Theme 2 - Resource management Flashcards
What is job production?
Job production is where one single product is made at a time for a specific client or customer by highly skilled workers. Products are made at a good quality meaning that they can charge higher prices
However the production process can be slow and labour intensive
Each product takes a long time to make so productivity is lower
What are the pros and cons of Job production?
Pros:
- Bespoke, unique, one-off, to customers measurements or specifications
- Very motivated workers who can can see one item made from start to finish
- Motivated workers are normally more productive and have lower rates of absenteeism ( regularly staying away from work/no good reason)
- Higher prices can be charged to the customers
Cons:
- Skilled labour and craftsmen are expensive
- Wide range of tools may be required
- Hard to speed up if demand increases
What is batch production?
Batch production= is when a business wants to make more than one item at a time. Goods are made in batches and can be switched over to make something different on the same product line.
The products made in each batch are identical to each other
This production method is used for businesses that have a small product mix that they sell limited quantities for limited amount of time. It allows businesses to be flexible with their output
What are the pros and cons of Batch production?
Pros:
- Production can be changed to meet customer needs or fluctuations in demand.
Standard production of items means that it can be mechanised less labour involved than job production
- Employees specalise to become good at their role
- Higher productivity levels as each batch produced is the same and can buy raw materials in bulk
Cons:
- Smaller batches carry higher average unit cost (economies of scale)
- Workers can be less motivated with repetitive work
- Idle time needs to be managed between batches as this is a wastage ( cost and inconvenience of storing lots of raw materials)
What is flow production?
Flow production uses production lines with continuous movements of items through the process
Many mass produced products are produced this way (cola bottles, toothpaste etc)
The factory would be laid out in assembly lines
Each worker within the flow completes a task before it is passed onto another worker. Operates 24hours per day. Flow production allows a firm to benefit from economies of scale as they buy raw materials in bulk.
What are the pros and cons of Flow production?
Pros:
- A business can make larger quantities
- Buy in bulk and benefit from economies of scale
-Automated and computerised production means improved quantity and more complex designs can be made in a short period of time
Cons:
- High costs to buy the factory and machinery
- Low motivation of staff due to repetitive tasks
- Break downs and lost production can be costly
- Very inflexible and hard to change factory machinery to change different products as it only makes one item
What is cell production?
Cell production is dividing up a production up a production line into separate self contained areas that are each responsible for a section of work
Each cell will have a team leader and a team of multi skilled workers. Results in individual workers not carrying out repetitive tasks on their own in a flow.
This could increase the workers productivity
What are the pros and cons of Cell production?
Pros:
- Wastage through movement of material is removed/reduced
- Time waiting for stock to arrive is reduced
- Bottlenecks in the production is reduced (where everything builds up waiting to go onto the next stage)
- Cell production can mean increased worker commitment and motivation and therefore productivity
Cons:
- Any breakdown machinery will stop production
- Needs more staff to supervise than a continuous flow
- Expanding can be hard as space may be limited or restricted by tasks
What is productivity?
Productivity is how a business can measure how hard a business person or machine is working
This helps in planning, scheduling, monitoring, budjeting and running the business.
How is productivity measured?
Productivity is measured as the output per unit of input per unit of time
How can businesses increase their productivity?
They can increase their productivity with a lower unit cost as less input is required to produce the same amount
Lower unit costs can also allow a firm to charge lower prices and still make a profit
If prices are lower than competitors products they will have a competitive advantage.
How can the use of machinery increase productivity?
Benefits and Drawbacks?
-Machines can often be used to complete the tasks used by human workforce
-Although initial costs of machinery is high once the machines are up and running they can increase the firms productivity and may invest into further machinery to boost firms productivity levels
However there are drawbacks to a firm using and relying on machinery
-machinery gets old the level of maintenance required to keep it running will increase which can result in production stoppages
- reducing productivity levels
What is a productivity bonus?
A productivity bonus is when a business may choose to boost their productivity levels by offering their employees a productivity bonus
For example: If employees increase their production levels by 5% they may be entitled to a lump sim bonus- £500/ a percentage of their wages
This will increase the costs of the business so may not maximise efficiency
What are productivity deals?
Productivity deals are the union in a business that may negotiate a productivity deal for all of the staff
This should motivate everyone in the organisation to work more harder and effciently
This is a financial method of motivation so there is a cost to this deal.
