Theme 2.4 Resource Management Flashcards
What is job production?
where items are made individually and each item is finished before the next one is started
What are the benefits of job production?
- customer requirements and changes can be handled
- associated with higher quality
- employees can be better motivated
- flexible production method
What are the disadvantages of job production?
- individual cost of one unit may be high
- often labour insensitive
- requires close consultation with the client
- usually reliant on high skills
What is batch production?
where groups of items are made together. Each batch goes through one stage of production before moving onto the next
What are the advantages of batch production?
- cost savings can be achieved by buying in bulk
- still allows customers some choice
- products can be worked on by specialist staff or equipment at each stage
- allows a firm to handle unexpected orders
What are the disadvantages of batch production?
- takes time to switch production of one batch to another
- requires the business to maintain higher stocks of raw materials and work-in-progress
- tasks may become repetitive and boring
- size of batch dependent on capacity allocated
What is flow production?
where identical, standardised items are produced on an assembly line.
What are the advantages of flow production?
- cost per unit of production reduced through improved work and material flow
- suitable for manufacture of large quantities
- capital intensive which means it can work constantly
- less need for training and skills
What are the disadvantages of flow production?
- very long set up time and reliant on high quality machinery
- high raw materials and finished stocks unless lean production used
- goods are mass produced (less differentiation)
- production is shut down if flow is stopped
What is cell production?
when flow production system is divided into set tasks with each set of tasks being completed by a work group
What are the advantages of cell production?
- group work allows for team bonding, support, and helping each other
- working closely together builds trust and is motivational
- improves productivity and efficiency (reduces waste, time and movement of inventory)
- respond to customer demands more rapidly
What are the disadvantages of cell production?
- issues if the team doesn’t bond
- need to adapt factory area to accommodate cells
- not standardised production line, therefore productivity is lower than with flow production
- staff trained in one aspect of production, therefore less flexible
What factors to consider when choosing the best method of production?
Target Market:
-does the customer demand product options?
Technology:
-can production be automated?
Resources:
-does the firm have finance and people to be able to use flow production?
Standards:
-what quality is required?
What is productivity?
the output per unit of input, per unit of time. The rate of production from each input.
OR
how much each employee makes over a period of time
How can productivity be measured?
- output per worker/hour of labour
- output per hour/day/week
- output per machine
What is the formula for productivity?
productivity = total output / number of workers or time period
What factors affect productivity level in a business?
Quality and age of machinery:
-as machinery gets old it will need a greater level of maintenance so more stoppages in production will be needed to carry this out. This will increase the time taken to make products and hence reduce productivity.
Skills and experience:
-A worker with skills and experience will know the best and quickest methods to make a product. This will make them more productive than a worker with less skills and experience. They are also less likely to make mistakes that need to be corrected.
Level of employee motivation:
-If they feel valued they will want to do their best to contribute to the success of the business. As a result they will strive harder to meet production targets hence becoming more productive.
How can efficiency be improved?
- Increase productivity (train staff, motivate staff, buy more equipment, improve organisation of production)
- Cut costs of production - could be variable costs e.g. raw materials or wages, or fixed costs such as rent
- Change the design mix of the product - by simplifying the design of the product might make it quicker and cheaper to produce
- Adopt lean production- minimising waste in order to reduce costs
What is efficiency?
about getting maximum output from a given amount of inputs or getting a given output from a minimum amount of inputs.
When efficiency is being achieved average (or unit) costs are at their lowest.
How can efficiency be measured?
Production will aim to operate at the minimum average cost per unit so that they can take advantage of economies of scale.
How do you calculate average (or unit costs)?
total costs (£) / total output (units)
where total costs= fixed costs + total variable costs
What is labour intensive production?
Labour intensive production is when a business uses more workers and less machinery.
What is Capital intensive production?
Capital intensive production uses more machinery and relatively few workers. Larger firms tend to be more capital intensive than smaller ones.
What are the benefits of labour intensive production?
- Unit costs may still be low in low-wage locations
- Labour is a flexible resource – through multi-skilling and training
- Labour at the heart of the production process – can help continuous improvement
What are the drawbacks of labour intensive production?
- Greater risk of problems with employee/employer relationship
- Potentially high costs of labour turnover (recruitment etc)
- Need for continuous investment in training
What are the benefits of capital intensive production?
- Greater opportunities for economies of scale
- Potential for significantly better productivity
- Better quality & speed (depending on product)
- Lower labour costs
What are the drawbacks of capital intensive production?
- Significant investment
- Potential for loss competitiveness due to obsolescence
- May generate resistance to change from labour force
What is capacity?
The capacity of a business is a measure of how much output it can achieve in a given period
What is capacity utilisation?
The proportion (percentage) of a business’ capacity that is actually being used over a specific period
How is capacity utilisation calculated?
current output/ maximum possible output x100
What is the buffer inventory?
- minimum amount of inventory a business will want to hold
- ensures production can continue in an emergency
What is the lead time?
- how long it takes from an order being placed with the supplier and the items arriving
- determines when an order has to be placed so stock doesn’t fall below the buffer
What is the re-order level?
- the level of stocks at which orders need to be placed
- depends on the buffer inventory, rate at which stocks are used up and the lead time
lead time x daily usage + buffer stock
What is the re-order quantity?
- amount a manager reorders
- the more often a manager reorders stock the smaller the reorder quantity will need to be
What are the advantages to holding buffer stock?
- It helps avoid running out of stock which is particularly important in a mass market where customer loyalty could be lost if customer demand cannot be consistently met.
- Holding large amounts of stock means the business may be able to benefit from discounts for bulk buying (purchasing economies of scale) which helps firms to lower unit costs and lower prices for consumers.
