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Business Theme 2 > 2.4 Resource management > Flashcards

2.4 Resource management Flashcards

1
Q

What is production?

A

The transformation of resources into finished goods or services

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2
Q

What is an example of primary industry?

A

The use of land and a tractor to grow cabbages

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3
Q

What is an example of secondary industry?

A

The use of wood, plastic, screws, cutting equipment etc to manufacture furniture

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4
Q

What is an example of tertiary industry?

A

Transport, education, health and social work are all examples

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5
Q

What are the methods of production?

A

Job
Batch
Flow
Cell

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6
Q

What is job production?

A

It is the production of a single product at a time

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7
Q

What are examples of products made in job production?

A

Small-scale an example is the baking of a child’s birthday cake. Large-scale an example is building a ship.

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8
Q

What is the labour like in job production?

A

The number of units produced is small, so the process tends to be labour intensive. The workforce is usually made up of skilled workers or specialists.

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9
Q

What are advantages of job production?

A

+ Quality is high as workers are skilled
+ Workers are well motivated because work is varied
+ Products can be custom made

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10
Q

What are disadvantages of job production?

A
  • High labour costs due to skilled workers
  • Production may be slow
  • Generally an expensive method of production
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11
Q

What is batch production?

A

Making quantities of the same item and dividing production into a number of operations

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12
Q

What are examples of products made in batch production?

A

A batch of armchairs in a furniture factory or croissants in a bakery

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13
Q

How is batch production efficient?

A

Larger production runs tend to lower the average cost of production. New technology is being introduced to make it more efficient too.

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14
Q

What are the advantages of batch production?

A

+ Workers are likely to specialise in one process
+ Unit costs are lower because output is higher
+ More use of machinery is made

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15
Q

What are disadvantages of batch production?

A
  • More complex machinery needed
  • Careful planning and co-ordination is needed
  • Money may be tied up in work-in-progress
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16
Q

What is flow production?

A

Production is organised so that different operations can be carried out in a continuous sequence

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17
Q

What are examples of products made in flow production?

A

Vehicles moving from one operation to the next on a conveyer belt

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18
Q

What is continual flow production?

A

Products such as clothing material pass continually through a series of processes

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19
Q

What is repetitive flow production?

A

The manufacture of large numbers of the same product, such as plastic toy parts

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20
Q

What are advantages of flow production?

A

+ Very low unit costs due to economies of scale
+ Output can be produced very quickly
+ Modern machines can allow some flexibility

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21
Q

What are disadvantages of flow production?

A
  • Products may be too standardised
  • Huge set-up costs before production can begin
  • Worker motivation can be low - repetitive tasks
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22
Q

What is economies of scale?

A

The higher the production, the lower unit costs

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23
Q

What is cell production?

A

It adopts a different approach and involves dividing the workplace into ‘cells’. Inside a cell, machines are grouped together and workers sees the production from start to finish.

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24
Q

What are examples of products made in cell production?

