Production of goods and services

Question 1

Define Productivity

Answer 1

Productivity is a measure of the efficiency of inputs used in the production process over a period of time. It is the output measured against the inputs used to produce it.

Question 2

Ways to increase Productivity

Answer 2

improving labour skills by training them so they work more productively and waste lesser resources
introducing automation (using machinery and IT equipment to control production) so that production is faster and error-free
improve employee motivation so that they will be willing to produce more and efficiently so.
improved quality control and assurance systems to ensure that there are no wastage of resources

Question 3

What is Lean Production

Answer 3

Lean production refers to the various techniques a firm can adopt to reduce wastage and increase efficiency/productivity.

Question 4

What is Kaizen and the benefits

Answer 4

it’s a Japanese term meaning ‘continuous improvement’. It aims to increase efficiency and reduce wastage by getting workers to get together in small groups and discuss problems and suggest solutions.
Benefits:

increased productivity
reduced amount of space needed for production
improved factory layout may allow some jobs to be combined, so freeing up employees to do other jobs in the factory

Question 5

What is Just-in-Time inventory control and the benefits

Answer 5

this techniques eliminates the need to hold any kind of inventory by ensuring that supplies arrive just in time they are needed for production
Benefits:Reduces cost of holding inventory
Warehouse space is not needed any more, so more space is available for other uses
Finished goods are immediately sold off, so cash flows in quickly

Question 6

Define Cell Production

Answer 6

the production line is divided into separate, self-contained units each making a part of the finished good. This works because it improves worker morale when they are put into teams and concentrate on one part alone.

Question 7

Define Job production

Answer 7

products are made specifically to order, customized for each customer
The product meets the exact requirement of the customer
Workers will have more varied jobs as each order is different, improving morale
very flexible method of production

Question 8

Define Batch Production

Answer 8

similar products are made in batches or blocks. A small quantity of one product is made, then a small quantity of another

Question 9

Define Flow Production

Answer 9

large quantities of products are produced in a continuous process on the production line

Question 10

Advantages and Disadvantages of Job Production

Answer 10

Advantages:Most suitable for one-off products and personal services
The product meets the exact requirement of the customer
Workers will have more varied jobs as each order is different, improving morale
very flexible method of production

Disadvantages:Skilled labour will often be required which is expensive
Costs are higher for job production firms because they are usually labour-intensive
Production often takes a long time
Since they are made to order, any errors may be expensive to fix
Materials may have to be specially purchased for different orders, which is expensive

Question 11

Advantages of Disadvantages of Batch Production

Answer 11

Advantages:Flexible way of working- production can be easily switched between products
Gives some variety to workers
More variety means more consumer choice
Even if one product’s machinery breaks down, other products can still be made

Disadvantages:Can be expensive since finished and semi-finished goods will need moving about
Machines have to be reset between production batches which delays production
Lots of raw materials will be needed for different product batches, which can be expensive.

Question 12

Advantages and Disadvantages of Flow Production

Answer 12

Advantages:There is a high output of standardized (identical) products
Costs are low in the long run and so prices can be kept low
Can benefit from economies of scale in purchasing
Automated production lines can run 24×7
Goods are produced quickly and cheaply
Capital-intensive production, so reduced labour costs and increases efficiency

Disadvantages:A very boring system for the workers, leads to low job satisfaction and motivation
Lots of raw materials and finished goods need to be held in inventory- this is expensive
Capital cost of setting up the flow line is very high
If one machinery breaks down, entire production will be affected

Question 13

What is Automation

Answer 13

Automation: equipment used in the factory is controlled by computers to carry out mechanical processes, such as spray painting a car body.

Question 14

Define CAD (computer aided design)

Answer 14

CAD (computer aided designing): a computer software that draws items being designed more quickly and allows them to be rotated, zoomed in and viewed from all angles.

Question 15

What is CAM (computer aided manufacturing)

Answer 15

CAM (computer aided manufacturing): computers monitor the production process and controls machines and robots-similar to automation

Question 16

What is CIM ( Computer integrated manufacturing)

Answer 16

CIM (computer integrated manufacturing): the integration of CAD and CAM. The computers that design the product using CAD is connected to the CAM software to directly produce the physical design.

Question 17

EPOS (electronic Point of scale)

Answer 17

EPOS (electronic point-of-sale): used at checkouts/tills where operator scans the bar-code of each item bought by the customer individually. The item details and price appear on screen and are printed in the receipt. They can also automatically update and reorder stock as items are bought.

