2.4.1 Production, Productivity & Efficiency

Question 1

What are the 4 methods of production?

Answer 1

Job Production
Batch Production
Flow Production
Cell Production

Question 2

What is job production?

e.g royal suits made

Answer 2

Manufactures produce one product at a time as ordered by the customer

Question 3

What are the advantages and disadvantages of job production?

Answer 3

Advantages:
* High quality Product
* Motivated & highly skilled workers
* Customised products can be produced

Disadvantages
* Production is slow
* Labour costs are high

Question 4

What is flow production?

e.g. clothes

Answer 4

Continuous manufacturing of standardised products usually on a production line

Question 5

What are the advantages & disadvantages of flow production?

Answer 5

Advantages:
* Low unit costs due to economics of scale
* Rapid production
* Usually highly automated (efficient)

Disadvantages:
* Customisation is difficult
* Captial equipment can be expensive to purchase

Question 6

What is batch production?

e.g. 1000 breadrolls/blueberry muffins

Answer 6

Groups of the same product are produced as a batch

Question 7

What are the advantages and disadvantages of batch production?

Answer 7

Advantages:
Workers can specialise
Production can take place as the previous ‘batch’ starts running out

Disadvantages:
Requires careful coordination to avioid shortages
Completed products need to be stored

Question 8

Define ‘productivity’

Answer 8

The output per input (person or machine) per hour

e.g. an Ikea worker is able to produce 2 Poāng chairs per hour

Question 9

What are the two subcategories of productivity?

Answer 9

• Labour productivity
• Captial productivity

Question 10

What is labour productivity?

Answer 10

A measure of the output per worker during a specific period of time

Question 11

What is the formula used to calculate labour productivity?

Answer 11

Output/Number of workers

Question 12

What is ‘capital productivity’

Answer 12

A measure of the output of capital employed (e.g. machinery) during a specified period of time

Question 13

What is the formula for capital productivity?

Answer 13

Output/number of machines

Question 14

What happens when productivity increases?

Answer 14

• Business costs decrease

When business costs decrease the firm can either pass on this decrease to consumers in the form of lower prices - or maintain the selling prices and enjoy higher profit margins

Question 15

What factors are there that influence productivity?

Answer 15

• Employee motivation
• Skills, educating & training staff
• Business organisation & working practices
• Investment in capital equipment

Question 16

How does employee motivation influence productivity?

Answer 16

• Motivated workers tend to be more productive

Financial incentives linked to output may increase worker productivity

Non-financial incentives may include workers in decision making, increase their commitment & productivity

Question 17

How does skills,education & training staff influence productivity?

Answer 17

• Well-trained and educated workers are likely to be able to make useful contributions to decisions that improve productivity
• (as well as being good & productive at their job)

Question 18

How does business organisation & working practices influence productivity?

Answer 18

• Flexible and adaptable workplaces can improve the commitment of workers
  and allow a business to respond to changes in demand

Question 19

How can investment in capital equipment influence productivity?

Answer 19

• Increased automation can improve levels of output and quality
• Well chosen machinery is less likely to make mistakes than humans
• Machinery and technology can operate for long periods without a break as long as it is properly maintained

Question 20

Define ‘competitiveness’

Answer 20

• Refers to the ability of a business to maintain or grow its sales & marketshare given the prescence & actions of rivals

Question 21

What is the link between competitiveness & productivity?

Answer 21

Businesses that increase their level of productivity (e.g of workers or capital equipment) are likely to be more competitive

Question 22

Define ‘efficiency’

Answer 22

• Refers to the ability of a business to use it’s production resources as cost-effectively as possible

Question 23

What is the formula for efficiency?

Answer 23

Total costs/Number of units

efficiency is often measured in terms of the average cost per unit

Question 24

How is maximum efficiency achieved?

Answer 24

When the cost per unit is at it’s lowest

Question 25

What are economies of scale?

Answer 25

A proportionate saving in costs gained by an increased level of production

Question 26

What factors can influence business efficiency?

Answer 26

• Standardisation of the production process
• Relocation or downsizing
• Investment in capital equipment
• Organisational restructuring
• Outsourcing
• Adoption of lean production techniques

Question 27

How can standardisation of the production process influence efficiency?

Answer 27

• Occurs when all staff use same components & techniques in the production process

Production lead time is reduced
& Training of workers is minimised

Question 28

How does relocating or downsizing influence efficiency?

Answer 28

Moving production to a cheaper or smaller location can reduce fixed costs

Labour-intenisve businesses may look for lower wage locations

However relocation is v disruptive & will incure significant short-term costs

Question 29

How does investment in captial equipment influence efficiency?

Answer 29

Purchasing or upgrading machinery & technology can increase the rate of output, lower costs & improve quality

Question 30

How can organisational restructuring influence efficiency?

Answer 30

• Reducing the level of staff or reorganising staff can better match labour to output needs
• Delayering reduces labour costs as levels of management are removed–> increasing efficiency as you upgrade your employees skill set that a bigger workforce may need- paying less employees but who are highly skilled

Question 31

How can outsourcing influence efficiency?

Answer 31

• Tasks may be given to other business who can complete it at a lower cost

Outsourcing allows a business to focus on improving the efficiency of its core competences

Question 32

How can an adaptation of lean production technqiues improve efficiency?

Answer 32

An approach to production that involves the reduction to all types of wastage (time,resources & space):
e.g.
Kaizen-improvement are made continuously
JIT-holding little to no stock-minimising storage costs

Question 33

What is labour intensive production?

Answer 33

• Predominantly uses physical labour in the production of goods and services

Delivery of services is usually more labour intensive than manufacturing

e.g. schools are labour-intensive operations as teachers plan and deliver lessons and provide pastoral support

countrys where labour costs are low e.g. bangladesh labour intensive production is common

Question 34

What is capital-intensive production?

Answer 34

• Predominately uses machinery & technology in the production of goods/services
• Manufacturing in developed countries where labour costs are relatively high is likely to be capital intensive

e.g. Automative manufacturers such as Ford use robots and other production technology to manufacture vehicles with supervisors overseeing the quality of output

Question 35

What are the advantages & disadvantages of capital intensive production?

Answer 35

Advantages:
- Low cost production where output is high
- Machines are usually consistent & precise
- Machines can run without breaks/days off (unlike employees)

Disadvantages:
- High set up & maintenance costs
- Breakdowns can severely delay production
- May not provide flexibility in production

Question 36

What are the advantages & disadvantages of labour intensive production?

Answer 36

Advantages:
* Low cost production when labour costs are low
* Provides opportunities for workers to be creative
* Workers are flexible (e.g. they can be trained)

Disadvantages:
* Workers may be unreliable & need regular breaks
* Incentives may be needed to motivate staff
* Training costs can be significant