3.1 Production Processes

Question 1

What is meant by the term “production”?

Answer 1

The process of changing inputs, such as labour services, into goods and services that can be sold.

Question 2

What are the 2 types of production?

Answer 2

> job production.

> flow production.

Question 3

Define Job Production.

Answer 3

A method of production where a product is supplied to meet the exact requirements of a customer.

Question 4

What are the advantages of job production?

Answer 4

• higher prices may be charged.
• likely to be high quality
• variety of work = employees may be less likely to be bored/demotivated at work

Question 5

What are the disadvantages of job production?

Answer 5

> more expensive due to the need of more resources.

> increased costs as employees may require more training.

Question 6

What is meant by the term “flow production”?

Answer 6

A method of production that involves the continuous movement of items through the production process.

Question 7

What are the advantages of flow production?

Answer 7

• lower costs as fewer resources are required - allows them sell products more cheaply.
• efficient.
• produce in bulk/huge quantities.

Question 8

What are the disadvantages of flow production?

Answer 8

> very costly due to equipment and staff training.
lower sales due to limited choice for consumers.
demotivated employees due to repetitive way of working.

Question 9

What is meant by the term “efficiency”?

Answer 9

How well the business is using its resources to produce a product.

Question 10

What is meant by the term “cost per unit”?

Answer 10

The cost of production of one unit of output.

Question 11

What is the formula for cost per unit?

Answer 11

total production costs / number of units produced.

Question 12

What is meant by the term “just-in-time production”?

Answer 12

When a business holds as little stock as possible therefore items are ordered just in time to be used.

Question 13

What is meant by the term “lean production”?

Answer 13

An approach to production that aims to minimise waste.

Question 14

What is meant by the term “stock”?

Answer 14

Raw materials, components and finished products held by a business.

Question 15

What is meant by the term “buffer stock”?

Answer 15

The minimum amount of stock held by a business to ensure production can continue as normal.

Question 16

What is meant by the term “just-in-case”?

Answer 16

When a business holds stocks just in case there is a delay from suppliers or a sudden unexpected increase in demand.

Question 17

What are 3 advantages of the just-in-time system?

Answer 17

> little to no stock so it doesn’t require employees and buildings to hold and manage stock.
less money used for stock.
no risk of stock becoming out of date or being stolen.

Question 18

What is meant by the term “procurement”?

Answer 18

The process of selecting suppliers, establishing terms of payment and negotiating a contract.

Question 19

What is meant by the term “supply chain”?

Answer 19

All the businesses, people and activities that take part in the production processes from the start until the product gets to the consumer.

Question 20

What is meant by the term “lead time”?

Answer 20

How long it takes for new stock to arrive.

Question 21

What are the advantages of a business holding high levels of stock?

Answer 21

> easier to manage when there’s an increase in demand.
doesn’t affect reorder levels as they won’t need to pay.
no distractions for staff as they are concentrated on selling and not restocking and tidying up.

Question 22

What are the disadvantages of a business holding high levels of stock?

Answer 22

> items can easily be stolen from warehouse.
items could become a waste if no one buys it/ is interested in it.
out of fashion.
high inventory costs (warehouse).
need high levels of labour in warehouse.
cost of training.
higher wages may be expected as staff may be higher skilled.

Question 23

What are the advantages of a business holding low levels of stock?

Answer 23

> less risk of waste from excess stock.
items may seem more premium.
customers may be more interested as they may think it’s running out/ serious customers.
USP of limited sizes and stock which could increase prices.
high traffic/footfall for e-commerce.
can focus on customer service.
customers will come with an intention to shop.

Question 24

What are the disadvantages of a business holding low levels of stock?

Answer 24

> could run out of stock quickly if sudden high demand.
not suitable for everyone.
less stock could disinterest buyers.
need good relationship with suppliers to make sure there’s enough stock at warehouse.