Question 18

EFTPOS( electric fund transfer at a point of scale)

Answer 18

EFTPOS (electronic funds transfer at point-of-sale): the electronic cash register at the till will be connected to the retailer’s main computer and different banks. When the customer swipes the debit card at the till, information is read by the scanner and an amount is withdrawn from the customer’s bank account (after the PIN is entered).

Question 19

Advantages of technology in Production

Answer 19

Greater productivity
Greater job satisfaction among workers as boring, routine jobs are done by machines
Better quality products
Quicker communication and less paperwork
More accurate demand levels are forecast since computer monitor inventory levels
New products can be introduced as new production methods are introduced

Question 20

Disadvantages of Production

Answer 20

Unemployment rises as machines and computers replace human labour
Expensive to set up
New technology quickly becomes outdated and frequent updating of systems will be needed- this is expensive and time-consuming.
Employees may take time to adjust to new technology or even resist it as their work practices change.

Question 21

Define Fixed Cost

Answer 21

Fixed Costs are costs that do not vary with output produced or sold in the short run

Question 22

Define Variable Cost

Answer 22

Variable Costs are costs that directly vary with the output produced or sold.

Question 23

Define Economies of scale

Answer 23

Economies of scale are the factors that lead to a reduction in average costs as a business increases in size

Question 24

Define Diseconomies of scale

Answer 24

Diseconomies of scale are the factors that lead to an increase the average costs of a business as it grows beyond a certain size

Question 25

Advantages of breakeven chart

Answer 25

Managers can look at the graph to find out the profit or loss at each level of output
Managers can change the costs and revenues and redraw the graph to see how that would affect profit and loss
The break-even chart can also help calculate the safety margin- the amount by which sales exceed break-even point.

Question 26

Limitations of breakeven Chart

Answer 26

They are constructed assuming that all units being produced are sold. In practice, there are always inventory of finished goods. Not everything produced is sold off.
Fixed costs may not always be fixed if the scale of production changes. If more output is to be produced, an additional factory or machinery may be needed that increases fixed costs.
Break-even charts assume that costs can always be drawn using straight lines. Costs may increase or decrease due to various reasons. If more output is produced, workers may be given an overtime wage that increases the variable cost per unit and cause the variable cost line to steep upwards.

Question 27

Define Quality assurance

Answer 27

Quality assurance is the checking for quality throughout the production process of a good or service.

Question 28

Advantages of quality assurance

Answer 28

Eliminates the fault or defect before the customer receives it, so better customer satisfaction
Since each stage of production is checked for quality, faults and errors can be easily identified and solved
Products don’t have to be scrapped or reworked as often, so less expensive than quality control

Question 29

Disadvantages of quality assurance

Answer 29

Expensive to carry out since quality checks have to be carried throughout the entire process, which will require manpower and appropriate technology at every stage.
How well will employees follow quality standards? The firm will have to ensure that every employee follows quality standards consistently and prudently, and knows how to address quality issues.

Question 30

Define TQM (Total quality management)

Answer 30

Total Quality Management or TQM is the continuous improvement of products and production processes by focusing on quality at each stage of production

Question 31

Advantages of TQM

Answer 31

quality is built into every part of the production process and becomes central to the workers principles
eliminates all faults before the product gets to the final customer
no customer complaints and so improved brand image
products don’t have to be scrapped or reworked, so lesser costs
waste is removed and efficiency is improved

Question 32

Disadvantages of TQM

Answer 32

Expensive to train employees all employees
Relies on all employees following TQM– how well are they motivated to follow the procedures?

Question 33

What are the factors which affect the location decision of manufacturing a firm

Answer 33

Market: if the product is a consumer good and perishable, the factories need to be close to the markets to sell out quickly before it perishes.

Raw Materials/Components: the factories may need to be located close to where raw materials can be acquired,
External economies: the business may locate near other firms that support the business by provide services

Availability of labour: Businesses will need to locate near areas where they can get workers of the skills they need in the factory

Transport & Communication infrastructure: the factories need to be located near areas where there are good road/rail/port/air transport systems.

ower and water supply: factories need water and power to operate and a reliable and steady supply of both should be ensured by setting up in areas where they are available.

Question 34

Why buisness locate in different countries

Answer 34

New markets overseas.
Cheaper or new raw materials available in other countries.
Cheaper and/or skilled workers are available overseas.
Rent/ taxes are lower..
Availability of government grants and other incentives
Avoid trade barriers and tariffs: when exporting goods to other countries, there will be some tariffs, rules and regulations to get by. in order to avoid this, firms start operating in the country itself, since there is no exporting/importing involved now.