Theme 2 - Resource management

Question 1

What is job production?

Answer 1

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

Question 2

What are the pros and cons of Job production?

Answer 2

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

Question 3

What is batch production?

Answer 3

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

Question 4

What are the pros and cons of Batch production?

Answer 4

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)

Question 5

What is flow production?

Answer 5

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.

Question 6

What are the pros and cons of Flow production?

Answer 6

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

Question 7

What is cell production?

Answer 7

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

Question 8

What are the pros and cons of Cell production?

Answer 8

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

Question 9

What is productivity?

Answer 9

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.

Question 10

How is productivity measured?

Answer 10

Productivity is measured as the output per unit of input per unit of time

Question 11

How can businesses increase their productivity?

Answer 11

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.

Question 12

How can the use of machinery increase productivity?

Benefits and Drawbacks?

Answer 12

-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

Question 13

What is a productivity bonus?

Answer 13

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

Question 14

What are productivity deals?

Answer 14

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.

Question 15

How can staff training increase productivity levels?

Answer 15

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

Question 16

How could piecework be used to increase levels of productivity?

Answer 16

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

Question 17

How could hiring a key worker increase productivity levels?

Question 18

How could investment in new machinery and equipment increase productivity levels?

Answer 18

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

Question 19

What factors influence productivity ?

Answer 19

-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

Question 21

What is efficiency?

Answer 21

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

Question 22

How is efficiency maximised ?

Answer 22

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

Question 23

What is the average cost formula?

Answer 23

Average cost = TC/OUTPUT ( where TC= FC+VC)

Question 24

What factors influence efficiency?

Answer 24

-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

Question 25

What is capacity utilisation?

Answer 25

Capacity utilisation = the extent to which the maximum capacity for output that is being used
- Usually expressed as a % of a maximum output

Question 26

What is capacity of a business?

Answer 26

The capacity of an organisation is the maximum output that it can produce in a given time period without buying any more fixed costs

Question 27

What can capacity utilisation help a business with?

Answer 27

Capacity utilisation is how to best use those resources for the benefit of the business

Question 28

What is full capacity?

Answer 28

Full capacity is when the business can no longer increase its output

Question 29

Why is capacity utilisation important?

Answer 29

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

Question 30

How could a business increase demand and sales at off peak times?

Answer 30

• 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

Question 31

What is the capacity utilisation formula?

Answer 31

Capacity utilisation = current output / maximum possible output x 100

Question 32

What is over utilisation?

Answer 32

High capacity utilisation is better than low utilisation but 100% capacity utilisagtion has its drawbacks.

Question 33

What are the drawbacks of over utilisation?

Answer 33

-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

Question 34

How can firms with over utilisation increase their capacity?

Answer 34

• 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

Question 35

What is under utilisation

Answer 35

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

Question 36

What are the drawbacks of under utilisation?

Answer 36

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

Question 37

How can firms with under utilisation deal with it?

Answer 37

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

Question 38

Why do businesses need to consider how their capcity needs will change?

Answer 38

• 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

Question 39

What is outsourcing?

Answer 39

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

Question 41

What is stock control?

Answer 41

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

Question 42

What is stock?

Answer 42

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

Question 43

What are the stock levels of the different production methods?

Answer 43

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

Question 44

What is buffer stock?

Answer 44

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

Question 45

What is lead time?

Answer 45

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

Question 46

What is the re order level?

Answer 46

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

Question 47

What are the advantages and disadvantages of holding buffer stock?

Answer 47

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

Question 48

What are high stock in costs?

Answer 48

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

Question 49

What are high stock out costs?

Answer 49

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

Question 50

What is just-in-time managment of stock?

Answer 50

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

Question 51

What are the advnatges and disadvantages of jit stock control?

Answer 51

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

Question 52

What is waste?

Answer 52

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

Question 53

What is waste minimisation?

Answer 53

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

Question 54

What are the seven deadly wastes?

Answer 54

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 =

Question 55

What is lean production?

Answer 55

Lean production = is a japanese approach to production to use less off everything: Time, labour capital space in factory for raw mayteirals

Question 56

What are the benefits of lean production?

Answer 56

• 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

Answer 62

Quality = how well a product or service does what it is supposed to do and meeting and exceeding consumer preferences

Question 63

How does a business improving quality reduce its costs and increase revenue?

Answer 63

• less raw material and machinery time gets used up by mistakes
• less advertising and promotional material is needed to persuade people to stock high quality products
• few complaints and refunds
• quality can function as a USP
• high quality products improve the brand image and reputation
• quality can be associated with consistently - makes it easier to keep existing customers and attract new customers

Question 64

What is quality mangament?

Answer 64

A business uses quality managment to ensure their product is at good quality

Question 65

How can a business improve quality by reducing its costs and increasing revenue

Question 66

What is quality control?

Answer 66

Quality control = means checking goods after youve made them or when theyve arrived from a supplier to see if theres anything wrong with them

• often done by specially trained quality inspectors
  -mainly about detecting faulty output rather than preventing it
• can be a very expensive process
  examples include : sampling or looking at data about the product to see if quality is consistent

Question 67

What is quality assurance?

Answer 67

Quality assurance = how a business can design the way a product or service is produced or delivered to minimise the chances that output will be sustained

Question 68

Whats the comparison between contol and assurance?

Answer 68

Quality control:
- QC looks at the results of the production process and checks quality is consistent
- QC is designed to inspect the product and correct any faults or defects which are regarded as being reactive

Quality assurance:
- QA the quality is built into every aspect of the product or service
- The QA system is designed to prevent quality faulting and defects occuring - regarded as being proactive
-Aim of QA is to improve the design and development of the product so that there are no faults and defects in the production process

Question 69

What is total quality management?

Answer 69

Total quality management = is a management approach change in business culture that puts quality at the heart of everything in the business

• every employee in every department focuses on quality in order to improve overall quality of the products
• Every employee has to try satisfy customers and co workers ( customers need to be happy with products sold and co workers need to be happy with work being passed onto them)

Question 70

What are the ads and dis of TQM

Answer 70

Advantages:
- Not paying for inspectors
- Empowered employees are motivated
- All employees are involved - helps them to bond as a team
- Improved quality therefore more satisfied customers
_ enhanced reputation
- Build good partnerships with suppliers
- More involved workers
-Less development time for new products

Disadvantages:
- Takes time to introduce
- Some staff can be resistent to change
- Will cost to train staff
- Defects may not be spotted until the end which can be expensive

Question 71

What is quality circle?

Answer 71

Quality circle = a group of employees who meet on a regular basis to talk about quality problems that are relevant to the part of the production process they work in

• Aim to identify and save specific quality problems
• Great way to get staff involved increase motivation
• Suggestions can often be unrealistic and people may not listen

Question 72

What is Kaizen?

Pros and Cons?

Answer 72

**The Kaizen approach is a lean production method **= it is a policy of constantly introducing small incremental changes in a business in order to **improve quality and efficiency **

• This approach assumes that employees are the best people to identify room for improvement - since they see the process in action
• This reduces waste as an employee and are constantly evaluating the way they work and finding ways to be more efficient

Employees need to know how to suggest improvements as it helps encourage workers to have ownership for their work and can help encourage a team working enviroment which increases motivation
-helps make workers feel involved in quality assurance
- Businesses can achieve competitive advantage through their quality
- may enable them to feel superior and customers will be willing to pay for more quality
- may encourage repeat purchases