2.4 resource management Flashcards
what is production?
when raw materials or components are changed into products
what is job production?
-production of single unique units
-this could be bespoke for the customer
what type of business often utilises job production?
small specialist businesses
what type of workforce would be needed for job production?
a highly skilled workforce
examples of businesses that use job production:
-architects
-plumbers
advantages of job production:
-specific to customer requirements
-associated with higher quality
-better motivation for employees
-flexible production method
(changes can be handled)
-high profit margins
disadvantages of job production:
-high unit costs
-labour intensive (high labour costs)
-requires close consultation with client
-usually need high skills (training)
what is batch production?
-standardised products are mass produced
-each batch goes through one stage of production process together before moving onto next stage
how can batch production be flexible?
the system can be modified to adjust the specification
(e.g. changing the size, colour and features)
examples of businesses that use batch production:
baking
advantages of batch production:
-cost savings through purchasing economies of scale
-still allows customers some choice
disadvantages of batch production:
-the business must maintain higher stocks of raw materials
-tasks may become boring
(reduced motivation)
what is flow production?
-continuous manufacturing of standardised products, usually on a production line
-when one task is finished next task must start immediately
-high levels of automation
advantages of flow production:
-very low unit costs due to economies of scale
-high levels of productivity
-capital intensive which means it can work constantly (automated)
-less need for training & skills
disadvantages of flow production:
-high set-up costs
-low motivation of workers
-customisation is difficult
-production stops if flow stops
what is process production?
a series of processes which raw materials go through
examples of process production
-oil refining
-cement
advantages of process production:
-processes can be automated
(reduce unit cost)
-large quantities can be produced
disadvantages of process production:
-expensive
(equipment / facilities)
what is cell production?
-workers are organised into multi-skilled teams, with each team responsible for a particular part of the production process
(produce an entire product or part of a products)
advantages of cell production:
-workers are more motivated (teamwork)
-production is more flexible
-more efficient (workers share their skills and expertise)
disadvantages of cell production:
-requires extensive reorganisation of production processes
-teams efficiency may be reduced by weaker workers
factors that affect choice of production method:
-the level of output required
-whether the product is standardised or customised
-the level of automation used in production (amount of capital)
what is a production process?
the steps followed to convert raw materials / components into products
2 types of focus for production
-labour intensive
-capital intensive
what does labour intensive mean?
high level of human input in the production process
what does capital intensive mean?
high level of capital investment
what is productivity?
the amount of output that can be produced with a given input in a specified time period
what does maximising productivity entail?
getting the most out of the resources available to the business
what is a way to measure productivity of workers?
by calculating labour productivity
what is labour productivity?
the output per employee in a certain time period
how to calculate labour productivity:
total output
——————
number of employees
what is a unit cost?
the costs incurred in producing one product
how to calculate unit cost:
total cost of production
————————————
total number of production units
methods of improving productivity:
-training (improving skills of the workforce)
-capital intensity (introducing automation to increase output)
-motivating workers (happy workers work harder and faster)
-better quality raw materials
when do economies of scale arise?
when unit costs fall as output increases
benefit of increasing productivity:
cost per unit is reduced → increased profit margin
evaluation of increasing the output of a worker:
-productivity and unit costs may increase in the short term
-high levels of output can cause stress and burnout
what can a focus on output compromise?
-quality & customer service
-mistakes and faults are also more likely to occur, leading to product returns and complaints
internal economies of scale
arise from the increased output of the business itself
external economies of scale
occur within an industry (all competitors benefit)
unit costs with labour intensive businesses
staff
unit costs with capital intensive businesses
equipment & machinery
benefits of capital intensity:
-greater opportunities for economies of scale
-potential for better productivity
-better quality & speed
-lower labour costs
drawbacks of capital intensity:
-significant investment
-may generate resistance to change from labour force
advantages of labour intensity
-low cost labour can be used
-labour is a flexible resource (through multi-skilling and training)
drawbacks of labour intensity:
-greater risk of problems with employee/employer relationship
-need for continuous investment in training
define efficiency
how well a business uses its resources
what happens when a business is running efficiently?
there is minimal waste
relationship between productivity and efficiency:
-greater productivity means the workforce is more efficient
-efficiency across the business allows more resources to be devoted to production
benefits of improved efficiency:
-resources can be reallocated (reuse)
(opportunity to explore new ventures)
-unit costs decrease → ability to charge lower prices and therefore improve competitiveness
what is waste?
anything that does not add value to the product
7 types of waste:
-transport
-inventory
-defects
-waiting
-overprocessing
-overproduction
-motion
waste: transport
unnecessary movement of the product or materials
waste: inventory
too much stock → obsolete
waste: defects
faulty products
waste: waiting
waiting for processes to finish before others can begin
waste: overprocessing
adding features that do not add value
waste: overproduction
making products that cannot be sold easily
waste: motion
unnecessary movement of people
what is capacity?
