4.1 - production of goods and services Flashcards
what is production?
the total output of a business in a given period of time
what is productivity?
the output measured against the inputs used to create it
how do you calculate productivity?
output/quantity of input
what does efficiency lead to?
lower average unit costs
benefits of increasing efficiency
- business being able to decrease their prices to be more competitive
OR - business making more profit per unit
how can a business increase efficiency?
- replace employees with machinery so that productivity is automated. this can therefore usually produce more goods per hour
- motivate employees to be more efficient
- train employees so that they have more skills to become more efficient
why do businesses hold inventories (stock)?
- allows a business to have enough inventory (raw materials) to produce their product to meet customer demand, leading to more sales
- allows a business to have enough inventory to have enough finished products for consumers - Increased customer satisfaction e.g. in a supermarket
what is lean production?
the term used for those techniques used to cut down on a waste of resources and therefore increase efficiency
2 methods to achieve lead production
- just in time stock control
- Kaizen
what is just in time stock control?
only ordering resources when they are needed. This reduces the amount of stock stored in the company, reducing storage costs and reducing risk of stock perishing/being damaged, therefore less wastage
what is Kaizen?
- a Japanese term meaning continuous improvement through the elimination of waste.
- small groups of workers meet together regularly to discuss problems of certain examples excess waste and potential solutions, helping to reduce wastage.
- for example, the factory floor can be rearranged so that it makes production as efficient as possible and doesn’t waste time during production
benefits of lean production
it decreases costs through:
- less storage costs of inventory (JIT)
- less money tied up in inventory- can be used elsewhere e.g. paying wages on time
- quicker production of goods and services (Kaizen), increasing efficiency.
3 methods of production
- job production
- batch production
- flow production
what is job production?
where a single unique product is made at a time. E.g. wedding cake
2 benefits of job production
- provides unique products, leading to a USP so they can charge a higher price for the product as it is unique
- workers are doing varied tasks (give contextual examples in exam) and so they are not bored, increasing motivation
2 drawbacks of job production
- skilled labour is often used (labour intensive) and so higher costs need to be paid to skilled labour
- production takes longer as a unique specific product is being made. Lower productivity and efficiency
what is batch production?
where large quantities of a product are produced, then a quantity of a another slightly different item will be made. E.g cupcake flavours or jean sizes
2 benefits of batch production
- production can be easily changed causing more variety compared to flow production, leading to more choice for consumers.
- still offers some variety to workers compared to flow production
2 drawbacks of batch production
- machines have to be reset between production batches, causing a delay, causing a reduction in efficiency.
- machinery breakdowns will cause a decrease in efficiency
what is flow (mass) production?
where a large quantity of products are produced in a continuous process
3 benefits of flow production
- high output of a standardised product – leading to high level of sales, provided there is demand.
- it is capital intensive (using machinery) increasing efficiency causing average unit costs to be lower.
- as they produce a large amount of products they will be able to benefit from E.O.S
3 drawbacks of flow production
- very boring system for workers, leading to demotivation
- as it’s producing a large amounts of products, it will need large storage space for inventory, leading to high storage costs
- if one machine breaks down will stop whole prices, decreasing output and efficiency
7 ways how technology has changed production methods and productivity
- automation- using more machinery can increase efficiency
- Computer Aided Design (CAD) allows you to design products online, decreasing the costs of designing and making it physically initially
- Computer Aided Manufacture (CAM) - computers monitor the automated production process and robots in the factory increasing efficiency and reducing risk of mistakes
- Computer Integrated Manufacturing (CIM) – CAD and CAM integrated
- Electronic Point of Sale (EPOS) allows sales assistants to scan barcodes, increasing efficiency at checkouts and so shorter queues for customers
- Electronic Funds Transfer at Point of Sale (EFTPOS) – paying by card increases efficiency at checkout at sales and so shorter queues for customers
- Contactless Payment- increases efficiency at checkout at sales and so shorter queues for customers
