Productivity & Investment Flashcards
Production : definition (as defined by economists)
Any economy activity which satisfies human wants. Production is a process by which businesses provide goods and services required by customers in a particular market.
Production process : diagram
Inputs (eg land, labour, machinery)——-> transformation process ————> outputs (eg finished goods, services)
Job production : definition
A firm produces a one off product for a specific customer. Eg tailor making fitted suits.
Batch production : definition
Occurs when a number of identical products are produced in a batch. Often sold to a range of customers. Eg bread made in a bakery.
Flow (mass) production : definition
Occurs when production takes place as a continuous process. Produces along an assembly line with components and parts added at each stage. Eg bar of chocolate.
Cell production : definition
Groups work together into multi skilled cells, each taking responsibility for production of a particular product or part of a product. Eg doc martens
Lean production : definition
Production technique which attempts to prop Duce goods and services while stripping out waste. Entails doing more work with less labour, less time, less space, less inventory and lower costs. Eg toyotal
Job method : brief breakdown
Low technology jobs : here the organisation of the product is simple, with skills and equipment easily obtainable. (Hairdressing)
High technology jobs : greater complexity. High management or project control needed. Essential features are ; clear definitions of objectives, decision-making process eg film production.
Batch method : brief breakdown
Requires that work for any task is divided into parts or operations.
Each operation is completed through the whole batch before the next operation is performed.
This method makes it possible to achieve specialisation of labour.
Capital expenditure can be kept lower although careful planning required.
Main aims are to ; concentrate skills and achieve high equipment utilisation.
Flow methods : brief breakdown
Aims are ; improve work and material flow, reduced need for labour skills, added value/ complete work faster.
There must be substantially constant demand.
The product and/or production tasks must be standardised.
Materials used in production must be to specification and on time.
Each operation in production flow must be carefully defined.
The output from each stage of the flow must conform to quality standard.
Cell production : brief breakdown
Each ‘cell’ is responsible for a significant part of the finished article, rather than each person only carrying out one very specific task, team members are skilled at a number of roles ie job rotation.
Benefits of cell production: communication, multi skilled workers, increased motivation(from teamwork), quality improvements.
Downsides of cell production: investing in new materials, not attainable for smaller scale production lines.
Lean production: brief breakdown
Aims to cut costs by making the business more efficient and responsive to market needs.
Cuts all activities that don’t add value to production process.
Advantages: reduce defects, lead time reduced, time saved.
Disadvantages: defining waste is subjective, dependence on external factors efficiency, long term commitment required.
Productivity : definition
An attempt to measure the efficiency with which a business converts its resources into goods or services.
Or
A measure of the amount of output per unit.
Productivity : formula
Productivity = output / input
How to boost productivity
Increase output using the same number of inputs.
Reduce inputs but maintain eel of output.
Increase outputs by more than the increase in inputs.
Partial productivity : definition
Takes a single input (usually labour, sometimes capital or materials) and uses it as thedenominator in the productivity ratio.
(i) Labour productivity : formula
Per worker = output / number of workers
Per hour = output / number of workers x hours they worked
(ii) Capital productivity : formula
Output / capital investment
(iii) Material productivity : formula
Output / cost of raw materials
Total factory productivity: def/formula
Examines how much is produced per £1 spent on capital and labour.
= value of output / cost of capital and labour used
Total productivity : def/formula
This measures how much output is generated per £1 spent on all inputs
= value of outputs / cost of all inputs
Factors that affect productivity
Improvement of labour productivity
Improvement of capital productivity
Labour productivity: how to improve
Try and improve the skills and abilities of workers or they could attempt to motivate workers to work harder and better.
Capital productivity : how to improve
Investing in new technology and equipments d maintenance of machinery.
Productivity summary : relies on 3 factors
Investment: in machinery, staff training, salary, no financial motivators.
Innovation : bring new products into market, new ideas for how to make a product. Simplifies and speeds up production process.
R&D : developing new products and processes, an investment in ways the firm can gain a competitive advantage over competitors.
Investment : definition
The purchase of capital goods or the expenditure by a firm which is likely to yield in the future.
Invention : definition
The creation of something new ie a process, product or service.
Innovation : definition
The act or process of bringing the new invention to life ie the commercial exploitation of an invention.
Research and development: definition
Refers to a wide range of activities designed to gather knowledge in business or organisations to improve processes, products or services, or develop a new one.
Purpose of investment :
Natures the firm can acquire the capital goods, capital goods can be replaced, help achieve functional objectives.
Improve efficiency/lower costs, increase competitiveness/gain market share, increase capacity/economies of scale, replace machinery/reduce labour costs, financial support for r&d/ maintain leadership position in market, comply with legislation/follow low.
Innovation and research and development : summary
Innovation could be : a new process to improve efficiency or productivity, developing new product, add value to existing product.
To move forward a business should study the marketplace.
Adapt a product or service to the way the marketplace is changing.
Advantages of innovation :
Improve productivity, reduce costs, increase competitiveness, build value of brand, establish partnerships, increase turnover and improve profitability.
Disadvantages of innovation :
Losing market share to competitors, suffering from falling productivity, losing key staff, experience reducing margins and profits, going out of business.
Research : breakdown
The initial stage involves assessing the current and future needs of customers and suppliers ie asking for views.
Once this happens it can : modify products, identify new commercially viable products, improve business process.
Development : breakdown
Research reveals ideas and markets for potential new products or services. It tests new ideas, demonstrates if they’re achievable and helps turn the ideas into reality.
Process examines potential risks.
Purpose of innovation and r&d :
Solving problems, improve safety, develop new products, reduce costs, develop new materials, reduce environmental damage.
Internal factors influencing innovation and r&d :
Culture of business, business corporate objectives,financial drivers, Human Resources, operational issues.
External factors influencing innovation and r&d :
The economy, competitor actions, dynamics of market, technological changes, social and political change.