a measure of how much output a business can theoretically achieve in a given period
when is a business said to be at 100% capacity utilisation?
when a business is unable to increase output
implications of capacity being dynamic:
-when a machine is having maintenance, capacity is reduced
-by working more production shifts, capacity can be increased
-capacity needs to take account of seasonal or unexpected changes in demand (eg: ice-cream factories in the UK needed to quickly increase capacity during a heat wave)
examples of capacity:
-a fast-food outlet may be able to serve
1,000 customers per hour
-a call-centre may be able to handle
10,000 calls per day
-a football stadium could seat no more than 45,000 fans at each match
-a car production line may be able to complete
50,000 cars per year
define capacity utilisation
the percentage of potential output levels that is being achieved
capacity utilisation formula:
actual level of output/max possible output
x 100
why capacity utilisation matters?
it is a useful measure of productive efficiency since it measures whether there are idle (unused) resources
why do businesses try to increase output?
-average production costs tend to fall as output rises (unit costs are reduced)
when is a high level of capacity utilisation required?
a business has a high break-even output
the costs of capacity:
-equipment: (production line)
-facilities: (building, rent)
-labour: (wages and salaries)
reasons most businesses operate below
capacity?
-lower than expected market demand
-a loss of market share
-seasonal variations in demand
-maintenance and repair programmes
disadvantages of operating at low capacity utilisation:
-higher unit costs
-less likely to reach breakeven output
-capital tied up in underused machinery
disadvantages of operating at high capacity utilisation:
-negative effect on quality
↳ production is rushed, less time for quality control
-employees suffer (added workloads & stress)
-de-motivating if sustained for too long
-production equipment may require repair
how to increase capacity utilisation?
-sub-contract some production activities
-reduce time spent maintaining production equipment
-offer overtime pay to the workforce.
-employ workers on temporary contracts
what is sub contracting?
hiring employees from another company to work for you
how to decrease capacity utilisation:
-redundancies or sale of assets
-sub-contract in work from another business
what is stock?
the raw materials, work-in-progress and finished goods held by a firm
what are raw materials?
-bought from suppliers
-used in production process
what is work in process?
semi or part-finished production
what are finished goods?
completed products ready for sale or distribution (products)
key reasons to hold stock:
-enable production to take place
-satisfy customer demand
-precaution against delays from
suppliers
working capital & stock
holding stock ties up cash in working capital
long holding times & stock
-the longer stocks are held, the greater risk they cannot be used or sold
(perishable items have expiry dates)
cost of storage
more stocks require large storage space and possibly extra employees and equipment to control and handle them
interest costs
holding stocks means tying up capital (cash) on which the business may be paying interest
why use stock control charts?
to maintain stock levels so that the total costs of holding stocks is minimised
what is the minimum level (stock control chart)?
minimum amount of product the business would want to hold in stock
what is the maximum level (stock control chart)?
max level of stock a business can or wants to hold
what is the re order level (stock control chart)?
acts as a trigger point, so that when stock falls to this level, the next supplier order should be placed
what is the lead time (stock control chart)?
amount of time between placing the order and receiving it
what is buffer stock (stock control chart)?
an amount of stock held as a contingency in case of unexpected orders/delays from suppliers so that orders can be met
how lead time affects re ordering stock:
higher lead times may require a higher re-order level
how demand affects re ordering stock:
higher demand normally means higher re-order levels
advantages for low stock inventory:
-lower stock holding costs (e.g. storage)
-lower risk of stock obsolescence
-less cash tied up in working capital → can be used elsewhere in the business
advantages of high stock inventory
-production fully supplied - no delays
-discount for bulk buying (lower unit costs)
-better able to handle unexpected changes in demand or need for higher output
4 ways to minimise stock waste
-store inventory appropriately
-rotate stock
-pricing strategies
-computerised stock management systems to track all inventory
minimising waste through stock rotation
old stock gets used sold first
minimising waste through pricing strategies
adjust prices to clear stock through sales promotions
what is lean production?
practices that reduce waste in the operational process, anything unnecessary is removed from the production process
key features of lean production:
less time
↳ the production process is organised in the most efficient way → reduces defects
fewer materials
↳ focus on waste reduction
less labour
↳ lean production is typically capital intensive
space required for prod. is reduced
↳ just in time stock management
what is the use of lean production likely to lead to and why?
a competitive advantage
lower unit costs due to minimal wastage
↳ prices may be lower than those offered by competitors
reduce lead times
↳ better customer satisfaction
which strategies does lean production use?
