Chapter 18 Production Flashcards
What are the different roles in the operations department
Factory manager
Purchasing manager
R&D Manager
What does a factory manager do?
Responsible for the quantity and quality of
products coming off a production line
Also responsible for the maintenance of the
production line and other necessary repairs
What does a purchasing manager do?
responsible for providing the materials, components and equipment required for the production
What does the R&D manager do?
responsible for the design and testing of new production processes and products.
What is productivity (definition)
output measured against in the inputs used to create it
Formula for productivity
Productivity = Output/Quantity of input
What is labour productivity (definition)
Formula
Output per employee
Labour productivity = output/number of employees
How to increase productivity (in general)
either
increase the output with the same amount of input
or
produce the same output with the less input
Why do companies look to increase labour productivity
Higher productivity = higher efficiency
Output per employee increases, hence the cost per product reduces, making the business more competitive
Ways to increase productivity and efficiency
» Improve quality of the product and inventory control to reduce waste.
» Replace employees with machines – automation.
» Improve training to increase employee efficiency.
» Motivate employees more effectively.
» Introduce new technology.
» Use more automation.
Benefits of increased productivity and efficiency
» Reduced inputs needed for the same output level.
» Lower costs per unit (average cost).
» Fewer workers may be needed, possibly leading to lower wage costs.
» Higher wages might now be paid (since costs have reduced business have more gross profit) to the remaining workers, which increases motivation.
What are the different components of inventory
raw materials
components
partly finished goods
finished products ready for delivery
spare parts for machinery incase of a break down, etc.
Why do businesses hold inventory
allows a business to maintain production and satisfy customer demand quickly.
What happens if inventory is too low
what happens if it’s too high
too low:
If inventory levels get too low they might actually run out if there is an unexpectedly high demand for the goods.
too high:
Costs a lot of money to hold high amount of inventory. There is a high opportunity cost. The business could use that money elsewhere instead eg advertising, R&D, investment opportunities, etc.
What is buffer inventory level
inventory held to deal with uncertainty in customer demand and deliveries of supplies.
What is lean production
a term for those techniques used by businesses to cut down on waste and therefore increase efficiency
What are the 7 types of wastes lean production aims to eliminate and explain all
» Overproduction – producing goods before they have been ordered by customers. This results in high storage costs and possible damage to goods while in storage.
» Waiting – when goods are not moving or being processed in any way, waste is occurring.
» Transportation – moving goods around unnecessarily causes waste and is not adding value to the product. Goods may also be damaged when they are being moved around.
» Unnecessary inventory – if there is too much inventory then this takes up space, may get in the way of production and costs money.
» Motion – any actions, including bending or stretching movements of the body of the employee, wastes time. It may also be a health and safety risk for the employees. This also applies to the movement of machines which may not be necessary.
» Over-processing – if complex machinery is being used to perform simple tasks then this is wasteful
» Defects – any faults require the goods being fixed and time can be wasted inspecting the products.
Benefits of lean production
» less storage of raw materials or components
» quicker production of goods or services
» no need to repair defects or provide a replacement service for a dissatisfied
customer
» better use of equipment
» cutting out some processes, which speeds up production
» less money tied up in inventories
» improved health and safety, leading to less time off work due to injury.
What are the 3 methods to achieve lean production
» Kaizen
» just-in-time inventory control
» cell production.
What is Kaizen
a Japanese term meaning ‘continuous improvement’ through the elimination of waste.
How is kaizen implemented
The workers themselves think of ideas for kaizen. Small groups of workers meet regularly to discuss problems and possible solutions. No one knows the problems better than the workers themselves who would be the best people to think of a way to overcome the problem
What are the advantages of kaizen
» increased productivity
» reduced amount of space needed for the production process
» work-in-progress is reduced
» improved layout of the factory floor may allow some jobs to be combined, thereby freeing up employees to carry out some other job in the factory.
