2.4 Resource Management Flashcards
Methods of Prodution
- Job production
- Batch production
- Cell production
- Flow production
Define Job production
Producing one item at a time, as ordered by the customer
Adv. of job production
High quality product
Motivated and highly skilled workers
Customised products can be produced
Disadv. of Job production
Production is slow
Labour costs are high
Define Batch production
Groups of the same product are produced, before moving on to a group of different products
Adv. of Batch production
Workers can specialise
Production can take place as the previous ‘batch’ starts running out
Disadv. of Batch production
Requires careful coordination to avoid shortages
Money is tied up in stock as completed products need to be stored
Define Flow production
Continuous manufacturing of standardised products, usually on a production line
Adv. of Flow Production
Low unit costs due to economies of scale
Rapid production
Usually highly automated (capital intensive)
Disadv. of Flow production
Customisation is difficult
Capital equipment can be expensive to purchase
Define Cell Production
This involves workers being organised into multi-skilled teams, with each team responsible for a particular part of the production process
Adv. of Cell production
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
Disadv. of Cell production
Requires extensive reorganisation of production processes
Teams efficiency may be reduced by weaker workers
Labour Productivity formula
Labour productivity= Output/ No. of workers
Capital productivity formula
Output/ No. of Machines
Factors that influence productivity
- Employee motivation
- Skills, education & training staff
- Business organisation & working practices
- Investment in capital equipment
Define Competitiveness
Competitiveness refers to the ability of a business to maintain or grow its sales and market share given the presence and actions of rivals
Factors that can influence business efficiency
- Standardisation of the production process
- Relocation or downsizing
- Investment in capital equipment
- Organisational restructuring
- Outsourcing
- Adoption of lean production techniques
Define Labour-intensive production
Labour-intensive production predominantly uses physical labour in the production of goods/services
Define Capital-intensive production
Capital-intensive production predominately uses machinery and technology in the production of goods and services
Adv. of Capital intensive production
Low-cost production where output is high
Machines are usually consistent and precise
Machines can run without breaks
Disadv. of Capital intensive production
Significant set-up and maintenance costs
Breakdowns can severely delay production
May not provide flexibility in production
Adv. of Labour intensive production
Low-cost production where labour costs are low
Provides opportunities for workers to be creative
Workers are flexible (e.g. they can be retrained)
Disadv. of Labour intensive production
Workers may be unreliable and need regular breaks
Incentives may be needed to motivate staff
Training costs can be significant
Define Capacity Utilisation
Capacity utilisation is measure of the level to which a businesses assets are being used to produce output
Capacity utilisation formula
Current output/ maximum potential output X 100
Implication of Under-utilisation of capacity
If a business has a low level of capacity utilisation, it will not be making the most of its resources and is likely to have increased unit costs
Fixed costs are spread over fewer units of output, resulting in higher average total costs
Workers may be under-deployed leading to fears of redundancy
Implications of Over-utilisation of capacity
If a business has a high level of capacity utilisation, it may not have the flexibility to respond to new orders from customers
Staff will be under a lot of pressure to produce high levels of output
Overworked staff may be inclined to leave, increasing staff turnover
Machinery may be pushed to its limits and prone to breakdowns, which disrupts production and increase costs
Ways of improving capacity utilisation
- Increase sales
- Increase usage
- Outsourcing
- Reduce capacity
- Redeployment
Define Buffer stock
Buffer stock is a quantity of goods/raw materials kept in case of stock shortages
Adv. of holding Buffer stock
Stability in supply
Buffer stocks ensure a stable supply of goods which is able to respond to unexpected customer demand
Price stabilisation
Buffer stocks can help prevent extreme price fluctuations as it helps the market to avoid shortages, which would result in rapid price increases
Raw materials security
Businesses that are dependent on particular raw materials avoid disruption to their supply
Competitive advantage
By having a reliable supply of goods, businesses can gain a reputation for always being able to meet the needs of their customers
Disadv. of holding Buffer stock
Cost
Holding buffer stocks can be expensive, as it requires storage facilities and inventory management systems
Risk of obsolescence
Buffer stocks can become obsolete if the demand for a particular product or input declines
Opportunity cost
Holding buffer stocks ties up capital that could be invested in other areas of the business
Implications of poor stock control
- Holding too much stock
- Holding too little stock
Define Just in time stock management (JIT)
Just in Time (JIT) stock management is a process in which raw materials are not stored onsite
Stock is ordered as required, and delivered by suppliers ‘just in time’ for production
Adv. of JIT stock management
Stockholding costs, including 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 stocks
Unused storage space is available for productive use
Teamwork is encouraged so employee motivation is likely to be improved
Disadv. of JIT stock management
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
Reasons for waste
Stock becomes obsolete unless used by a particular date
Perishable stock (food and medicines) that is not used before they deteriorate will need to be thrown away
Stock may be damaged as a result of poor storage conditions and may not be suitable for use in the production process
Ways to minimise waste
- Storage
- Planning
- Sales tactics
Define Lean production
Lean production involves the minimisation of the resources used in production
Competitive adv. from lean production
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
Adv. of Lean 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
Methods of Quality management
- Quality control
- Quality assurance
- Quality circles
- Total quality management (TQM)
Define Quality control
Inspecting the quality of output at the end of the production process
Benefits of Quality control
Quality specialists are employed to check standards
An inexpensive and simple way to check that output is fit for purpose
Drawbacks 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 production process
Benefits 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
Drawbacks of Quality assurance
Staff training and a skilled workforce is required so labour costs may be increased
Reworking may lengthen the production proces
Define Quality circles
Groups of workers meet regularly to solve quality problems identified in the production process
Benefits 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
Drawbacks of Quality circles
Management need to have trust in workers’ views and solutions
Meetings and structures must be organised regularly
Define Total quality management (TQM)
Organisation of the business with quality at its core and with every worker responsible for quality
Benefits of TQM
Quality in all aspects of the business improves efficiency
A culture of constant improvement exists within the business
Drawbacks of TQM
All workers must be committed and receive significant continued training
Careful monitoring and control is required
Define Kaizen
Kaizen involves a business taking continuous steps to improve productivity through the elimination of all types of waste in the production process
Elements of Kaizen:
- Total Quality Management
- Just in Time stock management
- Teamwork and quality circles
- Zero defects in manufacturing
- High levels of automation
- High levels of cooperation between workers and management
