Paper 2- Theme 2.4- Resource Management

Question 1

define production

Answer 1

the transformation of resources into goods or services

measured by the quantity of output

Question 2

4 methods of production

Answer 2

job
batch
cell
flow

Question 3

what is job production

pros and cons as a method of production

Answer 3

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

Question 4

what is batch production

pros and cons

Answer 4

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

Question 5

what is division of labour

Answer 5

work divided into separate tasks, allow workers to become skilled at one of them

Question 6

what is flow production

pros and cons

Answer 6

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

Question 7

what is cell production

pros and cons

Answer 7

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

Question 8

define productivity

and formula

Answer 8

outputs produced from given input over time

output / employee number (over a time period)

Question 9

define efficiency

Answer 9

production is at the minimum average cost

Question 10

the two options for a business as they get more productive and so want to be more competitive

Answer 10

price-

non price-

Question 11

define capital intensive

Answer 11

use of machinery in production of goods and services

Question 12

define labour intensive

Answer 12

use of human labour in production of goods and services

Question 13

why you need a mixture of capital and labour intensive production methods

Answer 13

• 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

Question 14

factors influencing productivity

Answer 14

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

Question 15

how to improve productivity

Answer 15

more capital intensive
train and motivate staff
lean production

Question 16

define economies of scale

Answer 16

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

Question 17

factors influencing efficiency

Answer 17

level of wastage in production
good overall management
production process used (lean?)

Question 18

define capacity

Answer 18

maximum amount of output a firm can produce at a given moment with its existing resources

Question 19

define capacity utilisation

formula

Answer 19

how much of its resources a firm is using

current output
___________ x 100
maximum output

Question 20

Benefits of high capacity utilisation

reversed for being under capacity

Answer 20

• 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

Question 21

Negatives of high capacity utilisation

reversed for being under capacity

Answer 21

• 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

Question 22

implications of over capacity utilisation

Answer 22

• 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

Question 23

causes of having spare capacity

Answer 23

- 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

Question 24

ways to increase capacity utilisation

Answer 24

• 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))

Question 25

define stock (inventory)

Answer 25

represent the raw materials, work in progress and finished goods held by a firm to enable production and meet customer demand

Question 26

reasons to hold stock

Answer 26

• 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

Question 27

costs of holding stock

Answer 27

• 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)

Question 28

define the lines on a stock control chart

Answer 28

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

Question 29

define and give features of JIT

Answer 29

Attempt to operate with zero buffer stock

FEATURES

• 0 defects
• pull production
• stock ordered when needed
• staff multiskilled

Question 30

define waste minimisation

examples

Answer 30

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

Question 31

waste =

reduce waste =

Answer 31

cost

reduce cost

Question 32

two ways lean production provide a competitive advantage

Answer 32

• reduces waste through JIT production or stock management
• reduces unit cost

1. price can be reduced - more price competitive
2. price stays same- increase profit margin- more non price competitive (competing on quality)

Question 33

define quality

Answer 33

• meet specifications that the firm wants of the product or service
• meets customer requirements
• fit fo purpose

Question 34

importance of quality

Answer 34

adds value
limits waste- less cost
customer loyalty and satisfaction (less complaints and returns)
differentiates from competition
premium pricing

Question 35

approaches to quality management

Answer 35

quality control
quality assurance
quality circles
TQM
Kaizen

Question 36

define quality control

Answer 36

inspect sample of finished product to ensure they meet required quality standard

Question 37

problems associated with quality control

Answer 37

• greater cost of returns
• mistakes inevitable
• employees don’t strive for best quality, just good enough to pass the quality check
• greater waste

Question 38

define quality assurance

&advantages

Answer 38

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

Question 39

problems with quality assurance

Answer 39

requires training (expensive)
must trust staff

Question 40

define quality circle

Answer 40

small group of workers in same area of production who meet regularly to study and solve problems

Question 41

pros and cons of quality circles

Answer 41

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

Question 42

define TQM

Answer 42

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

Question 43

pros and cons

Answer 43

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

Question 44

define Kaizen

Answer 44

japanese philosophy of continuous improvement

-gradual, orderly and continuous improvement involving everyone

Question 45

key elements of Kaizen

Answer 45

• 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

Question 46

problems with Kaizen

Answer 46

• management may resist culture change
• training costs
• justifying cost is hard as over long term

Question 47

how improved quality increases competitiveness

Answer 47

reduces returns (reduce cost)
adds value (premium pricing)
customer loyalty
USP against competitors

Question 48

methods of improving efficiency

Answer 48

• improving productivity
• economies of scale
• lean production
• outsourcing
• relocating
• delayering
• efficient procurement processes (reducing waste during buying processes in supply- lowest cost)