How can staff training increase productivity levels?
Staff training is when the firm train the staff up to be fully trained and they are able to work hard at their job and feel confident in their role
Training can be expensive because it means that two people (atleast) are away from their job while the employees are being trained so there is also a loss to productivoty while that happens
How could piecework be used to increase levels of productivity?
Piecework is where workers are paid only for the units they produce so theyre motivated to work faster. However, this could also lead to a reduction in product quality
How could hiring a key worker increase productivity levels?
How could investment in new machinery and equipment increase productivity levels?
More investment in machinery and equipment will make it more efficient and produce more goods per hour which will boost the productivity per hour.
Machinery or capital investment is expensive and may take years to recoup the costs so is very long-term stratergy to improve productivity
What factors influence productivity ?
-Quality of inputs in the production process- faulty parts in an assembly line can stop the line
- Labour shift organisation of workers having the right number of staff on at peak times will increase productivity overall, as stretched staff are demotivated by being overloaded
- Investment in new technology, robots can work 24/7 without rest breaks so it will increase productivity levels
What is efficiency?
Efficiency is when a production happens at an overall minimum average cost. Being efficient is essentially about getting more output from a given amount of inputs and reducing the waste of all the inputs
E.g. Time and materials
Greater efficiency levels should decrease unit costs and increase profits
How is efficiency maximised ?
Efficiency is maxmised when goods are produced at the minimum unit or average production cosy
Production will aim to operate at the minimum average cost per unit so that they can take advantage of economies of scale
What is the average cost formula?
Average cost = TC/OUTPUT ( where TC= FC+VC)
What factors influence efficiency?
-Firms have a higher output per employee are more efficient
- This can lead to a competitive advantage as prices per item made are lower than competition
- Quality may suffer as a result of tryintg to produce items to quickly
- An efficient factory production line
- Standardisation of the production process: Occurs when all staff use the same components and techniques in the production process
Training of workers is minimised
Bulk-buying of components reduces variable costs
Production lead time is reduced
BUT customisation of products is not usually possible
Relocation or downsizing
Moving production to a cheaper or smaller location can reduce fixed costs
Labour-intensive businesses may look for lower wage locations
Capital-intensive locations may look for lower rents or land costs
However, relocation is very disruptive and will incur significant short-term costs
Investment in capital equipment
Purchasing or upgrading machinery and technology can increase the rate of output, lower costs and improve quality
Organisational restructuring
Reducing the level of staff or reorganising staff can better match labour to output needs
Delayering reduces labour costs as levels of management are removed
Redeployment can motivate workers by providing opportunities for staff to take on a new role which will develop their skills and experience
Outsourcing
Tasks may be given to other specialist businesses that can complete it at a lower cost
Outsourcing allows a business to focus on improving the efficiency of its core competences
Adoption of lean production techniques
An approach to production that involves the reduction of all types of wastage (time, resources and space)
Kaizen means that improvements are made continuously
Just in Time involves the holding little or no stock which minimises storage costs
Capital Intensive & Labour Intensive Production
Labour-intensive production predominantly uses physical labour in the production of goods/services
The delivery of services is usually more labour-intensive than manufacturing
In countries where labour costs are low (e.g. Bangladesh) labour-intensive production is common
Small-scale production is likely to be labour-intensive
E.g. UK schools are labour-intensive operations as teachers plan and deliver lessons and provide pastoral support
What is capacity utilisation?
Capacity utilisation = the extent to which the maximum capacity for output that is being used
- Usually expressed as a % of a maximum output
What is capacity of a business?
The capacity of an organisation is the maximum output that it can produce in a given time period without buying any more fixed costs
What can capacity utilisation help a business with?
Capacity utilisation is how to best use those resources for the benefit of the business
What is full capacity?
Full capacity is when the business can no longer increase its output
Why is capacity utilisation important?
Capacity utilisation is important as it has a bearing on average cost per unit and therefore economies of scale
- In high capacity utilisation the fixed costs are spread over more units of production
- In low capacity utilisation the fixed costs can be too high to stay in business of keep producing that product
How could a business increase demand and sales at off peak times?
- A price cut sale or through promotion
- Offer special deals
- Make staff redundant
- could sell assets such as machinery
- lease capacity to other businesses
- Could move to a smaller premisises and rationalise
- Increase sales or increase usage
- Could balance seasonal demand production
What is the capacity utilisation formula?