What is the just in time production method
involves reducing the need to hold inventories of raw materials or unsold inventories of the finished product.
acronym: JIT
Why does JIT production work
» Reduces the costs of holding inventory, as no raw materials and components are ordered to keep in the warehouse just in case they are needed.
» Warehouse space is not needed, again reducing costs.
» The finished product is sold quickly and so money will come back to the business more quickly, helping its cash flow.
What is needed for JIT production
The business needs very reliable suppliers and an efficient system of ordering raw materials or components.
What is cell production
Production line is divided into separate, self-contained units (cells), each making an identifiable part of the finished product, instead of having a flow or mass production line.
Why does cell production work
benefits
improves the morale of the employees and makes them work harder so they become more efficient.
benefits:
feel valued + sense of belonging= increased motivation
lower chances of strikes or disruptions
What are the 3 methods of production
Job
Batch
Flow
What is job production
a single product is made at a time
eg: handcrafted goods, tailored, etc
What is batch production
a quantity of one product is made, then a quantity of another item will be produced.
What is flow production
aka
large quantities of a product are produced in a
continuous process.
mass production
eg: cars - large factory lines, etc.
Adv of job production
» It is most suitable for personal services or ‘one-off’ products.
» The product meets the exact requirements of the customer.
» The workers often have more varied jobs (they don’t carry out just one task).
» More varied work increases employee motivation – giving them greater job satisfaction.
» It is flexible and often used for high-quality goods and services, meaning that a higher price can be charged.
Disadv of job production
» Skilled labour is often used and this raises costs.
» The costs are higher because it is often labour intensive.
» Production often takes a long time.
» Products are specially made to order and so any errors can be expensive to correct.
» Materials may have to be specially purchased, leading to higher costs.
Adv of batch production
» It is a flexible way of working and production can easily be changed from one product to another.
» It still gives some variety to workers’ jobs.
» It allows more variety to products which would otherwise be identical. This gives more consumer choice (for example, different flavours of ready-meals).
» Production may not be affected to any great extent if machinery breaks down.
Disadv of batch production
» It can be expensive as semi-finished products will need moving about to the next production stage.
» Machines have to be reset between production batches which means there is a delay in production and output is lost.
» Warehouse space will be needed for inventories of raw materials, components and finished batches of goods. This is costly.
Adv of flow production
» There is a high output of a standardised product.
» Costs of making each item are kept low and therefore prices are also lower.
» It is easy for capital-intensive production methods to be used – reducing labour costs and increasing efficiency.
» Capital-intensive methods allow workers to specialise in specific, repeated tasks and therefore the business may require only relatively unskilled workers – little training may be needed, reduces costs.
» May benefit from purchasing economies of scale
» Low average costs and therefore low prices usually mean high sales.
» Automated production lines can operate 24 hours a day (capital intensive adv)
» There is no need to move goods from one part of the factory to another as with batch production, so time is saved.
Disadv of flow production
» It is a very boring system for the workers, so there is little job satisfaction, leading to a lack of motivation for employees.
» There are significant storage requirements – costs of inventories of raw materials/components and finished products can be very high unless just-intime systems are used.
» The capital costs of setting up the production line can be very high.
» If one machine breaks down the whole production line will have to be halted.
Name the factors that affect the choice of production used
Nature of the product
Nature of the demand
Size of the market
Size of the business
How does the nature of the product influence the choice of production
If the product is unique and one of a kind (specially tailored to the customer’s requirements), job production has to be used
If the product can be mass produced using an automated production line then flow production will be used.
How does the the size of the market influence the choice of production
International markets where theres a high demand - flow production
local or nice markets may not have that much demand - batch or job production
How does the nature of the demand influence the choice of production
If the demand is constant and recurring then it is economical to set up flow production. Eg: dishwasher
If the demand is more voltatile then job or batch production may be used instead. eg: furniture
How does the size of the business influence the choice of production used
Large scale business - more access to capital - can set up large production lines and use flow production
small scale businesses - may not be able to afford the production lines and would hence use job or batch production
