Chapter 18 - production Flashcards
Formula for productivity
Productivity = Output/Quantity of input
What is labour productivity (definition)
Formula
Output per employee
Labour productivity = output/number of employees
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 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 are the 7 types of wastes lean production aims to eliminate
» Overproduction
» Waiting
» Transportation
» Unnecessary inventory
» Motion
» Over-processing
» Defects
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.
Storage(less need to store raw materials + less money tied up in inventories), Speed(cut out unnecessary process + quicker production overal) , Defects
SSD
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.
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.
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
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.