Capacity utilisation = current output / maximum possible output x 100
What is over utilisation?
High capacity utilisation is better than low utilisation but 100% capacity utilisagtion has its drawbacks.
What are the drawbacks of over utilisation?
-Businesses have to consider all their objectives when they plan their capacity usage
- Might not be possible to operate at 100% capacity and keep quality high
- Might have to turn away potential customers because it cant increase output any more
- Machines are on all the time if they break it causes delays and work piles up
- No time for equipment maintenance which can reduce life of machines
- No margin of error - everything has to be perfect the first time which can cause stress to the manager and mistakes are more likely
- Businesses cant temporarrly increase output for seasonal demand
- If output is greater than demand there will be a surplus of stock its noy good to have valuable working capacity tied up in stock
How can firms with over utilisation increase their capacity?
- Businesses can increase capacity by using their facilities for more of the working week. They can have staff working in two ot three shifts in a day and on weekends and bank holidays
- Businesses can buy more machines if they can afford them
- Businesses can increase staff levels in the long run by recruiting new permanent staff. In short run they can emply temporary staff or get staff ro work overime
- Businesses can increase their capacity by increasing productivity. They can reorganise production by reallocating staff to the busiest areas and they can increase employee motivation
What is under utilisation
Low capacity utilisation is called under utilisation
Its ineffcient because it means a business is not getting good use out of machines and facilities that have been paid for
What are the drawbacks of under utilisation?
Fixed costs have to be spread over fewer units of ouput, so unit costs increase. An increase in unit costs may mean a firm needs to increase prices. This could make it less competitive which may reduce sales and profit
- Underutilisation can lead to a negative brand image being percieved by consumers
- It can reduce employee motivation as there may be long periods when theres not enough work for them to do. There be less need for supervisory roles compared to high utilisation- less opportunity for promotion which can reduce employee motivation
How can firms with under utilisation deal with it?
Under utilisation can occur when a firm has too much capacity and not enough demand for their product. Theyll first try tio increase demand but if it doesnt help theyl need to reduce capacity
- Businesses stimulate demand by changing their marketing mix
- Changing the marketing mix might take customers away from competitors - if a competitor exits the market it may cause emand for the remaining businesses to increase
- Businesses can also fill spare capacity by accepting outsourced work from other firms its often better to make goods for competitor and make some money tat iy os to leave machinery doing nothing
- If a businesss cant increase demand for their product they need to reduce capacity by closing part of their production facilities ( rationalisation)
- Businesses can reduce capcity in short term by stopping overtime or reducing the length of the working week, allocating staff to other work in the busines and by not renewing temporary contracts
- Businesses can reduce capacity in the long term by replacing staff as they naturally retire ( natural wastage) , making staff redundant and by selling off factories or equipment
Why do businesses need to consider how their capcity needs will change?
- Demand changes over time so firms must think about demand in the future as well as the current demand
- Key to long term success is planning capacity changes to make long term changes in demand. You can use market research to help predict future demand but its not 100% certain theres always some risk
- Short term changes in capacity provide flexibility Firms should be flexible and temporarily increase existing capacity utilisation if an increase in demand isnt expected to continue in the long term
- long term solutions end up giving lower unit costs as long as predictions of demand turn out to be true
What is outsourcing?
Outsourcing = when a business uses another firm to do some work on its behalf, E.g. a manufacturer of detergent might make a detergent for a supermarket and package it with the supermarkets own label
Firms can outsource work to other businesses in busy periods.
This means they can meet unexpected increases in demand without increasing their own capacity and having the costs of extra staff and facilities all year round
What is stock control?
Stock control= the control of the flow of stock in a business, it concerns the ordering and management of - raw materials, component, work in progress and finished goods
What is stock?
Stock includes the raw materials needed for making the product, the materials being used for work in progress and the store of finished goods that a business holds to supply to customers.
- Most businesses try to minimise the amount of stock they are holding because of the costs involved
- The maximum level of stock a businesses usually wants to hold depends on the size of their warehouse, stock rooms, an opportunity cost and their production method
- Businesses that use flow production need a large stock of materials whereas batch production leads to large stocks of work in progess Job production often means theres no stock of finished goods to be stored and cell production usually relies
What are the stock levels of the different production methods?
