2.4 Resource Management Flashcards
Methods Of Production
Job Production
Batch Production
Flow Production
Cell Production
Job Production
PROS / CONS
Producing one item at a time, as ordered by the customer
( Ship Building, Custom Built Cars, Personal Trainer, Tailored Suit )
OPERATIONS: Factory Built To Its Specific Needs
HR: Use Recruitment Agency To Find People With Specific Skills
MARKETING: Use PR Company To Build Campaign
FINANCE: Use Accountants To Audit Accounts
PROS:
- Higher Quality vs. Mass Market ( Flow )
- Unique To Customer ( Personal ∴ ↑ Price )
- Workers = ↑ Motivated As They Take Product From Start 🠮 Finish
CONS:
- Cost Per Making One Thing Is High vs. Mass Market ( Flow )
- Need to ↑ % Labour = ↑ Wage Bill + Training ( ↑ Costs )
Batch Production
PROS / CONS
Groups of the same product are produced, before moving on to a group of different products ( Clothing ⮕ Size ⮕ Colour )
Batch One ( Group ) ⮕ Stop Production ⮕ Adjust Production ⮕ Batch Two Group
PROS:
- Workers can specialise
- Production can take place as the previous batch starts running out
CONS:
- Requires careful coordination to avoid shortages
- Money is tied up in stock as completed products need to be stored
Flow Production
PROS / CONS
Continuous manufacturing of standardised products, usually on a production line of Mass Market
( Tv, Household Appliances, Standard Cars, Clothes )
PROS:
- Produce More to Meet ↑ Demand
- Low unit costs due to economies of scale
- Rapid production / Usually highly automated (capital intensive)
- Workers can specialise in one activity
CONS:
- Capital equipment can be expensive to purchase
- Workers ↓ motivated from continuous same tasks
- ↓ Flexible vs. Job Production ( Customisation is difficult )
Cell production
This involves workers being organised into multi-skilled teams, with each team responsible for a particular part of the production process
PROS:
- 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
CONS:
- Requires extensive reorganisation of production processes
- Weaker workers may reduce team efficiency
Calculating Productivity
( Labour productivity / Capital productivity )
Equation:
The labour productivity of a business is measure of the output per worker during a specified period of time
Labour productivity = Output / Number of Workers
Capital productivity is a measure of the output of capital employed (e.g. machinery) during a specified period of time
Capital productivity = Output / Number of Machines
Average Unit Cost
Equation:
Average Unit Cost = Total Costs / Units Sold
Factors that Influence Productivity
- Employee motivation
- Skills, education & training staff
- Business organisation & working practices
- Investment in capital equipment
- Management Style
Factors that Influence Efficiency
- Standardisation of the production process
- Relocation or downsizing
- Investment in capital equipment
- Organisational restructuring
- Outsourcing
- Adoption of lean production techniques
Capital Intensive & Labour Intensive Production
Capital-intensive production predominately uses machinery and technology in the production of goods and services
PROS:
- Low-cost production where output is high
- Machines are usually consistent and precise
- Machines can run without breaks
CONS:
- Significant set-up and maintenance costs
- Breakdowns can severely delay production
- May not provide flexibility in production
Labour-intensive production predominantly uses physical labour in the production of goods/services
PROS:
- Low-cost production where labour costs are low
- Provides opportunities for workers to be creative
- Workers are flexible (e.g they can be retrained)
CONS:
- Workers may be unreliable and need regular breaks
- Incentives may be needed to motivate staff
- Training costs can be significant
Capacity Utilisation
Equation:
Capacity Utilisation
= Current Output / Maximum Possible Output × 100
Ways of Improving Capacity Utilisation
- Increase Sales
- Require more units to be produced
- Promotional spending needs to increase - Increase Usage
- Encourage sales when there is low demand
- Lower Prices - Outsourcing
- Contract tasks to other businesses to increase output
- Profit margin may be reduced - Reduce Capacity
- Sell fixed assets or reduced staffing levels to remove excess capacity
- Flexibility response to increased demand is reduced - Redeployment
- Move underused resources to other parts of the business that require them
