2.4 - Resource Management Flashcards
Methods of production
- Job
- Batch
- Flow
- Cell
Job production
When a one off or small number of items are produced
Advantages of job production
- Customer requirements and changes can be handled
- Associated with higher quality
- Employees can have more job satisfaction making them more motivated
Disadvantages of job production
- Unit costs may be high
- Labour intensive so high labour costs
- Usually requires highly skilled workers
Batch production
When similar items are produced together offering standard products with some options
Advantages of batch production
- Cost savings can be achieved by buying in bulk
- Still allows customers some choice
- Allows a firm to handle unexpected orders
Disadvantages of batch production
- Takes time to switch production of one batch to another
- Requires business to maintain higher stocks of raw materials and work in progress
- Tasks may become repetitive and boring
Flow production
When a product moves continuously through the production process so as one task is finished the next one starts immediately
Advantages of flow production
- Unit costs are lower due to higher outputs produced and improved work flow
- Suitable for manufacture of large quantities
- Less need for training and skills
Disadvantages of flow production
- Very long set up time and reliant on high quality machinery
- High raw materials and finished stocks unless lean production is used
- Goods are mass produced so less differentiation for the consumer
Cell production
When work is organised into teams giving each team responsibility of doing part of the production process as a product moves through the assembly line
Advantages of cell production
- Motivating for workers to see completed product and work in teams
- Less time moving from place to place
Disadvantages of cell production
- Could create tension in or between cells if work gets competitive
- Huge investment in machinery for each cell
Labour productivity
The amount a worker produces
Formula for labour productivity
Output / Number of employees
Ways to improve productivity
- Training
- Improved employee motivation
- More capital equipment
- Improved organisation of production
Efficiency
Ability of a business to maximise output while minimising input, such as time, cost, and resources
Factors affecting efficiency
- Level of wastage in production
- Achieving the right balance between variable factors that affect efficiency, such as equipment and staff
Formula for unit costs
Total production costs / Total output
Economies of scale
When unit costs fall as output increases
Types of economies of scale
- Purchasing
- Technical
- Marketing
- Network
- Financial
Purchasing economies of scale
When firms buy in larger quantities which results in lower unit costs
Technical economies of scale
When firms use specialist equipment or processes to boost productivity
Marketing economies of scale
When a firm spreads a fixed marketing spend over a larger range of products, markets and customers
Network economies of scale
When a firm adds extra customers or users to a network that is already established
Financial economies of scale
When larger firms benefit from access to more and cheaper finance
Examples of external economies of scale
- Having many specialist suppliers close by
- Access to research and development facilities
- Pool of skilled labour to choose from
Labour intensive
When production relies on using labour resources
Capital intensive
When production relies on using capital resources
Advantages of capital intensive production
- Greater opportunities for economies of scale
- Potential for significantly better productivity
- Better quality and speed
- Lower labour costs
Disadvantages of capital intensive production
- Significant investment required
- Potential for loss competitiveness due to obsolesence
- May generate resistance to change from labour force
Advantages of labour intensive production
- Unit costs may still be low in low wage locations
- Labour is a flexible resource through multiskilling and training
- Labour being at the heart of the production process can help continuous improvement
Disadvantages of labour intensive production
- Greater risk of problems with employee and employer relationships
- Potentially high costs of labour turnover
- Need for continuous investment in training
Capacity
Measure of how much output a business can achieve in a given period of time
Capacity utilisation
Percentage of a business’ capacity that is actually being used over a specific period
Formula for capacity utilisation
(Actual level of output / Maximum potential output) * 100
Implications of under utilisation of capacity
- Higher unit costs will impact competitiveness
- Capital tied up in under utilised assets
- Negative brand image, such as empty seats in a restaurant
Benefits of under utilsation of capacity
- Sufficient space to meet extra orders
- Maintenance of machines is easier
Implications of over utilisation of capacity
- Production may be rushed and less time for quality control worsening quality
- Decreases in employee motivation due to added workloads and stress
- Less able to meet sudden or unexpected increases in demand causing a loss of sales
Three main types of stock
- Raw materials and components
- Work in progress
- Finished goods
Factors influencing the amount of stock held
- Need to satisfy demand
- Need to manage working capital
- Risk of stock losing value
The costs of holding stock
- Cost of storage
- Obsolescence risk
- Stock out costs
Stock out costs
When a business runs out of stock they may have lost sales and need to pay extra to fulfil urgent replacement orders
Lead time
Amount of time between placing the order and receiving the stock
Buffer stock
Amount of stock held as a contingency in case of unexpected orders
Advantages of low stock levels
- Lower stock holding costs
- Lower risk of stock obsolescence
- Less capital tied up in working capital
Advantages of high stock levels
- Production fully supplied so no delays
- Potential for lower unit costs by ordering in bulk
- Better ability to handle unexpected changes in demand
Just In Time stock control
Where businesses only order and receive stock when it is needed for production or sales, rather than holding large amounts of inventory
Just In Case stock control
Where businesses keep large amounts of stock on hand to prevent shortages and meet unexpected demand
Advantages if Just In Time stock control
- Reduced storage costs
- Improved cash flow
- Greater flexibility
Disadvantages if Just In Time stock control
- High dependence on suppliers
- Risk of stock shortages
- No bulk discounts
Advantages of Just In Case stock control
- Prevents stock shortages
- Bulk buying discounts
- Less supplier dependence
Disadvantages of Just In Case stock control
- Higher storage costs
- Risk of waste
- Tied-up capital
Lean production
Business approach focused on minimising waste while maximising efficiency and productivity. It aims to use fewer resources (time, materials, and labour) while still meeting customer demand and maintaining high-quality standards
Quality control
Process of inspecting products to ensure they meet the required standards, which is done at the end of the production process
Quality assurance
Process that ensures production quality meets the requirements of customers, which builds quality into the production process
Advantages of quality control
- Reduces defects
- Improves customer satisfaction
Disadvantages of quality control
- High costs
- Time consuming
- Only detects defects rather than preventing them
Advantages of quality assurance
- Prevents defects
- Reduces waste and costs
- Boosts efficiency
Disadvantages of quality assurance
- Higher training costs
- Difficult to implement
- Not always foolproof
Total Quality Management
Management philosophy committed to a focus on continuous improvements of products and services with the involvement of the entire workforce
Advantages of Total Quality Management
- Puts customer at the heart of the production process
- Motivational as workers feel more involved
- Eliminates costs of inspection
Disadvantages of Total Quality Management
- Requires strong leadership
- Substantial investment in training and support
- Disruptions and costs may outweigh the benefits
Kaizen
Management philosophy focused on making small, incremental improvements across all areas of a business, engaging every employee in the process
Quality circles
Small groups of employees who voluntarily meet on a regular basis to identify, analyse, and solve work-related problems, with the aim of improving product quality, operational efficiency, and overall workplace performance. These circles focus on continuous improvement through collaborative problem-solving and open communication
Advantages of quality circles
- Motivates workers
- Infuses team spirit amongst workers and improves communication
- Improves productivity
Disadvantages of quality circles
- Time consuming
- Resistance to change
- Expensive due to regular meetings
