2.4 - resource management Flashcards
capacity utilisation
- a measure of the extent to which the productive capacity of a business is being used (%)
- formula = current output/maximum possible output x 100
why do businesses want to perform at full capacity?
efficiency would be maximised means decreased costs and increased revenue
benefits of under-utilisation
- sufficient space for factory to meet new orders
- able to cope more easily with sudden increases in demand
- workers will be more relaxed
- less work-related stress
- machinery repairs can be scheduled more easily
disadvantages of under-utilisation
- higher fixed costs per unit
- undermotivated staff
- not making the most of resources
- affects the morale of workers
- can resent to working harder as they are not working at full capacity
benefits of over-utilisation
- lower average costs
- improve competitiveness
- raise profits
- better staff motivation
- happier staff
- improved company image = customers become more confident making orders
drawbacks of over-utilisation
- can put a strain on resources
- causes stressed staff
- machines can be overworked
- may not be able to respond to an increase in demand
- insufficient time for staff training = saves money but staff can lack vital skills in the long term
ways of improving capacity utilisation
- increase sales
- increase usage
- outsourcing
- redeployment
rationalisation
reducing the number of resources, particularly labour, and capital, put into the production process, usually undertaken because a business has excess capacity
stock (inventory)
items used to make a product which is then sold to a customer
examples = raw materials, work-in-progress, finished goods
types of stock
- raw materials = purchased from suppliers, used in the production process
- work-in-progress = partly finished goods, not yet fully complete
- finished goods = completed goods ready for sale, kept in to cope with changes in demand
influences of stock control
- demand
- stockpile goods
- costs of stock holding
- amount of working capital available
- type of stock
- lead time
- external factors
buffer stock diagram
stock focuses on the re-order quantity (amount of stock ordered when a new order is placed) and the re-order level (level of stock currently held when an order is in place)
buffer stock
emergency stock held in case there is a stock shortage
advantages of buffer stock
- easily respond to changes in consumer demand
- if suppliers can’t deliver on time production won’t be affected
disadvantages of buffer stock
- cost of storage is high
- tied up working capital
implications of stock control
- storage
- opportunity cost
- spoilage costs
- administrative and financial costs
- unsold stock
- shrinkage
just-in-time management of stock
bringing in stock only when it is needed
advantages of just-in-time
- cashflow improves
- reduces wastage
- more factory space
- costs of stock holding reduced
- links with suppliers improved
disadvantages of just-in-time
- a lot of faith placed in the reliability and flexibility of suppliers
- increased ordering and admin costs
- advantages of bulk buying may be lost
- difficult to cope with a large increase in demand
- possible loss of reputation
waste minimisation methods
- more accurate sales forecasting to meet demand
- suitable stock rotation
- used computerised stock management system
- adjust pricing strategy to minimise wastage
- transport perishable goods rapidly
- creative uses of wastage (too good to go)
- use refrigeration for perishable goods
what do consumers take into consideration when they think about the quality of a product/service?
- physical appearance
- reliability/durability
- special features
- suitability
- availability of parts
- after-sales service
- repairs & maintenance in the future
- image
- reputation
why are businesses concerned about the quality of the product design?
- poor design can cause problems
- costs time and money to redesign
- clients can be lost
why are businesses concerned about the quality of the production process?
- faults can cause faulty products
- machinery can break down
- repairs can be expensive
- late deliveries can harm reputation
total quality management (TQM)
- at all stages, there is quality assurance
- preventive approach by the japanese
quality assurance
at each stage, someone is making sure quality is high
quality circles
small groups of workers in the same areas of production who meet regularly to solve production problems
kaizen
japanese concept where improvements are always being made with everyone being involved
productivity
output per input per hour
production
total amount of output that is produced in a time period
methods of production
- job
- batch
- flow
- cell
job production
production of one single product at a time
- can be used for small one off’s or a large-scale project
- production process is labour-intensive
- found in manufacturing and service industry
- workforce made up of skilled and specialised workers
advantages of job production
- quality is high because workers are skilled
- workers are well motivated because work is varied
- products can be custom-made
- production is easy to organise
disadvantages of job production
- high labour costs due to skilled workers
- production may be slow
- wide range of specialist tools needed
- expensive method
batch production
production of a product with similar characteristics which passes through different production operations
- more standardisation due to product made in batches
- products can be made in large or small batches
advantages of batch production
- workers specialise in one process
- unit costs are lower because output is higher
- production is more flexible
- more use of machinery
disadvantages of batch production
- more complex machinery may be needed
- careful planning and co-ordination needed
- less motivation because workers specialise
- small batches = high costs
- money may be tied up
flow production
production is organised so that different operations can be carried out, one after the other in a continuous sequence (mass production)
- large quantities of simplified and standardised product
- semi-skilled workforce
- large amount of machinery and equipment
- large stocks of raw materials needed
advantages of flow production
- very low unit costs due to economies of scale
- output produced quickly
- modern machines can allow some flexibility
- production speed can vary according to demand
disadvantages of flow production
- products may be too standardised
- huge set-up costs before production can begin
- worker motivation can be low
- breaks in production can be expensive
cell production
involves producing a family of products in a small self-contained unit within a factory
- each cell occupies an area of the factory floor
- product family = a group of products that requires a sequence of similar products
advantages of cell production
- floor space is released, cells use less space
- product flexibility is improved
- movement of resources and handling time is reduced
- less work-in-progress
- team work is encouraged
- safer working environment
disadvantages of cell production
- may have to invest in new materials handling and ordering systems
- may not allow a firm to use its machinery as intensively as it wants
- allocation of work to cells has to be efficient so they have enough work
ways to improve productivity
- productivity bonus
- productivity deal
- staff training
- investment in new machinery and equipment
factors influencing productivity
- quality of inputs in the production process
- labour shift organisation of workers
- investment of new technology
labour productivity
- output per worker over a given period of time
- formula = output per period/number of employees at work
