2.4 - Resource Management Flashcards
4 methods of production
- Job
- Batch
- Flow
- Cell
Define job production
Involves making one-off items to suit each customer’s individual requirements
Benefits of job production (2)
- Can charge a higher price as products can be tailored to meet exact specifications
- Work should be more interesting for staff
Drawback of job production (2)
- Cost per unit is very high due to gift level of skill and low rates of production
- Finding staff with sufficient skill can be hard and pay will have to be high
Define batch production
Makes a group of products to one specification at a time, allowing some variation in products, yet some specialisation
Benefits of batch production (2)
- Allows variation in the product being made
* Speedier than job production as making a batch of identical products speeds up production
Drawbacks of batch production (2)
- More costly to set up than job production as some specialist machinery will be needed
- Cost per unit will still be higher than flow production as machinery will need to be adjusted between batches
Define flow production
Refers to continuous production of a single, standardised product
Benefits of flow production (2)
- Unit labour costs are extremely low
* High volumes allow huge demand in mass markets to be met
Drawbacks of flow production (2)
- High initial costs of installing production machinery
* Products need to be identical - no tailoring to suit different tastes
Define cell production
Involves organising workers into small groups or cells that can produce a range of different products more quickly than job production allows
Benefits of cell production (2)
- Group working allows ideas to be generated within the cell improvements to processes
- The small highly skilled cell can adjust products to suit customers’ needs
Drawbacks of cell production (2)
- As it is still heavily reliant on people rather than automation, costs are relatively high
- Production volumes will not be as high as flow production
Define productivity
- Is a measure of the efficiency of the production processes
- It is usually measured as output per worker per time period
Formula for productivity
(Total output / number of workers) or (output per worker / time period)
Factors influencing productivity (3)
- Quality and age of machinery
- Skills and experience of workers
- Level of employee motivation
What is the link between productivity and competitiveness?(2)
- Higher levels of productivity lead to lower unit costs - this is because the labour cost involved in making each unit as workers work faster
- Lower unit costs allow businesses to cut prices while maintaining the same profit margin
Define efficiency
Measures the extent to which the resources to which the resources used in process generate output without wastage
Factors influencing efficiency (3)
- Quality and age of machinery
- Skills and experience of workers
- Level of employee motivation
Impact of quality and age of machinery on productivity
Newer machinery may work faster, and break down less
Impact of quality and age of machinery on efficiency
Fewer breakdowns mean fewer faults and newer machinery may produce with less variation
Impact of skills and experience of workers on productivity (2)
- Highly skilled staff can produce things faster
* Experience brings knowledge of how to complete tasks with high efficiency and quality
Impact of skills and experience of workers on efficiency (2)
- Skilled staff are likely to make fewer mistakes
* Experience can mean staff spot the problems that lead to faults before they occur
Impact of level of employee motivation on productivity
Motivated staff are likely to focus on the task without distraction and to work as quickly as they can
Impact of level of employee motivation on efficiency
Motivation brings pride in work - motivated staff will be careful not to make roots and to lose concentration less
Define labour intensive production
Means that a production process relies heavily on human input with little use of automation
Key issues relating to labour intensive production:
2 disadvantages
1 advantage
- Labour costs will form a high proportion of total costs
- Managing labour cost becomes critical - could force a firm to move abroad to lower-wage countries or spend heavily on motivational methods
- Offers far greater scope for tailoring products to suit customers’ needs thus adding value and allowing a higher selling price
Define capital intensive production
Uses high levels of automation, reducing the role of humans of humans as much as possible, replacing them with machines
Key issues relating to capital intensive production
2 disadvantages
1 advantage
- Initial costs will be very high with the need to invest in a lot of specialist machinery
- Running costs will be low
- It may offer little flexibility in terms of product variations
What is capital utilisation?
