36
How does education and training influence productivity?
- more trained workforce --> produce more quickly
| - learning new processes and machines
37
How does motivation of workforce influence productivity?
- motivation = happier - more productive
| - longer, faster and better workforce
38
How does working practices influence productivity?
- trying new processes and practices to increase productivity --> if some workers come up with a quicker process they get rewarded -- ( can lead to more motivation)
- Kaizen
- Marginal gains
39
How does labour flexibility influence productivity?
- shift pattern or turning the machines off at night and on in the morning
- more efficent if going 24/7 or longer
40
How does Capital productivity influence productivity?
- machines productivity
- are they more productive then humans
- buy a more efficient machines
- production vs. machines costs
41
What is the definition of Capacity Utilization?
the use that a business makes of its resources.
42
What is Excess or Surplus Capacity?
when a business has too many resources, such as labour and capital, to produce its desired level of output.
43
What is Full Capacity?
the point where a business cannot produce any more output.
44
What is Mothballing?
leaving machines, equipment or building space unused, but maintained, so they could be brought back into use if necessary.
45
What is Over-utilization?
the position where a business is running at full capacity and ‘straining’ resources.
46
What is Rationalization?
reducing the number of resources, particularly labour and capital, put into the production process, usually undertaken because a business has excess capacity.
47
What is Under-utilization?
the position where a business is producing at less than full capacity.
48
What is Capacity Utilisation?
- Capacity Utilisation is the use the business makes of its resources.
- If a business is not able to increase output, it is said that they are running at full capacity, and its capital utilisation will be at 100%.
- If a business is able to increase more output and use up more of it’s resources than it currently is, it is said to have excess, surplus or unused capacity.
- Businesses aren’t all able to work at full capacity all of the time, so therefore they aim to operate as close to capacity as possible, at 90% for example.
- In some cases businesses choose to operate at less than full capacity to make themselves more flexible.
49
How do you Calculate measuring capital utilization?
Capacity utilisation can be measured by comparing actual or current output with the potential output at full capacity.
Capacity Utilisation = Actual Production Level/Maxium Production Level x 100
50
What are the implications of under-utilization?
- A business may be under-utilising capacity if it has experienced a drop in demand, for example it may have lost customers to a market competitor.
- Some businesses have to deal with seasonal demand where at certain times of year the demand is expected to be low.
- There are both drawbacks and benefits of under-utilisation, and these will be discussed more in the following slides
51
What are Drawbacks of Under-utilization?
- If a business is working with under-utilised capacity it will not be making the most of its resources.
- It may be working inefficiently because its unit costs are not minimised.
- Operating with too much spare capacity may also affect the morale of workers, this is because they may feel as if the business is struggling to generate orders and therefore this may make them feel insecure in their jobs.
- If workers become accustomed to a ‘light’ workload, they may resent working harder if the business suddenly gets more orders.
52
What are the implications of over-utilization?
-Many businesses prefer to operate as close to full capacity as possible as this means average costs will be lower. However, if a business is running at full capacity it may be over-utilising its resources. This means that resources will be stretched uncomfortably.
for example, overutilization may occur if people are being asked to work long periods of overtime without a reasonable break for rest.
53
What is the benefits of over-utilization?
- Average costs will be lower because fixed costs will be spread across more units of output- this will help improve competitiveness and raise profits
- Staff motivation might be good of workers feel secure in their jobs
- Workers may be happier if there is lots of work available to do overtime to increase their earnings
- A busy operation can improve the companies image therefore customers may feel more confident when placing orders
54
What are the Drawbacks of over-utilization?
- Pressure of constant work at full capacity can strain some resources
- Causing stress and tiredness to the workforce, possible increasing risk of accidents or absence
- Machines may be overworked to breaking point
- If flow production is used, breakdowns on a production line can be very expensive, especially if production is stopped completely for a period of time
- Business may not be able to respond to an increase in demand
- There may be insufficient time for staff training and important maintenance work
55
What are ways of improving capacity utilization?
A business will look to improve capacity utilisation however they can. They will do this in one of three ways. They may reduce capacity, increase sales or increase usage in order to improve their capacity utilisation.
