5.1 & 5.2 Flashcards
Operations
Takes raw materials purchased from suppliers (input), uses these raw materials in production (process) and turns the raw materials into finished goods (output).
The Role of Operation
- Purchasing of raw materials to meet production requirements
- Managing stock
- Ensuring the quality of output is consistent and standardised
- Warehousing and distribution of finished products
- Ensuring appropriate methods of production are used
Operations and Sustainability
While the quality of the finished product is highly important, the operations manager also has wider responsibilities:
Economic Factors
Social Factors
Ecological Factors
(Known as the three pillars of sustainable development or triple bottom line)
Economic Factors
- Budgets must be respected and wastage kept to a minimum. Further savings should be identified through efficiency
- Usually measured in monetary terms with focus on economies of scale and average cost per unit
- Focus on increasing profitability year on year to ensure the business remains liquid
- This is known as economic sustainability
Social Factors
- Businesses need to understand their responsibility towards their workers as internal stakeholders as well as to external stakeholders such as the local community
- Employees should be treated fairly, working conditions acceptable
- The quality of life for local residents should nit be affected by decisions made by a business
- Known as social sustainability
Ecological Factors
- Business must acknowledge and take responsibility for the negative impact their decisions have on the natural environment, especially different forms of pollution.
- Known as ecological sustainability
The Triple Bottom Line
Demonstrates the fact that business decisions should not only consider financial aspects, but also the well-being of local communities and the natural environment. It is ideal as in reality, economic aspects largely drive most commercial organisations.
Production Process
Labour Intensive Production
Capital Intensive Production
Labour Intensive Production
- Products are made using human labour
- Small quantities of products are produced
- Used by smaller businesses where products are manufactured to suit specific requirements
- E.g. wedding cake
Capital Intensive Production
- Products are made using machinery and equipment
- Products are standardised and large quantities or identical products are made
- E.g. soft drinks
Labour Intensive Production Advantages
- Products can be made to suit individual customer requirements (satisfaction)
- The initial cost is cheaper as expensive machinery is not required
- Employees can use their skills and initiative resulting in job satisfaction
Labour Intensive Production Disadvantages
- Wages are higher as employees are highly skilled
- Human errors result in an increase in waste and costs
- The business cannot take advantage of economies of scale
Capital Intensive Production Advantages
- Large volumes of identical products are made
- Quality of output is standardised and consistent
- Can take advantage of economies of scale
- Machinery can operate 24/7
Capital Intensive Production Disadvantages
- Individual customer requirements cannot be met
- Production stops if machinery breaks down
- Machinery is expensive to purchase and maintain
- Worker motivation may be low if employees have been de-skilled
Methods of Production
Process in which raw materials are converted into goods and services. Business must decide on the most suitable method of production, the objective is to minimise the cost per unit.
Job Production
Batch Production
Flow Production
Cellular Production
Job Production
Production of a single product at a time:
- Custom made to customer specifications
- Small number of units required
- The process is highly labour intensive
- Workforce usually skilled workers
- Many small business start like this
- E.g. hot drink in Starbucks
Job Production Advantages
- Can produce one-off orders exactly to customer demand
- Workers more likely to be motivated as tasks require high degree of skill and expertise
- A high price may be charged
- Specifications can be changed by customer even if production has started
Job Production Disadvantages
- Labour costs high
- No bulk buying discounts
- Lead times can be lengthy
- Once demand for a firm’s product rises, job production may become costly
Batch Production
A number of products are produced at once:
- The process is mechanised
- Each product in the batch is identical but products may vary from batch to batch
- Production is broken down into a number of operations
- A particular operation is carried out on each batch before moving to the next stage
- All products in the batch move onto the next stage at the same time
- Used in the food industry; tinned products (soup) and bakery (white bread, seeded bread)
Batch Production Advantages
- Flexibility: each batch can be changed to suit customer requirements
- Employees can concentrate on one operation rather than on the whole task (specialisation)
- Reduced need for costly, highly skilled staff
- Machinery can be standardised which reduces costs
Batch Production Disadvantages
- Careful production planning required or machines may lie idle
- Workforce may be less motivated due to repetition
- If batches are small, then unit costs are high
- Expensive machinery may be required
Flow Production
Production items move from one operation to the next in a continuous sequence. Often used in mass produced products:
- Large quantities are produced
- A standardised product is made
- Semi-skilled workforce
- Large amounts of robotics, machinery and equipment (automated and capital intensive)
- Large stocks of raw materials and component parts are required
- E.g. washing machines, newspapers, high volume food products
Flow Production Advantages
- Unit costs are reduced through economies of scale
- The process can be highly automated
- Quality systems can be built into production
- Lower labour costs and less human error
Flow Production Disadvantages
- Set up costs are very high
- Product is standardised
- Worker motivation can be low
- Supply may exceed demand
Cellular Production
A form of mass production in which the flow is broken up by teams of workers who are responsible for certain parts of the line:
- An attempt to improve mass production techniques to allow teams of workers to operate as self-contained units called cells
- Traditional manufacturing firms and newer industries in the quaternary sector are drawn to this method as they believe quality and productivity improves and costs can be reduced
Cellular Production Advantages
- Quality improves as members of the cell are responsible for cheking their own work before moving to the next cell (less wastage)
- Easier to halt production in a cell rather than on an assembly line, so if there is a quality problem, it can be dealt with quickly without affecting other parts of the productin process
- Workers have more responsibility leading to greater motivation and productivity
Factors Affecting the Choice of Production
Nature of the product
Size of the market
Stage of business development
Technology
Finance available
Factors Affecting the Choice of Production - Size of the Market
- Products with high sale volumes (soft drinks), will be produced using flow production due to demand
- Products with low demand, flow production would not be cost efficient
Factors Affecting the Choice of Production - Stage of Business Development
- When a sole trader first sets up, sales may be low and therefore job or batch production is used
- Once sales grow and the business becomes established, flow production may be used
Factors Affecting the Choice of Production - Technology
- Current technology will affect business decisions regarding production methods
- E.g. the development of computers have changed the way cars are produced
Factors Affecting the Choice of Production - Finance Available
- Smaller business might not afford automated technology and may have to use job production
- Large businesses are more likely to use flow production
