4.3 Increasing efficiency and productivity Flashcards
The importance of capacity
A business must understand its capacity to make sure that it does not commit to more orders than it can fulfil within a certain time period
Importance of productivity
Increasing the number of, or productivity levels of staff and investing in technology can help a business to increase its total capacity
Why do businesses aim to increase their capacity utilisation
Fixed costs can be spread out over a greater number of unit - Economies of Scale
Disadvantage of 100% capacity utilisation
The business cannot respond to additional or special orders made at short notice as they do not have any further capacity to produce these products
What can a business do to increase capacity at short notice
Outsourcing
Advantage of outsourcing
Allows a business to increase total capacity which allows the business to meet increasing demand
Disadvantage of outsourcing
Can lead to quality issues if outsources do not take quality as seriously as the business
How can efficiency be improved
Lean production - minimises waste
What is Just in Time production
- A form of lean production
- involves businesses only ordering supplies when they are needs, and therefore reduces waste
Disadvantage of Just in Time production
The business will have no spare stock to respond to an unexpected customer order which may affect customer satisfaction
How to increase efficiency
- Capital intensive businesses (machinery) (cheaper in long-term & require businesses to commit to start-up costs)
- Labour intensive businesses (increases operational flexibility as people can be reassigned to different projects or retrained to complete different tasks)
How can technology be used to increase efficiency
- Computer aided design (CAD): used to create and amend designs instead of doing it manually
- Computer aided manufacture (CAM): use CAD and CAM to create products
- E-commerce and email systems: administrative tasks can be completed more quickly than they could using paper-based systems