56
what are way of reducing capacity?
-A business may decide to cut capacity by rationalising. This is where the business reduces excess capacity by getting rid of resources that the business can do without.
This could be by:
- Reducing staff by making people redundant, employing more part time/temporary staff or offering early retirement
- Selling off unused fixed assets
- Review leasing capacity E.g. leasing unused floor space of stores or factories
- Move to a smaller premises where costs are lower
- Mothball some resources. This is where fixed assets are left unused but are maintained so can be brought back into use at anytime
57
how do you increases sales and what may the implication be?
If a business sells more output, it will have to produce more. Therefore capacity utilisation will rise. A business may need to spend money on promotion to increase sales, however if these costs are not covered by the extra revenue created then raising capacity utilisation in this way may not be viable.
58
How do you increase usage of the business?
A problem many businesses face is dealing peak demand. Train operators can find that capacity utilisation is close to 100% during rush hour but sometimes as low as 10% late at night. Businesses like this would like to increase capacity utilisation during off peak hours. A busy operation could improve the business’ reputation and therefore customers may be more confident when placing orders.
59
what are the different ways of increasing capacity utilization?
- outsourcing
- if capital machinery is going relatively unused or is used very little but maintained for future use (mothballing) then it may be more efficient to outsource or sub-contract. Outsourcing refers to employing other businesses to complete work that was previously done in-house
- For example, if a business requires delivery vans as part of their business, it could potentially work out cheaper to hire other businesses to deliver the products for them, as opposed to maintaining vans that are used minimally. This can lead to other benefits for the business, such as the ability to spend less money if they employ full-time drivers who are under-utilised for long periods of the day.
60
How is outsourcing an advantages to the business?
- No need to employ staff who are under-utilised for long periods of the day, like the delivery van example.
- Sub-contractors will have more knowledge of how to run their business – a delivery business will be better at delivering than one with little knowledge of how to operate effectively.
- Outsourcing services that will be purchased in bulk or in multiples may offer the chance to negotiate lower prices than if just one unit was outsourced.
61
How is redeployment used in business?
If a business has too many resources in one department, they may be able to deploy them into other parts. For example, a bank may ask a number of employees to work in another branch for a short period.
62
What is stock?
- the goods or merchandise kept on the premises of a shop or warehouse and available for sale or distribution.
- A business may purchase raw materials and components for a product, for example a computer manufacturing business might purchase a motherboard, screws, circuits plastic covers as well as a variety of metals, these stocks can also be called inventories. These are assembled into a product and sold off to consumers. Some businesses may hold stocks of finished products before they are delivered to the consumers. A variety of stocks are held for different reasons.
63
What are raw materials and components?
-These are purchased from suppliers before production and often stored in firms for when there is a change in production levels. Delays in production may be avoided if materials are supplied via stores rather than waiting for a new arrival of delivery. When a company is let down by suppliers, stocks will enable them to resume production.
64
What are work-in-progress?
These are partly finished goods, for example a car on the assembly line where half of it is completed but the product is still not finished.
65
What are Finished Goods?
Finished goods may be kept due to changes in demand and to cope with these changes. This avoids having to step up production dramatically.
66
What factors influence stock levels?
- Buffer stocks- this is the term used to describe stock held to cover unforeseen rises.
- Stockpile goods- toy manufacturers may store stock up until December as demand will rise during the Christmas period.
- Cost of stock handling- it is expensive to hold stock therefore low quantities are held.
- The amount of working capital available- a business of short working capital may not be able to purchase stock even if it is needed.
- External factors- fear of future shortages may lead to more stock held.
- Types of stock- businesses will hold different items at different quantities for example fresh food ingredients will be in low stock as they have a best before date while screws etc may be held in abundance.
- Lead Time- the amount of time it takes stock to be ordered, received, inspected and made ready for use. The longer the lead time the higher the minimum level of stock needed.
67
What are buffer stocks?
- Buffer stocks are essentially emergency stocks held in case of a stock shortage; a business may keep buffer stocks of finished goods in case there is an increase in demand. If businesses cannot meet with a surge in demand then they will miss out on sales opportunities. Businesses that keep buffer stocks are those that likely experience sharp fluctuations in demand.
