Paper 2- Theme 2.4- Resource Management Flashcards
define production
the transformation of resources into goods or services
measured by the quantity of output
4 methods of production
job
batch
cell
flow
what is job production
pros and cons as a method of production
items made individually that meet the requirements of the customer, finished before another one is started
pros: workers are very high skilled which adds value
- create high quality products that meet customer specification
cons: high costs of labour as very labour intensive
- quite inefficient only focusing on one product at a time
what is batch production
pros and cons
products made in groups with a series of tasks performed on each group
(usually uses division of labour)
pros: lower average costs than job as fixed costs spread over more output
- more efficient than job
cons: one mistake ruins whole batch
- stock needed to be stored and cash stuck in it
what is division of labour
work divided into separate tasks, allow workers to become skilled at one of them
what is flow production
pros and cons
continuous production of an identical product on an assembly line
pros: more capital intensive so lower labour costs
- can work 24/7
- reduce human error
cons: boredom of staff lead to less motivation, productivity and so lower quality
- downtime caused by reparations or maintenance of machinery
what is cell production
pros and cons
Small self contained production line, made up of a flexible team, producing a part of the finished product
pros: group working leads to higher productivity
workers are multiskilled and so can do more than one specialised job (cover for others)
cons: possible team conflict
- recruitment and training expensive as must be multiskilled
define productivity
and formula
outputs produced from given input over time
output / employee number (over a time period)
define efficiency
production is at the minimum average cost
the two options for a business as they get more productive and so want to be more competitive
price-
non price-
define capital intensive
use of machinery in production of goods and services
define labour intensive
use of human labour in production of goods and services
why you need a mixture of capital and labour intensive production methods
- capital intensive is cheaper in long term as fewer salaries payed (higher startup costs)
- machinery may not need repairs which cost and cause downtime
- labour intensive means that your workers are more flexible
factors influencing productivity
working conditions how capital/labour intensive amount of capital to invest into it level of training leadership style nature of product staff morale production method used
how to improve productivity
more capital intensive
train and motivate staff
lean production
define economies of scale
factors that cause average cost per unit to fall as output increases
(happens when business gets bigger)
Diseconomies of scale is the opposite
e.g. larger scale marketing, bulk buying, more efficiency in production
factors influencing efficiency
level of wastage in production
good overall management
production process used (lean?)
define capacity
maximum amount of output a firm can produce at a given moment with its existing resources
define capacity utilisation
formula
how much of its resources a firm is using
current output
___________ x 100
maximum output
Benefits of high capacity utilisation
reversed for being under capacity
- fixed cost per unit at lowest (more profit)
- maximise resource efficiency- staff more productive and efficient
- less wasted space
- maximise sale opportunities
- positive brand image- look busy
Negatives of high capacity utilisation
reversed for being under capacity
- stressed staff (lower morale)
- less quality as more possible mistakes
- high staff turnover
- can’t respond to new demand
- possible downtime if machinery need mantainence
implications of over capacity utilisation
- overtime costs to allow factory to run above capacity maximum
- cant accept new orders
- mistakes increase or drop in quality if using machinery or staff above recommended limits
- —> (staff fatigue)
- cant maintain machinery, inevitable repairs will disrupt production
causes of having spare capacity
- management want to be agile in responding to demand OR - mismanagement of resources - fall in demand (change in taste and trends) - lower disposable income for consumers - increase in competition - economy worsen (recession) - mismanagement of resources
ways to increase capacity utilisation
- motivate staff
- increase workforce hours
- increase demand- marketing, release new product
- rationalisation and redundancy (close down some areas if capacity is larger than demand suggests it should be (excess capacity))
define stock (inventory)
represent the raw materials, work in progress and finished goods held by a firm to enable production and meet customer demand
reasons to hold stock
- enable production (more efficient)
- satisfy demand (possible seasonal change)
- avoids supplier delays affecting production
- gain from purchasing economies of scale
- contingency in case of mistakes
- boost reputation for customers of being reliable
costs of holding stock
- storage and insurance costs
- depreciation in value
- if capital for stock is borrowed the interest rate will become significant
- cash stuck in stock- (negative for cashflow-decrease –working capital and opportunity cost- could use it elsewhere, may hinder competitiveness)
- could become obsolete (higher wastage)
define the lines on a stock control chart
maximum level- max level of stock a business can/ wants to hold
re order level- acts as a trigger point, so that when stock falls to this level, the next order is placed
minimum level (buffer stock) - min. amount of product the business would want to hold in stock (contingency if demand increase or supply delayed)
lead time- amount of time between placing the order and receiving the the stock
stock levels- decrease when stock is used up
define and give features of JIT
Attempt to operate with zero buffer stock
FEATURES
- 0 defects
- pull production
- stock ordered when needed
- staff multiskilled
define waste minimisation
examples
cutting out any processes that don’t add value to the business in order to minimise inputs
e. g- time wasted by idle workers
- transition time between tasks
- excess stock
- machine downtime
- obsolete and unsold stock
waste =
reduce waste =
cost
reduce cost
two ways lean production provide a competitive advantage
- reduces waste through JIT production or stock management
- reduces unit cost
- price can be reduced - more price competitive
- price stays same- increase profit margin- more non price competitive (competing on quality)
define quality
- meet specifications that the firm wants of the product or service
- meets customer requirements
- fit fo purpose
importance of quality
adds value limits waste- less cost customer loyalty and satisfaction (less complaints and returns) differentiates from competition premium pricing
approaches to quality management
quality control quality assurance quality circles TQM Kaizen
define quality control
inspect sample of finished product to ensure they meet required quality standard
problems associated with quality control
- greater cost of returns
- mistakes inevitable
- employees don’t strive for best quality, just good enough to pass the quality check
- greater waste
define quality assurance
&advantages
ensure production quality meets the requirements of customers throughout the process
- faults prevented by self checking
- empower and motivate staff as important role
- 0 defects
problems with quality assurance
requires training (expensive) must trust staff
define quality circle
small group of workers in same area of production who meet regularly to study and solve problems
pros and cons of quality circles
pros: employees who are doing the job have more of an idea on how to improve processes
- increase motivation as valued
- people from all levels mix together and are respected
cons: may not feel confident to speak up
- action as a result may not happen
define TQM
total quality management- a philosophy that aims to involve all employees in the quality management process
- all employees of equal importance
- quality is at centre of all things they do starting from design
pros and cons
pros: empowers and motivates staff
- leads to competitive advantage over time as strive for best
cons: expensive to install as extensive training
- long time to install
- everyone must be on board
- managers have to be open to losing control
define Kaizen
japanese philosophy of continuous improvement
-gradual, orderly and continuous improvement involving everyone
key elements of Kaizen
- each employee has two jobs: doing the job ad being the best at their job
- based on people and their ideas rather than technology
- hundreds of small improvements amount to a lot
problems with Kaizen
- management may resist culture change
- training costs
- justifying cost is hard as over long term
how improved quality increases competitiveness
reduces returns (reduce cost)
adds value (premium pricing)
customer loyalty
USP against competitors
methods of improving efficiency
- improving productivity
- economies of scale
- lean production
- outsourcing
- relocating
- delayering
- efficient procurement processes (reducing waste during buying processes in supply- lowest cost)