Is the proportion of maximum capacity being used by the business
Formula for capacity utilisation
(Current output / maximum possible output) x 100
Implications of under-utilisation of capacity (3)
- Lead to fears for job security among staff, damaging motivation
- Cause poor moral among managers
- Contribute to a poor reputation for the business, especially in the service sector, imagine a restaurant that usually has many tables empty even during busy periods
Implications of over-utilisation of capacity
- The firm may be unable to accept any new order, potentially turning away new customers to rivals
- There will be little or no time to carry out maintenance on machines or train staff
2 Ways of improving capacity utilisation
- Increase current output
* Reduce maximum capacity
Ways of improving capacity utilisation - increase current output (2)
- This is likely to be accomplished using marketing methods to boost the volume of sales made by the business, perhaps through advertising or cutting the selling price
- Alternatively the business could use its capacity t make products for other businesses looking to subcontract work
Ways of improving capacity utilisation - Reduce maximum capacity
This will involve selling off assets or laying off staff - although redundancies can be costly in the short term but in the long term it reduces fixed costs
Key features of a stock control diagram (4)
• The maximum stock level set by the business, strongly affected by the amount of space available and the firm”a stock-holding policy
• The minimum or buffer stock level, i.e the amount of stock of that item that the business aims to always have available
• The re-order quantity, which is the vertical upwards, is the amount of stock ordered each time an order is placed
• The lead time, or delivery times, which is the horizontal between a re-order being placed and the delivery of stock arriving
(Photo of graph)
Reasons for keeping buffer stocks of raw materials (2)
- If deliveries are delayed, buffer stock allows production to continue
- If a batch of supplies is found to be faulty, the buffer stock can be used to continue production
Reasons for keeping buffer stocks of finished goods (2)
- Helps to ensure that the business can always supply customers when they need a product with the right size or colour
- Allows firms to accept rush order from customers
Implications of poor stock control - too much stock (5)
- Opportunity cost - ties up capital as stock prevents that money from being used in other ways
- Cash flow problems - danger that a firm could run out of actual cash
- Increased storage costs - keeping stock is costly as it needs space, security or potential refrigeration costs
- Increased financing costs - if stock has been purchased using any form of borrowing the firm will have to pay interest costs
- Increased wastage - too much stock may lead to stock “going off” or becoming obsolete
Implications of poor stock control - too little stock (3)
- lost customers
- Delays in production - employees left idle until stock is delivered
- Loss of reputation - bad word of mouth promotion about how the firm struggles to maintain enough stock to meet customer needs promptly
What is just-in-time stock management? (3)
- Is a Japanese-rooted approach to stock management that aims to eliminate buffer stock completely
- Eliminate costs of stock-holding
- Increased danger of production halting due to a lack of materials
Key issues to consider for a firm using JIT stock management (5)
- Suppliers must be willing to deliver frequently (often several times a day)
- Deliveries must be absolutely reliable; missed deliveries leave the firm without stock
- Suppliers May need to relocate close to the company using just-in-time
- Will smaller, more frequent deliveries lead to a loss of bulk-buying discounts?
- Will frequent deliveries lead to increased congestion and pollution from lorries ?
Define waste minimisation
Is the aspect of lean production that focuses on reducing waste in any business process, such as wasted time, labour on materials
How does waste minimisation reduce waste? (3)
- Less stock is held, meaning there is far less likelihood of stock wastage
- Cash is not tied up in stock, effectively wasting
- Removing buffer stocks helps to highlight bottlenecks and problems in production processes. This can be ironed out by adjusting the production system
Define lean production
Is a collective term for a range of Japanese techniques designed to eliminate waste from business processes
How can lean production improve the way businesses are run? (4)
- More input from staff
- A focus on quality
- Fewer wasted resources through just-time-time and total quality management
- A focus on reducing wasted time, so speed can become become a source of competitive advantage
Factors that lead to sources of competitive advantage (4)
- Higher levels of productivity, reducing labour cost per unit
- Less space used to hold lower stock levels, reducing fixed costs
- Higher quality, leading to reputations advantages and greater repeat custom
- Faster development of new products, allowing the firm to be first to market with new ideas
Quality control (2)
- Involves checking output to find any faults in a production system
- An inspection of output is carried out by a person not involved in working on or making the products
Quality Assurance (3)
- This system focuses on producing methods to prevent quality problems arising
- These methods are checklists or procedures that form a part of company policy
- If procedures are followed the system is designed to prevent any quality problems
Total quality management (2)
- Involves encouraging staff to get things ‘right first time’
- Quality becomes a part of everybody’s job
Pros of Total quality management (2)
- Should becomes deeply rooted into the company culture e.g product safety at a producer of baby car seats
- Once all staff think about quality it should show through from design to manufacture and after-sales service e.g Lexus or BMW
Cons of total quality management (2)
- Especially at first, staff are sceptical of management initiatives as they are not a clear concrete programme as QC or QA
- To get TQM into the business culture may be expensive, as it will require extensive training among all staff
Pros of quality control (2)
- Can be guaranteed that no defective item will leave the factory
- Requires little staff training: therefore suits a business with unskilled or temporary staff (as ordinary workers don’t need to worry about quality)
Cons of quality control (2)
- Leaving quality for the inspectors to sort out may mean poor quality I’d built in to the product
- Qc can only be trusted when 100% of output is tested
Pros of quality assurance
- Makes sure the company has a quality system for every stage in the production process
- Some customers like the reassurance provided by keeping records about quality checks at every stage in production; they believe they will get a higher-quality service and may be more willing to pay more
Cons of quality assurance (2)
- QA does not promise a high-quality product, only a high quality reliable process; this process may churn out standard products reliably
- QA May encourage complacency; it suggests quality has been sorted whereas rising customer requirements mean quality should keep moving ahead
Define quality circle
Is a group of staff who meet regularly to find quality improvements
Key aspects of continuous improvement/kaizen (5)
- Cell production
- Quality circles
- Small but frequent changes
- Regular suggestions
- Quality and productivity improvements
What competitive advantages can be gained from quality management? (4)
- It allows price premium to be charged (often greater than the extra cost of producing high quality)
- It helps to gain distribution, with retailers confident they will not need to deal with product returns and refunds
- Creates brand loyalty and repeat purchase
- It can help to build a brand reputation that spreads to other products within a firm’s portfolio