Businesses that use flow production need a large stock of materials whereas batch production leads to large stocks of work in progress
Job production often means there’s no stock of finished goods to be stored and cell production usually relies on just in time stock
What is buffer stock?
Buffer stock = the minimum level of stock so that it wont run out of raw materials or finished goods
- The amount of buffer stock needed depends on the storage space avaliable, the kind of product ( perishable), the rate of which the stock is used up and the lead time
What is lead time?
The lead time = the time it takes for goods to arrive after ordering them from a supplier
- Longer the lead time = the more buffer stock you need to hold
- If customer demand suddenly went up you wouldn’t want to wait
What is the re order level?
The re order quantity = the amount the business orders from its suppliers
The stock level at which this is placed is called the re order level
What are the advantages and disadvantages of holding buffer stock?
Ads:
- Holding buffer stock means a business can easily respond to changes in consumer demands
- Avoid running out of stock - beneficial in a mass market
- If suppliers cant deliver on time that production will not be affected
-May be beneficial for firms to hold large amounts of buffer stock as businesses can be discounted for buying in bulk which gives them purchasing of economies of scale and lowers unit costs
Dis:
- The cost of storage is high, a business will pay for premises staff and security of stock
- This can tie up the working capital of a business
What are high stock in costs?
High stock in costs = the cost associated with holding too much costs
This occurs if a business doesnt control stock properly
This would be bad for small businesses with little money or those in dynamic market where there is high chance that demand might change
What are high stock out costs?
high Stock out costs = the costs of not having stock when it is needed
This occurs due to poor stock control and running out of stock could affect the whole supply chain
- If a supplier loses contact with a big buyer then it could ruin the supplier business
- Stock out costs can be associated with lost sales from losing customer to customer
What is just-in-time managment of stock?
Just in time (JIT) = Means that a business does not keep stocks of parts in a warehouse
Instead they order the parts and get them delivered on the same day from the supllier
This means very close links with suppliers as they need to have good communication to make sure the right amount of goods are delivered at the right time
Aims to reduce waste of materials and products by having little stock as possible
What are the advnatges and disadvantages of jit stock control?
Ads:
- As parts are ordered as they are needed there is no wastage
- Parts are bit warehoused which is a massive cost saving in terms of premises and staff
- Stock is less likley to go out of date
-The business will improve their cash flow as their money is not in stock
Dis:
- The business wont be able to meet the unpredicted surges in demand
- The business wont be able to quickly replace damaged parts
- If delivery does not turn up in time this can stop whole production line
What is waste?
Waste = any activity or result that the customer doesnt value and is not willing to pay for.
These activities that dont add value for the customer between the inputs and the outputs must be removed or minimised
What is waste minimisation?
Waste minimisation can help improve efficiency and reduce the unit cost of production and can also improve the public image of the business if they are seen to be more eco frinedly
Waste minimisation can carry heavy legal fines for wow compliance
What are the seven deadly wastes?
Over production = Means that the business is making more than required and maybe running at over capacity
- Over capacity and stop the smooth flow of raw materials of the factory and reduces the quality of goods
Waiting time = The waste of waiting time can take 2 forms: Waiting becayse the next step in the process is not ready
Waiting because there are not enough inputs necessary to complete the next process
Transportation time = There can be signifcant costs spent on transporting parts componenys and stock to each work station between sites - Wastes energy and resources of an employee that could be better used
Wastes fuel for fork lifts and lorries
Anyrime that materials have to be moved to anogther work station is an opportunity to reduce wasetful transportation
Excess processing= Can mean any extra processes that take the original raw material further and durther from its natural state
This is fine if it meets customer needs but if it doesnt this is wasteful
If customer orders plain shed and comes paintef its wasteifl unnecessary process
Excess stock = If a product is over produced then it must be stored somewhere until it is needed - requires warehousing tracking and monitoring
It risks producys becoming obselete, going ogg or going out o style
Excess motion =
Product quality =
What is lean production?
Lean production = is a japanese approach to production to use less off everything: Time, labour capital space in factory for raw mayteirals
What are the benefits of lean production?
- Improved customer service through delivering exactly what is required when they want
- Improved productivity in terms of output per worker per time period
- Quality improvements through reduction in defects and reworking faulty goods
-Shorter lead times which can become a competitive advantage - Happy customers who dont have to wait for long
- Reduces waste in terms of 7 dw
- Safer work enviroment with more organised leanee proudc line comes higher levels fo saftey