What are the disadvantages of holding buffer stock?
- Storage costs will be high (rent for warehouse, heating, lighting, refrigeration, security etc.)
- Wastage costs could be higher – throwing away stock that has perished, been damaged or gone out of fashion.
- Finance costs – if the capital to buy this stock is borrowed then interest costs will be higher
- There is an opportunity cost to holding stock – as money is tied up in stock the business has lost the opportunity to have spent that money elsewhere which could benefit the business.
What may influence buffer stock?
- The space available
- Whether the stock is perishable
- The rate at which stocks are used up
- The lead time
What do high stock-in costs include?
- storage, wastage and opportunity costs previously outlined
- These are problems for small businesses with limited resources and in dynamic markets where demand can change quickly.
What do stock-out costs include?
- Production will have to stop whilst still having to pay workers and other expenses.
- Loss of customers to competitors.
- Damaged reputation.
What is inventory control?
the management process that makes sure that stock is ordered, delivered and handled in the best way.
An efficient stock control system will balance the need to meet customer’s demands against the cost of handling stock.
What is Just-in-time production?
a process that focuses on producing exactly the amount you need at exactly the time your customers need it.
What are the advantages of JIT?
- Lower stock holding = reduction in storage space = saves rent and insurance costs
- As stock is only obtained when it is needed, less working capital is tied up in stock
- less likelihood of stock perishing, becoming obsolete or out of date
- Avoids the build-up of unsold finished product that can occur with sudden changes in demand
- Less time is spent on checking and re-working the product of others as the emphasis is on getting the work right first time
What are the disadvantages of JIT?
- little room for mistakes as minimal stock is kept for re-working faulty product
- very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed
- no spare finished products available to meet unexpected orders, because all product is made to meet actual orders – however, JIT is a very responsive method of production
What are the principles of lean production?
- Produce more using less
- Eliminate all forms of waste from the production process
- Maximise the input from staff
- Focus on quality (supplies and finished product)
- Minimise wasted resources
- Minimise wasted time
What is lean production?
minimising waste and using as few resources as possible to make products whilst still delivering quality and value to the customer.
What are the 8 types of waste and techniques used to minimise it?
DEFECTS -TQM -Cell production OVERPRODUCTION -JIT production WAITING -Time based management NON-UTILISED TALENT -Kaizen TRANSPORTATION -JIT production INVENTORY -JIT production MOTION -kaizen EXTRAPROCESSING -JIT production
What is quality?
the extent to which a good/service meets (or exceeds) customer requirements.
a good/service that is described as good quality means it is fit for purpose
What is quality management?
using systems to ensure a businesses products are good quality
What does quality result in?
- generate a high level of repeat purchase and therefore a longer product life cycle
- allow brand building and cross marketing
- allow a premium price
- makes products easier to place (retailers likely to stock products)
Why does focusing on improving quality reduce costs?
- less mistakes will be made if quality is focused on meaning less raw materials will be wasted
- less advertising and promotional materials is needed to persuade shops to stock high quality goods
- fewer customer complaints will be made and less refunds will be given
Why does focusing on improving quality increase revenue?
- quality can function as a USP and therefore generate more sales
- will improve the image and reputation of the business; demand will become less elastic allowing higher prices
- will be easier to keep existing customers and attract new ones
What is quality control?
the process of inspecting products to ensure that they meet the required quality standards
DETECTING RATHER THAN PREVENTING
What are the pros of quality control?
- can be used to guarentee that no defective item will leave the factory
- requires little staff training since most workers needn’t worry about quality
What are the cons of quality control?
- poor quality may be “built in” to product and therefore, costly to rework, so scrapped
- can be trusted if 100% of output is tested which can be time consuming
- cost of employing someone to purely check quality
What are the pros of quality assurance?
- there are clear processes about how things should be done to achieve set standards
- some customers will like the fact that quality checks are made at each stage of production and maybe willing to pay higher prices as a result
What are the cons of quality assurance?
- doesn’t promise a high quality, reliable process. The process may churn out “ok” products
- may encourage complacency following the processes doesn’t meet customer needs if these are rising quality should keep increasing
- cost of training all staff
What is TQM?
total quality management is the management idea committed to a focus on continuous improvements of products and services with the involvement of the entire workforce
What are the advantages of TQM?
- puts customers at the heart of the production process
- motivational as workers are more involved
- less wasteful than throwing defective finished items
- eliminates cost of inspection
What are the disadvantages of TQM?
- requires strong leadership
- subtantial investment in training and support
- maybe resisted by employees as it will be a substantial change in corporate culture
- distruption to production if employees reject work passed on
What are quality circles?
a group of employees who meet together regularly for the purpose of identifying problems and recommending adjustments
What are the advantages of quality circles?
- helps identify practices that improve quality
- increases staff morale through involvement
- draws on the knowledge of workers
What are the disadvantages of quality circles?
- can be demotivating if suggestions are not listened to
- suggestions may be unrealistic
What are the advantages of kaizen?
- reduces waste
- workers motivated
- ideas come from employees= could be easier to implement
- small improvements
- ideas come from existing talents of workforce
What are the disadvantages of kaizen?
- will need training
- can be demotivating
- requires change
- not suitable for urgently improving
- workers may fear “kaizening” themselves or employees out of a job
What are the features of quality assurance?
- focus on process
- achieved by improving process
- targeted at whole organisation
- emphasises the customer
- quality is built into the product
What are the features of quality control?
- focus on outputs
- achieved by sampling and checking
- targeted at production activities
- emphasises required standards
- defect products are inspected out