- Some businesses need to hold buffer stocks of raw materials, this is to protect themselves in a break of supply, which could lead to a halt in production.
- For example, some coal powered electricity generators keep large buffer stocks of coal so they can deal with surges in demand for electricity. If there is a ‘cold snap’ in winter they will be able to supply them.
68
What are the implications of holding too much stock?
-Storage – Stocks of raw materials, components and finished goods occupy space in buildings. Some businesses may also have to pay heating, lighting and labour costs (such as security guards)
-Spoilage Costs- The quality of stock may deteriorate over time. If this is too happen they may not be able to be sold and need to be thrown away which increases costs as no revenue is made.
-Unsold Stock – unexpected reduction in demand the firm may be left with stocks that are unable to be sold.
-Administrative and financial costs – include the cost of placing and processing orders, handling costs
-Shrinkage – Very large stocks might result in a increase in theft by employees. They may feel the business will not miss the stock.
and the cost of failing.
-Opportunity Cost – Capital in stocks earns no rewards. Money which purchased stocks could of purchased new machinery.
69
What are the implications of holding too little stock?
- May not be able to keep up with unexpected increases in demand, this may lead to a loss of customers if they cannot supply regularly
- If stock is delayed during delivery, the business may run out of stock and have to stop production of the product. This can lead to idle labour and machinery
- The firm is less able to cope with unexpected shortages of materials. Again this could result in loss of production
- A firm which holds very low stocks may have to place more orders. This will raise total ordering costs. It might also miss out on discounts from bulk buying.
70
what is Just in Time management of stock?
- Developed in the 1950’s and 1960’s, in the Japanese ship building industry. They recognised that a great deal of money was tied up in stocks
- As the industry became more competitive shipbuilders insisted that steel suppliers deliver orders ‘just in time’.
- This reduced the need for high levels of working capital and improved the financial performance of the business
- JIT was extended to all stages of production
- JCB use JIT, every machine on the production line has already been sold. Supplies of components such as engines from Perkins, and raw materials, such as steel plate, arrive on the day they are needed.
- Requires high levels of organisational skills and reliable suppliers.
71
What is waste minimization?
-A failure to control stock adequately can result in wasted stock. This is most likely to happen to perishable stock (stock that deteriorates after a certain amount of time e.g. food). However, stock can be wasted if it has a limited life span and becomes obsolete after a certain amount of time. This may include newspapers, seasonal goods, and merchandise produced for specific events like a concert.
72
What are some ways to minimise waste?
- If goods are perishable they must be stored in refrigerated units to prolong the life, particularly in warm weather.
- Businesses have to be diligent when forecasting demand patterns for perishable goods. If they overestimate demand they could be left with a lot of unsold stock. Businesses may use complex quantitative techniques, historic data relating to demand and the shelf life of products to calculate this.
- The use of a stock rotation method e.g. the FIFO method (first in first out). This means the stock that was delivered first must be issued first.
- The use of a computers to manage stock control. -Computerised systems are programmed to automatically order stock when the re-order level is reached. In supermarkets, computerised checkout system record every item of stock purchased by customers and automatically subtract items from total stock levels.
- Some large businesses might be able to use adjustable pricing strategies to help minimise waste e.g. if the sell-by-date is approaching prices might be reduced to encourage purchases.
- Perishable goods need to be transported rapidly. If transportation can be speeded up then goods will reach the market place more quickly and be available in a better condition. Some, goods like food and flowers are flown to customers to increase the speed of delivery.
- A business may find creative methods in the disposal of good that have passed their sell-by-date. For Example. Food products might be given to charities or sold as animal feed, newspapers and magazines are likely to be recycled.
73
what techniques can be used to reduce the amount of resources used in production?
- Kaizen
- Cell production
- Flexible manufacturing
- Team working
- Empowerment
- Multi-skilling
74
What are the benefits to businesses who are lean producers?
Lean producers use less time, less stock, fewer materials, less labour, less space and few suppliers. Lean producers have a competitive advantage because the reduction in waste and resource use will lower production costs. Specifically, competitiveness will be improved
75
What does lean production do?
