2.4.1 Production, Productivity, Effciency Flashcards
Methods of production
- job
- batch
- flow
Can take place in different ways depending on type and quantity required of product
Production
The transformation of resources into goods or services
Production process
- Input (primary) resources, C.E.L.L
- Production /Transformed (secondary) processing, manufacturing , fabrication
- Output (tertiary) goods/service, wastage, by-products
C.E.L.L
Capacity
Equity
Land
Labour
Factors affecting which method of production chosen
- capital required
- scale/output/type of business
- availability/supply of skilled labour
- demand/nature/type of product
Job production:
producing items = specific requirements of customer
- labour intensive - high quality
- one off and one at a time
- unique, individuals, tailor made
E.g. wedding cake/dress, architecture
Batch production
products are made in groups = series of tasks performed on each group
E.g. food industry (money is in stock)
- concentrate skills
- capital intensive
- better use of equipment = good quality products more economically than manufacturing
Flow/Mass production
- as many as possible , identical product continuously (no stopping=shift work) , assembly line
- mass market products
- high automated
E.g. drinks and tvs and mobile phones
ADVs of Mass/flow production
- reduced human error - efficient
- specialised at their role/job = less training
- cost/unit production reduced (improved work/material flow)
- manufacture large quantities
- capital intensive = work constantly
DISs of mass/flow production
- motivation = job security/redundancy &repetitive task
- training
- interruptions =delay whole line = loss production time = delay to customer = could have lots of waste ==down time
- need investment =maintenance, depreciation =obsolete, manage robot= training & safety gear
- stressful environment
- random quality checks (some missed, waste, quality controlled inspector)
- long set up/reliant on high quality machinery
- cash flow issues
- high raw materials unless use lean = waste
- less differentiation/inflexible product
Obsolete
When something is producing no value to the business
Specialisation
When work is divided into separate tasks or jobs that allow workers to become skilled at one of them
Productivity formulae
Outputs divided by input per time period
How does a business growing affect production? (4 THINGS)
- employee staff/invest in machinery = capital intensive
- scale of production increases
- invest in new factories
- consider off-shoring
Production in action
- business may use a combination of all 3 types of production
- at different times
- depends on products/customer needs
Which production method is best for growing a firm depends on: (4 THINGS)
- target market (customer demand)
- technology (production automated)
- resources (finance/people to be able to use flow
- standards (quality required)
Advs of job production
- customer requirements handled
- high quality = high price
- motivated employees = more job satisfaction
- flexible production method
Dis of job production:
- individual cost per unit = high
- labour intensive = high labour costs
- close consultation with client
- reliant on high skill
Advs of batch production (4 THINGS)
- cost saving (buying in bulk)
- customers some choice
- specialist staff/equipment to work with products
- handle unexpected orders
Dis of batch production
- time to switch production of one batch to another
- maintain higher stocks raw materials & work in progress
- boring/repetitive = motivation decreases
- size of batch dependant on capacity allocated
CELL
Work is organised into teams each cell takes responsibility for production of complete units of output (work as team-achieve)
- set contained cells
- each cell = responsibility for production of complete units of output
- members work as team ensue quality and goals met
ADVS of CELL production
- improved productivity - increase motivation
- efficient use of space
- team=flexibility =ownership
- multi skilled = productive
- better communication
DIS of CELL production
- conflicts
- managers resent giving authority
- small scale = not enough savings to make switch worthwhile
- have enough work but not too much allocated
- not allow as much machinery use as traditional flow
- invest in new materials-handling/ordering systems suitable for CELL
Concept of LEAN production & ways of becoming lean
Japanese approach to production focused on eliminating all forms of waste (looking at ways of improving)
- CELL
- JIT
- Kaizem
- TQM
Lean production principals
- pull system
- one piece flow
- tact (how to manufacture to reach demand)
- zero defects (self assurance/ self check)
Productivity
- important measure of efficiency
- how many outputs produced from a given number of inputs over a period of time
Output/units of labour over time period (divided by)output/units of capital
How to minimise input without decreasing output
- efficient workers
- training
- motivate staff (non financial and financial incentives)
- become more capital intensive
How to increase output without increasing input
- reduce waste - efficiency
- increase capital intensity
- change method of production
How to improve productivity
- capital intensive
- motivate/train staff (expensive/may not improve productivity)
- lean production
- better capital equipment (demotivate workers = replaced)
- better quality raw materials - reduce time waste on rejected
- improved organisation (may resist changes = fear of job loss)
Factors influencing productivity
- demand to be fulfilled
- leadership style
- working conditions
- training levels
- amount of capital to invest
- type of business/how capital intensive
Link between competitiveness and productivity
2 types of competitiveness:
1. PRICE (closer link):more likely in dynamic/competitive markets where cost of production is priority
2.NON PRICE; more likely in Monopoly/Oligopoly markets where production differentiation is a priority
Monopoly market
market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute.
Oligopoly market
is a market structure with a small number of firms, none of which can keep the others from having significant influence
A monopoly is one firm, a duopoly is two firms and an oligopoly is two or more firms.
Efficiency
Production at lowest unit cost
Acpu calculated; total production cost in period divided by total output in period (units)
Acpu
Average cost per unit
Economies of scale
Factors that cause Acpu (efficiency) to fall as output increases
MES;
Minimum efficient scale
- point where you are most efficient
- most output for lowest cost
Economies of scale matter because
- impact firms competitiveness - lower interest rates for larger amounts
- increase profit by :reducing unit cost (more funds for investment or owners) Or reduce price (more sales, passing reduced cost onto consumer) = barrier to entry for other firms wishing to enter market
Diseconomies of scale
Factors that cause acpu to rise as output increases
Why do bigger businesses start to experience problems
- communication is harder (repeat tasks, mistakes, wrong tasks) = alienated - reduces productivity
- different branches/departments (uncoordinated, own objectives, moving away from corporate objectives - wasted resources)
- motivation is lower (less personal contact from line manager) (span of control widens = feel less supported (mistakes could affect productivity)
- cause internal politics
How to combat diseconomies of scale
-invest in electronic forms of communication - more staff to control, have regular communication times
-rewards (performance related pay), appraisal performance review, -non financial = training, team building social events
Fringe benefits.(e.g. company car)
management by objectives
Increase efficiency
- efficient resource allocation
- adapt production (LEAN) - no waste (JIT production)
- capital intensive (nw technology)
- incentives = motivation
- lower cost per unit (bulk buy)
- introduce standardisation
- outsourcing
- delayering, downsizing, relocating
