Chapter 18 Production

Question 1

What are the different roles in the operations department

Answer 1

Factory manager
Purchasing manager
R&D Manager

Question 2

What does a factory manager do?

Answer 2

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

Question 3

What does a purchasing manager do?

Answer 3

responsible for providing the materials, components and equipment required for the production

Question 4

What does the R&D manager do?

Answer 4

responsible for the design and testing of new production processes and products.

Question 5

What is productivity (definition)

Answer 5

output measured against in the inputs used to create it

Question 6

Formula for productivity

Answer 6

Productivity = Output/Quantity of input

Question 7

What is labour productivity (definition)
Formula

Answer 7

Output per employee

Labour productivity = output/number of employees

Question 8

How to increase productivity (in general)

Answer 8

either
increase the output with the same amount of input
or
produce the same output with the less input

Question 9

Why do companies look to increase labour productivity

Answer 9

Higher productivity = higher efficiency

Output per employee increases, hence the cost per product reduces, making the business more competitive

Question 10

Ways to increase productivity and efficiency

Answer 10

» 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.

Question 11

Benefits of increased productivity and efficiency

Answer 11

» 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.

Question 12

What are the different components of inventory

Answer 12

raw materials
components
partly finished goods
finished products ready for delivery
spare parts for machinery incase of a break down, etc.

Question 13

Why do businesses hold inventory

Answer 13

allows a business to maintain production and satisfy customer demand quickly.

Question 14

What happens if inventory is too low
what happens if it’s too high

Answer 14

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.

Question 15

What is buffer inventory level

Answer 15

inventory held to deal with uncertainty in customer demand and deliveries of supplies.

Question 16

What is lean production

Answer 16

a term for those techniques used by businesses to cut down on waste and therefore increase efficiency

Question 17

What are the 7 types of wastes lean production aims to eliminate and explain all

Answer 17

» 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.

Question 18

Benefits of lean production

Answer 18

» 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.

Question 19

What are the 3 methods to achieve lean production

Answer 19

» Kaizen
» just-in-time inventory control
» cell production.

Question 20

What is Kaizen

Answer 20

a Japanese term meaning ‘continuous improvement’ through the elimination of waste.

Question 21

How is kaizen implemented

Answer 21

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

Question 22

What are the advantages of kaizen

Answer 22

» 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.

Question 23

What is the just in time production method

Answer 23

involves reducing the need to hold inventories of raw materials or unsold inventories of the finished product.

acronym: JIT

Question 24

Why does JIT production work

Answer 24

» 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.

Question 25

What is needed for JIT production

Answer 25

The business needs very reliable suppliers and an efficient system of ordering raw materials or components.

Question 26

What is cell production

Answer 26

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.

Question 27

Why does cell production work
benefits

Answer 27

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

Question 28

What are the 3 methods of production

Answer 28

Job
Batch
Flow

Question 29

What is job production

Answer 29

a single product is made at a time

eg: handcrafted goods, tailored, etc

Question 30

What is batch production

Answer 30

a quantity of one product is made, then a quantity of another item will be produced.

Question 31

What is flow production

aka

Answer 31

large quantities of a product are produced in a
continuous process.

mass production

eg: cars - large factory lines, etc.

Question 32

Adv of job production

Answer 32

» 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.

Question 33

Disadv of job production

Answer 33

» 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.

Question 34

Adv of batch production

Answer 34

» 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.

Question 35

Disadv of batch production

Answer 35

» 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.

Question 36

Adv of flow production

Answer 36

» 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.

Question 37

Disadv of flow production

Answer 37

» 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.

Question 38

Name the factors that affect the choice of production used

Answer 38

Nature of the product
Nature of the demand
Size of the market
Size of the business

Question 39

How does the nature of the product influence the choice of production

Answer 39

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.

Question 40

How does the the size of the market influence the choice of production

Answer 40

International markets where theres a high demand - flow production
local or nice markets may not have that much demand - batch or job production

Question 41

How does the nature of the demand influence the choice of production

Answer 41

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

Question 42

How does the size of the business influence the choice of production used

Answer 42

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