- Raise productivity
- Reduce costs and cut lead times
- Lowers the number of defective products
- Improve reliability and speeds up design time
With these improvements business will be able to charge lower prices, offer better quality and reliability, and fight odd rivals in the global market place.
76
What is Quality?
features of a product that allow it to satisfy customers' needs, it may refer to some standard of excellence
77
What is Quality assurance?
a method of working for businesses that take into account customer's wants when standardizing quality. if often involves guaranteeing that quality standards are met
78
What is quality chains?
when employees form a series of links between customers and suppliers in business, both internally and externally
79
What are Quality circles?
groups of workers meeting regularly to solve problems and discuss work issues
80
What is the definition Quality control?
making sure that the quality of a product meets specified quality performance criteria
81
What is Statistical process control?
- the collection of data about the performance of a particular process in a business
82
What is total quality management?
a managerial approach that focuses on quality and aims to improve the effectiveness, flexibility and competitiveness of the business
83
What factors influence quality?
- physical appearance
- reliability & durability
- special features
- suitability
- Parts - complementary products
- repairs
- after sales service
- image
- reputation
84
What are different methods of ensuring quality?
- quality control
- quality assurance
- quality circle
85
What is quality control?
- Traditionally used in manufacturing
- Product’s quality is checked at the end of the process
- Sampling will be taken out of a batch
- If those samples passed testing batch is passed.
86
What are the advantages of Quality Control?
- not wasting time
- cheaper
- lower training costs than Quality Assurance
- Less difference in opinion on quality
87
What are the disadvantages of Quality Control?
- dont know when the problem occurred
- the sample may not reflect on the entire batch
- Harder to identify an error
- May be expensive as whole batches could be discarded
- inefficient if errors occur early on - waste of time and resources
88
What is Quality Assurance?
- Checks the processes throughout production
- About identifying issues at the earliest stages
- Each worker or process is responsible for their output.
89
What are the advantages of Quality Assurance?
- Guaranteed a perfect product at the end
- Can easily identify where the problem is
- less chance of waste products as quality is assured
90
What are the disadvantages of Quality Assurance?
- may be usafe to check some products before they are completed e.g. chainsaw
- time-consuming
- expensive training costs
- complaint in the checking process as it has been checked previously
91
What are Quality circles?
- These are small groups of individuals from the same area of production who come together to meet and discuss quality issues.
- They will look to identify areas in the production process that may be failing and look for improvements, or to improve working practices to make things more efficient.
- To be successful, quality circles need the support of both management and workers. Workers need to feel that comments can be aired freely without fear of reprisal to allow the business to benefit from these groups.
92
What are the different factors of TQM that can improve/give quality?
- quality chains
- company policy, accountability and empowerment
- control
- monitoring
- teamwork
- consumer views
- zero defects
- quality circles
93
How can Quality chains improve/give quality?
- Great stress is placed on the operation of quality chains
- In any business a series of suppliers and customers exist both inside and outside the business
- The chain remains intact if the supplier satisfies the customer
- It is broken if a person or item of equipment does not satisfy the needs of the customer
- Failure to meet the requirement in any part of the quality chain creates problems, such as delay in the next stage of prduction
94
How can Empowerment improve/give quality?
- there will only be improvement in quality if there is a company-wide quality policy --> TQM must a start at the top and spread throughout the business to every employee
- People must be totally committed and take ' a pride in the job' --> an example of enrichment
- Lack of commitment particular at the top causes problems --> knock on affect it has on employees motivation and commitment
- in TQM everyone is accountable for their own performance -->employees may also be empowered to make decisions
95
How can control improve/give quality?
- Consumers' needs will only be satisfied if the business has control of the factors that affect a product's quality
- These may be human administrative or technical factors
- The process is only under control if materials, equipment and tasks are used in the same way every time
- These methods can be document can be documented and used to assess operations
- Regular audits must be carried out by the firm to check quality
- Quality audits and review may lead to suggestions for improvements - a different material, perhaps, or a new piece of equipment
96
How can monitoring improve/give quality?
