Production of goods and services Flashcards
Labour incentive
Use of many workers and few machines for the production of a good/service.
Mainly in developing countries
Capital incentive
Use of robots or machines more that human workers
Mainly in developed countries
Productivity
is the output measured over the inputs used to create it.
Ways to increase productivity and efficiency
- Improve quality of the product and inventory control to reduce waste
- Replace employees with machines
- Motivate employees more effectively
- Improve training to increase employee efficiency
- New technology
- Use of automation
Benefits of increasing productivity
- Reduce inputs needed for the same output level
- Lower costs per unit
- Fewer worker may be needed, possibly leading to lower wage costs
- Higher wages might now be paid to workers, which increases motivation
Buffer Inventory
is the inventory held to deal with uncertainty in customer demand and deliveries of supplies.
Lean production
is a term for those techniques used by businesses to cut down on waste and therefore increases efficiency, for example, by reducing the time taken for a product to developed and become available for sale
Seven types of waste that can occur in production
- Overproduction
- Waiting
- Transportation
- Unnecessary inventory
- Motion
- Over-processing
- Defects
Seven types of waste that can occur in production
- 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 of repairs or provide a replacement service for a dissatisfied customer
- Better use of equipment
- cutting of some processes, which speeds up production
- ## less money tied up in inventories
Benefits of lean production
- Less storage of raw materials or components
- Quicker production of goods or services
- No need of repairs or provide a replacement service for a dissatisfied customer
- Better use of equipment
- cutting of some processes, which speeds up production
- less money tied up in inventories
- Improved health a safety, leading to less time off work
Methods Lean production can be carried out from
- Kaizen
- Just-In-Time inventory control
- Cell production
Kaizen
is a Japanese term meaning continuous improvement through the elimination of waste
Advantages of kaizen
- Increased productivity
- Reduced space needed for production
- Work-in-progress is reduced
- Improved layout of the factory floor could combine some jobs, leaving employees to do more tasks
Just in time inventory
Just in time inventory is production method which involves reducing or virtually eliminating the need to hold inventories of raw materials or unsold inventories of the finished product
Advantages of Just-In-Time production
- Costs of holding inventories are reduced, as no raw materials are ordered to keep in warehouse
- Money gained quicker as products are sold quicker.§
Job production
is where a single product is made at a time
Batch production
is where a quantity of one product is made, then a quantity of another product is made
Flow production
is where large quantities of products are produced in a continuous process. Also known as mass production
Advantages of Job production
- More suitable for personal services
- Meets exact requirements of customer
- Workers has more varied jobs, which increases employee motivation
- Flexible, mainly used for high quality products, so higher price can be charged
Disadvantages of Job production
- Skilled labour is used, which raises costs
- Labour intensive, costs are high
- Production takes a long time
- Errors can be expensive
- Specific materials may be needed, which is expensive
Advantages of Batch production
- It is flexible way of working and production, can be changed from product to product
- Some variety given to the workers
- Machinery break down will not affect production
Disadvantages of Batch Production
- Expensive, as semi finished product will have to transported to different stages
- Delay in production, since machines have to be reseted
- Warehouse space needed, for raw materials and finihsed batches of products.
Advantages of Flow production
- High output of standardised products
- Cost of each product is kept low, so overall costs are low
- Capital-intensive methods can be used
- Benefits from economies of scale
- Low costs, so price will be lower, meaning higher sales
Disadvantages of flow production
- Boring for the employees, little job satisfaction, causing lack of motivation
- There are significant storage requirements - costs of inventories of raw materials.
- Capital cost for setting up the business may be high
- One machine could lead to stoppage of production
Factors affecting the choice of method of production
- Nature of product
- Size of market
- Nature of demand
- Size of business
Advantages of new Technology
- Productivity is greater, more efficient and less costs
- Greater job satisfaction, as boring jobs are done by machines
- Workers may be motivated as more employees are needed to use the machinery, which requires training.
- Accuracy and Quality is improved
- Quicker communication and reduced paperwork
- Better and quicker decision making, with assistance of IT tools
Disadvantages of new Technology
- Unemployment rises as humans are replaced by machines
- Expensive
- Employees may be unhappy as more tech is introduced which will change work patterns
- New tech is being changed all the time, so new devices should replace the old one frequently
