3.4.3 Increasing efficiency and productivity Flashcards
3 what happens if capacity is too low
managers need to consider whether investment is worth it to expand
costs, return, risk involved
3 what happens if capacity is too high
increase demand, through more promotions
downsize by closing parts of facilities
3 what is capacity utilization
percentage of potential output being achieved
3 what is the equation for capacity utilisation
(actual output / maximum output) x 100
3 what is capacity utilization if the Eden Hotel has 320 rooms, but only 250 rooms are occupied?
250/320 x 100 = 78%
3 why is capacity utilisation important
the higher the capacity utilisation, the higher the output from existing resources, unit cost will fall
low utilisation is wasteful, and may require downsizing
good to have some spare capacity - 95% etc
4 what i the importance of efficiency
help bring the price down
maintain competitiveness
match competitors pricing
make higher profits with the same prices
4 what are economies of scale
advantage an organization gains due to an increase in size
they cause an increase in efficiency
improve labour productivity
4 what are diseconomies of scale
disadvantage due to an increase in size
cause decreased efficiency and increased unit cost of production
4 what are technical economies of scale
modern equipment improves efficiency
mass production, high trained, large transportation all improve efficiency and decrease unit cost
4 what are specialisation economies of scale
large firm: skilled specialists, division lof labour, high salaries
small firm: diverse specialists, specialist areas, lower salaries
4 what are purchasing economies of scale
bulk buying, reduces costs
suppliers offer discounted prices
4 what is marketing economies of scale
large firm: expensive research to persuade customers
reduce overall advertising and marketing costs
4 what is financial economies of scale
large firm: safer to get loans more easily
easier access to funds
4 what are research and development economies of scale
develop more innovation
easier to create new goods
4 what are social and welfare economies of scale
large firm: provide social benefits like health care
improve motivation, easier to recruit
4 what are managerial and administrative economies of scale
large firms employ best managers and adopt cost-effective procedures
4 what is co-ordination diseconomies of scale
loss of control, disobedience, rigid and inflexible demands
4 what are communication diseconomies of scale
too much hierarchy can reduce effectiveness
span of control widens too
4 what is motivational diseconomies of scale
assess the needs, managers don’t know employees
less time for recognition and reward
4 what are technical diseconomies of scale
large scale production, hard to organise
4 what are excessive bureaucracy diseconomies of scale
management levels increase, slowing decisions
4 what are staff problems diseconomies of scale
high staff turnover is not good
4 what are less flexible diseconomies of scale
growing firms, fail to meet the needs of customers
4 how can you increase efficiency
‘maximise output achieved from given inputs’
lean production techniques
optimal resource mix
use technology
capacity utilisation
labour productivity
5 what is lean production
cutting waste and improving efficiency
just in time
kaizen
5 what is Just In Time
minimise stockholding at each stage, minimise costs
5 what is Kaizen
small but frequent improvements to minimise waste at the end
5 advantages of Just In Time
no extra storage costs
less risk of stock being damaged or stolen
less faulty stock hold
less/no waste
5 disadvantages of Just In Time
might not arrive in time
rely on suppliers
surge in demand is unaccommodated for
bulk buying is cheaper
frequent deliveries means high costs and more pollution
complex start up required
5 what is inventory
raw materials
work in progress
finished goods
5 what influences the choice between capital or labour intensive workforces
method of production
relative costs
customers
standard or personalised products
size and financial position of business
5 what does Kaizen mean
Kai = change
Zen = good
5 what does Kaizen do
focuses on small but frequent improvements in every aspect of the production process
all members involved (could be bad)
quality circles (Kaizen groups)
any level of hierarchy
requires high commitment and motivation
5 what is Kaizen a big part of
Total Quality Management
5 what is Total Quality Management
check quality at every stage of production
6 what are the four factors of the resources mix
land
labour
capital
enterprise
6 what is the optimal resource mix
best way of combining the factors of production in order to meet these requirements with financial constraints
6 what is land
where the business is
6 what is labour
employees
6 what is capital
machinery used
6 what is enterprise
risk taking
innovation
6 advantages of capital intensive
standard quality, added value
higher output, increased speed
need only a few people
6 disadvantages of capital intensive labour
expensive to set up
less motivation
if there’s a fault, production comes to a stop
running costs are high
6 advantages of labour intensive
cheaper in low wage location
workforce can easily adapt to change
multiskilled
continuous improvement: kaizen
new ideas, government funding to protect jobs
6 disadvantages of labour intensive
industrial relations: strikes
lack of skilled workers, demands aren’t high enough
high wage costs
HR costs are high to recruit, select and train staff
6 what is technology
used to improve efficiency
6 what is robotics
programming robots to carry out task more traditional
production process
logistics
quality assurance
6 advantages of robotics
accuracy and consistency
speed and reliance
hazardous environments can be worked in
6 disadvantages of robotics
initial costs and maintenance costs are high
loss of human touch
lack of initiative and adaptability
6 when would you choose a capital intensive workforce
secondary sector, manufacturing
6 when would you choose a labour intensive workforce
tertiary sector, services
7 what is automation
use of machines to control a process
more accurate stock predictions through analysis
automated stock control levels and reordering
asses data on stock and location
use Electric point of sale (barcodes, scanners)
7 what is design technology
use of computers in design stage of developing a product
Computer Aided Design
3D simulation to allow more manipulation
easily altered
changing conditions testing