- TQM relies on monitoring the business process to find possible improvements
- Methods have been development to help achieve this
- Statistical process control (SPC) involves collecting data relating to the performance of a process
- SPC can be used to reduce variability, which is the cause of most quality problems
- Variations in products delivery times, methods materials, people's attitudes and staff performanceoften occur
97
How can teamwork improve/give quality?
TQM strongly fabours teamwork as it builds trust and morale, improves communication and co-operations and develops interdependence
- TQM stresses that teamwork is the most effective way of solving problems the main advantages are:
- a greater range of skills, knowledge and experience can be used to solve the problem
- Employee morale is often improved
- problems across departments are better dealt with
- a greater variety of problems can be tackled
- team 'ideas' are more likely to be used than individual ones
98
How can consumer views improve/give quality?
- Firms using TQM must be committed to their customers
- They must be responsive to change in people's needs and expectations
- information must be gathered on a regular basis and there must be clear communication channels for customer to express their view
- Consumers are often influential l in setting quality standards
- The information can be used to identify the strengths and weaknesses of their operations
99
How can zero defects improve/give quality?
- This aims to ensure that every product that is manufactured is free from defects
- A business that is able to guarantee zero defects in customers; order is likely to gain a good reputation
- This could lead to new clients and improve sales
100
How can quality circles improve/give quality?
- TQM stresses the importance of teamwork and in many business, quality circles have been introduced
- In order for quality circles to be successful
certain conditions must exist:
-A steering committee should be set up to oversea the whole quality circle programme
- a senior manager should > ideally chair the committee they should show commitment to the principle of quality circles
- At least on person on the committee should be accountable for the programme
-Team leaders should be properly trained
101
How does using Total Quality Management help a business?
- Focus clearly on customer needs and relationships with suppliers
- Achieve quality in all aspects of the business
- Critically analyse the processes to remove waste and inefficiencies
- Find improvements and develop measures of performance
- Develop a team approach to quality and improvement
Improve communication within the organisation
- Continually review processes to develop a strategy for continuous improvement
102
What are the drawback to Total Quality Management?
- There are training and development costs for new systems
- Will only work with commitment from entire business
- Can increase bureaucracy and systems require frequent audits
- Stress can be placed upon the process and staff.
103
What is Kaizen?
Means “continuous improvement”
- There are a number of features of Kaizen which affect a business:
- Continuous Improvement
- Eliminating Waste
- Implementing Continuous Improvement
104
What is Continuous Improvement as part of Kaizen?
- Kaizen is main difference between Japanese and western approaches to management.
- Western approach tends to lead to occasional large increases in production
- Large increases tend to be more disruptive and costly than smaller continuous changes
105
What is Eliminating Waste as part of Kaizen?
- “Muda” in Japanese mean the elimination of waste and is important to the Kaizen philosophy.
- The argument being waste in any activity increases cost, without adding value.
- Examples include;
- Time wasted as staff wait around before starting a task
- Time wasted when workers move unnecessarily in the workplace, ie walking to central storage areas
- Irregular use of machinery, still requires servicing and maintenance.
- Excessive workloads can lead to a tired, less efficient workforce.
106
What is Implementing Continuous Improvement as part of Kaizen?
Japanese businesses use the PDCA cycle:
- Plan – where is the improvement needed? Plan how to generate improvement
- Do – implement changes to processes
- Check – to see if changes have led to desired improvements
- Action – if, so apply across the rest of the business
This process is usually applied across smaller teams first, before being rolled out across the whole business.
107
What are the Advantages of improving quality?
```
- Increased quality = increased sales
Cutting costs:
-Less waste
- Increased efficiency
- Lower unit costs
- Development of a USP – reputation for quality (Rolls Royce, JLR, Apple, etc)
- Charge premium prices
- Competitive advantage
```
108
What are the benefits of under-utilisation?
- a business will be able to cope more easily with sudden increases in demand --> a business that is not able to meet immediate customer needs may lose out in the long term
- working below full capacity there is likely to be less work- related stress
- both workers and managers will be more relaxed and comfortable with their workload
- This can reduce sickness and abesneteeism
109
What factors influence efficiency?