A

A furniture manufacturer making a kitchen range or a car assembly line

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25
What are advantages of cell production?
+ Product flexibility is improved + Team-working is encouraged + Safer working environment and more efficient maintenance
26
What is productivity?
The amount of output that can be produced with a given input of resources. You measure productivity in a period of time.
27
How do you calculate labour productivity?
Output / Number of workers
28
How do you calculate capital productivity?
Output / Number of machines
29
What factors influence productivity?
• Specialisation and the division of labour • Education and training • Motivation of workers • Working practices • Labour flexibility • Capital productivity
30
What is meant by standardisation and division of labour?
Standardisation is the production of a limited range of goods by a business, eg Coca-Cola specialises in soft drinks. Division of labour is when workers/departments specialise in different tasks.
31
What is meant by education and training?
Involves providing more equipment for schools or improving the quality the quality of teaching
32
What is meant by motivation of workers?
Firms might use financial incentives, such as piece rates or job rotation
33
What is meant by working practices?
The methods and systems that employees adopt when working eg productivity might increase by changing the factory layout
34
What is meant by labour flexibility?
If workers are trained to do different jobs and can switch from one to the other at short notice or where workers can choose their own hours
35
What is meant by capital productivity?
Introducing new, more efficient technology
36
What will raising productivity do for a business on a small scale?
They will be able to produce more output with the same level of resources. This will mean costs will be lower and they can charge lower prices, making them more competitive.
37
What will raising productivity do for a business on a large scale?
They make become more competitive in overseas markets. This will help to boost the nation's exports and improve the performance of the UK economy.
38
Why might improving productivity not be enough to outcompete overseas?
Other factors need to be taken into account. for example, price of exports is influenced by exchange rates. If they improve for the UK the price of exports will rise, reducing the competitiveness of UK goods.
39
What is efficiency?
Making the best possible use of all a business's resources. A business will want to use its materials, labour and capital as effectively as possible.
40
When is production said to be efficient?
If average costs are minimised
41
Draw the average cost curve graph
42
What does the diagram show?
Average costs fall at first, reach a minimum and then rise again
43
How does introducing standardisation improve efficiency?
It involves using uniform resources and activities. However, it is inflexible as it makes customisation and design more difficult.
44
How does outsourcing improve efficiency?
Work currently done by a business is given to specialists outside that can do the same work at a lower cost.
45
How does relocating improve efficiency?
Moving the entire business to a new site can result in lower costs eg rents or wages. Many relocate overseas where labour costs are lower.
46
How does downsizing improve efficiency?
Involves reducing capacity, eg laying off workers and closing unprofitable divisions. This can save costs and increase profit, give a more competitive operation etc. However, it could mean losing skilled and experienced workers.
47
How does delayering improve efficiency?
Involves reducing staff at particular levels of a business such as managerial posts. This helps saving as managers are expensive and may lead to better communication with staff.
48
How does investing in new technology improve efficiency?
New machinery may be quicker, more accurate, be capable of more complex tasks etc.
49
How does lean production improve efficiency?
Its aim is to use fewer resources and reduce waste in production eg factory space, materials, stocks etc. As a result, it raises productivity, cuts costs and speeds up production.
50
How does kaizen improve efficiency?
Workers are always coming up with ideas to improve quality, reduce waste or increase efficiency. The improvements may be very small, but long term can have a huge impact.
51
How does just in time production improve efficiency?
This involves minimising or eliminating the amount of stock held by a business. It reduces all of the costs associated with stock holding.
52
What does labour and capital intensive mean?
Labour intensive - using a larger proportion of labour than capital Capital intensive - employing more machinery relative to labour
53
What factors effect the optimal resource mix between labour and capital?
The nature of the product The relative prices of the two factors The size of the firm
54
What are the positives and negatives of capital intensive?
+ Cost-effective if large quantities produced + Machinery more precise - Huge set-up costs - Huge delays and costs of machinery faults
55
What are the positives and negatives of labour intensive?
+ More flexible - eg retrained + People can solve problems and make improvements - People can be unreliable - People cannot work without breaks and holidays
56
What is capacity?
The maximum output that a business can produce in a given period with available resources
57
What is maximum capacity?
The total possible level of sustained output a business can achieve in a given time, capacity utilisation is 100%.
58
What is capacity utilisation?
A measure of the proportion of that capacity that is currently being used
59
What is the optimum level of capacity a business wants to work at?
Close to full capacity, about 90%. This is to help stay flexible, for example to cope with increased orders from regular customers. Or they risk letting down or losing customers.
60
How can capacity utilisation be calculated?
(Current output / Maximum possible output) x 100
61
What are drawbacks of operating under capacity?
- It will not make the most of its resources - Operating inefficiently as unit costs aren't minimised - Affects morale of workers - Lacks liquidity if too much stock is held
62
What are benefits of operating under capacity?
+ Cope more easily with sudden demand + Less work-related stress so relaxed workers
63
What are drawbacks of operating over capacity?
- Constant work can strain resources - Stressed workforce can increase risk of accidents - Machines overworked to breaking
64
What are benefits of operating over capacity?
+ Average costs will be lower as fixed costs will be spread across more output + Improves competitiveness and raise profits + Improves company's image
65
What are ways of improving capacity utilisation?
* Rationalisation (downsize, close outlets, sell unsold assets) * Increase sales (promotion, price reduction) * Outsource (shift production to 3rd party) * Reduce demand (increase price) * Long term expand premises
66
What is stock?
There are 3 types: * Raw materials - stored to cope with changes in production levels * Work-in-progress * Finished goods - stored to cope with changes in demand
67
What is stock control?
The process of a firm controls stock within the business. If the purchase has been efficient, they will receive the right quantity and quality of stock at the right time and lowest cost. Stock must also be handled correctly once inside the firm.
68
What factors influence stock levels?
Demand Stockpile goods Costs of stock holding Amount of working capital available Type of stock Lead time (time taken for stock to be ordered, received, inspected etc) External factors
69
What is a stock control diagram?
An illustration of the flow of stocks in a business. It focuses on the re-order quantity and the re-order level.
70
What is the re-order quantity and level?
Quantity - the amount of stock ordered when a new order is placed Level - the level of stock currently held when an order is placed
71
What are buffer stocks?
An emergency stock held in case there is a stock shortage or delay with delivery which could halt production
72
Implications of holding too much stock
* Storage costs * Opportunity cost means capital tied up in stocks * Spoilage costs of perishable goods * Unsold stock in an unexpected demand reduction * Shrinkage (employees can get away with theft)
73
Implications of holding too little stock
* Unable to cope with unexpected demand * In case of delays, firm may run out of stock * Less able to cope with unexpected shortages of materials

Business Theme 2 (6 decks)

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