- But training of staff and retooling costs may increase
Stock Control Diagrams
A stock control diagram illustrates the flow of stock ( inventory ) into and out of a business over time
Just in Case / Buffer Stocks
PROS / CONS
Buffer Stocks ⮕ Minimum stock the business intends to hold
PROS:
- Manage Uncertainty = If supplier fails to deliver. Can still continue production
- Negotiate Better Deals With Suppliers ( ↑ Order Size & ↓ Average Cost Per Unit )
- Competitive advantage By having a reliable supply of goods, businesses can gain a reputation
- Price stabilisation Buffer stocks can help prevent extreme price fluctuations as it helps the market to avoid shortages
CONS:
- Higher Storage Costs
- Wastage? ( e.g Food might get old )
- Risk of obsolescence Buffer stocks can become obsolete if the
demand for a particular product or input declines
Just in time (JIT) Stock Management
PROS / CONS
Just in Time ( JIT ) stock management is a process in which raw materials are not stored onsite
PROS:
- Stockholding costs, including storage costs, are minimised
- Cash cow 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
CONS:
- 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
Ways To Minimise Waste
- Storage:
- Refrigeration
- Protection from damage
- Effective security
- Careful Stock Rotation - Planning:
- Staff Training
- Diligent Forecasting
- Computerised Stock Control - Sales Tactics:
- Reduce Price
- Alternative uses for obsolete stock
Lean Production
Lean production involves the minimisation of the resources used in production
- Less time is required as the production process is organised in the most efficient way
- Fewer materials are used as there is a focus on waste reduction
Less labour is used as lean production is typically capital intensive - The space required for production is reduced as a result of just in time stock management
- A small number of trusted suppliers work closely with the business
- 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
Just In time: Stock comes when needed
kaizen: Continuous Improvement
Cell Production: Teams work together to complete tasks efficiently
Lean Design: Fast product design
Quality Control ( QC )
PROS / CONS
A system to ensure a final good or service meets a certain level of quality
- Identify Defects
Poor Quality Control (QC) = ↑ Defects ↑ Wage Costs
↑ Cost Of Production ↑ Final Price? = ↓ Competitiveness
PROS:
- Avoid selling defects ∴ ↓ Defects ↓ Refunds = ↑ Reputation ↑ Sales
- With QC checks occur after the product is produced ∴ ↓ impact to production process
CONS:
- ↑ Cost for QC inspectors
- There is little focus on the cause of defect
- The rejection of finished goods is a significant waste of resources
Quality Assurance ( QA )
PROS / CONS
Inspecting the quality of production throughout the production process
Poor Quality Assurance ( QA ) = ↑ Defects ↑ Waste Costs
↑ Cost of Production ↑ Final Costs? = ↓ Competitiveness
PROS:
- ↓ Defects ↓ Waste ↓ Cost Of Production = Ability To ↓ Price
∴ ↑ Competitiveness
- 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
CONS:
- Staff training and a skilled workforce is required so labour costs may be increased
- Reworking may lengthen the production process
Quality Circles
Groups of workers meet regularly to solve quality problems identified in the production process
PROS:
- Workers may be motivated as they are involved in decision making
- Relevant and focused solutions are likely as workers are familiar with processes
CONS:
- Management needs to have trust in workers views and solutions
- Meetings and structures must be organised regularly
Total Quality Management ( TQM )
Organisation of the business with quality at its core and with every worker responsible for quality
PROS:
- Quality in all aspects of the business improves efficiency
- A culture of constant improvement exists within the business
- Increase customer loyalty ∴ ↑ Sales ↑ Price Sensitivity
CONS:
- All workers must be committed and receive significant continued training
- Careful monitoring and control is required
- Cost for TMQ culture
- Time to see real impact
Kaizen
Kaizen involves a business taking continuous steps to improve productivity through the elimination of all types of waste in the production process
- Changes are small and ongoing rather than significant one-offs and are constantly reviewed to ensure that the desired positive impact on productivity is achieved