Just in Time stock control and Kaizen
what is just in time (JIT) stock management?
stock levels are kept to a minimum
-raw materials are ordered as required & delivered by suppliers when they are to be used
suppliers & JIT
-close relationships with suppliers need to be developed
-suppliers may need to be in close proximity
which businesses are JIT particularly useful for and why?
businesses that operate in dynamic markets:
-products may need frequent design changes that require different components
-holding large amounts of stock risks wastage through obsolescence
advantages of JIT
-stockholding costs (storage costs) are minimised
-close working relationships are developed with a small number of trusted suppliers
-cash flow is improved as money is not tied up in stock
disadvantages of JIT
-bulk buying economies of scale are not generally possible
-the ability to respond to unexpected increases in demand is reduced
-unreliable suppliers (e.g. late or poor quality deliveries) can quickly halt production
what is kaizen?
taking continuous steps to improve productivity by eliminating of all types of waste in the production process
how is kaizen long term?
-changes are small and ongoing rather than significant one-off’s
-they are constantly reviewed to ensure that they achieve the desired positive impact on productivity and always focused on meeting customers’ needs
kaizen & staff
-all workers must be actively involved in making improvements, not just management
-ongoing training and development is vital
methods of kaizen
-zero defects in manufacturing
-high levels of automation
-high levels of cooperation between workers and management
-employees are likely to work in teams and be empowered to work creatively
-staff training
-computer inventory management systems
define quality
the extent to which a product or operation meets its customers’ requirements & needs
the importance of quality:
-the key to meeting customer needs
-can help a business differentiate & gain competitive advantage
-markets are highly competitive so customers are more:
↳ knowledgeable & demanding
↳ able to share information about poor quality
4 aspects of quality:
-buying process
-product reliability
-cost of ownership
-after-sales service
examples of poor quality
-product breaks
-doesn’t execute function
-product is delivered late
-unresponsive customer service
consequences of poor quality
-loss of customers
-bad brand reputation (customers may tell others about their bad experience)
-cost of reworking or remaking product
-costs of replacements or refunds
-wasted materials
-legal costs??
methods of achieving quality
-clear understanding of customer needs
-train employees in quality procedures
-invest in technology
-work with high quality suppliers
-use quality management methods
(eg: control & assurance)
how might quality be measured?
-customer service ratings
-rejected output from production
-market surveys
-product returns
what is quality management?
controlling activities to ensure that products and services meet their purpose & customer needs
two main approaches of quality management:
-quality control
-quality assurance
define quality control
inspecting the quality of output at the end of the production process
what is quality control about?
identifying the faults of products
how many people would be involved in quality control?
a small amount, likely one
advantages of quality control:
-quality specialists are employed to check standards
-inexpensive and simple way to check that output is fit for purpose
disadvantages of quality control:
-the rejection of finished goods is a significant waste of resources
-there is little focus on the cause of defects
define quality assurance
inspecting the quality of production throughout the process
what is quality assurance about?
the process
how many people would be involved with quality assurance?
all employeees
advantages of quality assurance
-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
disadvantages of quality assurance
-staff training and a skilled workforce is required so labour costs may be increased
-reworking may lengthen the production process
difficulties in improving quality
-customers’ perception of quality is constantly changing
-improving quality can add more work so might be naturally opposed by the workforce
-measuring quality can be difficult and expensive
what is total quality management (TQM)?
a system of management based on quality being the priority throughout the organisation
who is involved in TQM?
-all employees are concerned with quality at every stage of production
-quality is ensured by workers and not inspectors
which 5 principles underpin TQM?
-quality chains
-quality policies
-controls
-team work
-customer views
quality chains (TQM)
-each person in the production chain is a customer of the preceding process
-as such, their needs need to be fully met
quality policies (TQM)
clear policies are established on the expectations of all employees and how they should achieve the highest quality
controls (TQM)
a range of controls are put in place to guarantee quality is achieved
team work (TQM)
people work in teams to solve problems and identify opportunities
customer views (TQM)
feedback from customers is taken into account to improve the process and product
advantages of TQM
-puts customer at heart of production process
-less wasteful than throwing out defective finished products
-eliminates cost of inspection
disadvantages of TQM
-all workers must be committed and receive significant continued training
-careful monitoring and control is required
what are quality circles?
groups of workers meet regularly to solve quality problems identified in the production process
advantages of quality circles
-workers may be motivated as they are involved in decision making
-relevant and focused solutions are likely as workers are familiar with processes
disadvantages of quality circles
-management need to have trust in workers’ views and solutions
-meetings and structures must be organised regularly
quality and competitive advantage
-quality adds value to products
-high levels of quality will allow a business to charge a premium price & ensure customers are satisfied
-
how can a business maintain competitive advantage through quality?
-continually improve quality and adapt to the needs of customers (as quality is a highly subjective concept)