- Introducing standardisation
- Outsourcing
- Relocating
- Downsizing
- Delayering
- Investing in new technology
- Lean production
- Kaizen
- Just-in-time production
110
How does introducing standardisation influence efficiency?
- can be applied to tools components, equipment, procedures and documents
- Bulk purchases can be made, the same tools and procedures could be used for fitting and training time could be reduced
- in general efficiency will improve if there is standard measurements, procedures, materials etc,
- however standardisation is somewhat inflexible because it makes customisation more difficult and design more challenging
111
How does outsourcing influence efficiency?
- by outsourcing specific business activities can be given to a specialist outside the business who can do the same work at a lower cost or more flexibly
112
How does relocating influence efficiency?
Moving the entire business to a new site is a drastic measure, but can result in much lower costs
- By relocating , businesses might enjoy lower rents, lower wages and better transport links
- Many business have relocated their operations overseas to countries such as China where labour costs in particular are substantially lower
113
How does downsizing influence efficiency?
Advantages to downsizing can include:
- cost savings and increased profit
- a leaner, more competitive operation
- removal of unprofitable or inefficient parts of a business
- profitable business no longer subsiding unprofitable ones
However Downsizing can have drawbacks e.g. laying off workers means that businesses will lose skills, experience and knowledge, and adversely affect morale of current workers
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How does Delaying influence
| efficiency?
- Cuts are directed at a particular levels of a business, such as managerial posts
- Thew main advantage of delaying is the savings made from laying off expensive managers
- it may also lead to better communication and better motivated staff if they are empowered and allowed to make their own decisions
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How does Investing in new technology influence new technology?
- New technology can often improve efficiency
- New machinery may be quicker, more accurate be capable of more tasks and carry out work in more extreme conditions than older equipment or labour
- most machinery is controlled by computers and can undertake very complex tasks
- the use of information and communications technology has help most businesses improve efficiency
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How does lean production influence efficiency?
- raises productivity
- reduces costs and cuts lead times
- reduce the number of defective products
- improves reliability and speeds up product design
Lean production involves using a range off practices designed to reduce waste and improve productivity and quality e.f. Kaizen, JIT production, cell production empowerment and teamworking
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How does Kaizen influence efficiency?
- strong link between Kaizen and lean production
- continuous improvement --> workers are always coming up with ideas to improve, quality, reduce waste or increase efficiency
- The improvements may be very small, but over a long period of time they can have huge impact
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How does Just-in-Time production influence efficiency?
This involves minimising or eliminating the amount of stock held by a business
- It reduces all of the costs associated with stock hold
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How does a business decide whether it is going to be labour or capital intensive?
- the nature of the product
- the relative prices of the two factors
- the size of the firm
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How does the nature of the product affect whether a business will be capital or labour intensive?
- everyday products with high demand are massed produced ion huge plants using large quantities of machinery
- However in modern economies like to UK an increasing number of the products supplied by businesses are services, generally the provision of services is labour intensiveq
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How does the relative prices of the two factors affect whether a business will be capital or labour intensive?
- if labour costs are rising then it may be worth the company employing more capital instead
- However in places like China and India where labour is cheap, a labour intensive production method is prefered
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How does the size of the firm affect whether a business will be labour or capital intensive?
As a firm grows adn the scale of production increases it tends to employ more capital relative to lavour
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What are the benefits of a Capital intensive strategy?
- Generally more cost-effective if large quantities are produced
- Machinery is often more precise and consistent
- Machinery can operate 24/7
- Machinery is easier to manage than people
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What are the drawback of a Capital intensive strategy?
- Huge set up costs
- Huge delays and costs if machinery breaks down
- Can be inflexible mach machinery is highly specialised
- often poses a threats to the workforce and can reduce morale
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What are the benefits of a Labour investive strategy?
- Generally more flexible than capital - can be retrained for example
- Cheaper for small-scale production
- Cheaper for large-scale production in countries like China and India
- People are creative and therefore solve problems and make improvements
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What are the drawbacks of a Labour intensive strategy?
- People are more difficult to manage than machines, they have feelings and react
- People can be unreliable, they may be sick or leave suddenly
- People cannot work without breaks and holidays
- People sometimes need to be motivated to improve performance
