Theme 2.4: Resource Managment Flashcards
Efficiency
The use of resources in production in which the costs are kept as low as possible whilst still getting the maximum output from minimum input
The 4 methods of production
. Job Production a.k.a One off production
. Batch Production
. Flow Production a.k.a Mass Production
. Cell Production
Job Production
Producing a single item at a time usually specialised products that are made to order such as a plane, piece of art or a luxury car
Batch Production
Making a variety of differentiated product in the same factory in groups or batches of product e.g the Daily Mirror may make batches of one days newspaper, then reset the machine and print the next days later on
Flow Production
Continuous production of a mass product on an assembly line. Can be either capital or labour intensive relative to what the product is
Cell Production
Cell production is a form of team work where the entire process of production is split into small groups called cells. Each cell is responsible for a complete unit of work
Features of Job Production
. Flexible . Labour intensive . Low output . High cost of production . Smaller niche market . Better customer satisfaction . Inefficient
Features of Batch Production
. Flexible to an extent . Can be capital or labour intensive . Medium sized output . Lower cost of production . Larger market . Fairly Efficient
Features of Flow Production
. Low flexibility if not no flexibility . Capital intensive, some times labour . Mass output . Lowest cost of production . Mass market . Very Efficient
Features of Cell Production
. Fairly Flexible . Labour intensive but can have some elements of capital . Medium to large output . Medium to large market . Very Efficient
Productivity
A measure of how efficiently a business is making use of its resources by looking at output per unit of input over a given period e.g output of an employee per hour
Ways of increasing productivity
. Supply workers with better tools or machines to allow labour it be more efficient and increase output . Invest in better technology . Invest in staff training . Address motivation issues . Re-arrange the way the business is run
Benefits of increasing productivity
. Fall in cost of production
. Has room to reduce price due to bigger profit margin giving them the competitive advantage
. Better quality as a result of investment in research and development, this means the product and business is more attractive
. Wages may be able to be increased which will give the workers a boost in motivation
Process innovation
Using new technology to improve production in terms of efficiency, productivity and so on so costs can be reduced
Human Capital
The knowledge and skills the workforce have acquired, the more education and training, the higher the human capital
Capital Investement
Pumping money into a business in order to increase labour productivity and thus try to cut costs
Outsourcing
Having an external business perform a certain duty or task for you rather than have your own staff run this sector. For example lots of customer service phone lines are outsourced to India where costs are lower for the business because they are specialised there and have lower wage costs.
Capital intensive
Production uses more capital relative to labour i.e machinery
Labour intensive
Production uses more labour relative to capital so the wokrforce
Determining whether something is capital or labour intensive
. Nature of the product: Products that are in the mass market and have high demand are usually capital intensive whereas products in the service industry are labour intensive as there is usually less demand but machinery cannot carry out the tasks…. yet
Capacity Utilisation
Measures what proportion or percentage of the maximum output is actually being used
Capacity Utilisation Formula
Current Output divided by Maximum Possible Output times 100 e.g a factory can make 1000 cars a day but are only making 760, capacity utilisation is 76%
Under-utilisation of capacity
Some resources are not being used and production is not as high as it could be. Is inefficient because the maximum outcome isn’t being achieved from it resources and average costs are higher because the fixed costs are spread over less products
Over-Utilisation of capacity
The business is trying to produce more than it is capable of which can overwork both the machinery and the workers, no downtime for the machines means more chance of breakage, quality may be effected since they need to produce so much in a certain period of time, can give customers a bad impression if you take on orders you cant actually meet
What is the best percentage for capacity utilisation to be at?
95% because not all is used so there is capacity left as a precaution encase another machine breaks, staff are being worked less and resources are being used to the greatest degree of efficiency
Ways to increase capacity utilisation
. Improve marketing to increase sales
. Diversify into new markets
. Add a new product to your line
. Take on production form other over-utilised businesses when you are under-utilised and vice versa
Ways to decrease capacity utilisation / improve it
. Get staff to work overtime
. Outsource production
. Employee Temporary or part-time staff
. Invest in higher capacity if this is a constant problem
. Work to increase productivity - rationalization, re-organization, staff motivation
. Recruit more full-time staff
Stock Control
The process of making sure the level of stock is kept at an optimum and is held so that demand can be met while keeping the costs of holding the stock to a minimum
Buffer Stock
The stock kept just in case in order to cope with the demand for unforeseen circumstances such as an unexpected surge in demand or a delay in delivery
Just-In-Time stock management
Stock control system that gets rid of the need for holding large amounts of stock of products or materials. Stock arrives just as it runs out so that the capacity is used to the maximum
JIT Advantages
. Previous storage space is now available for production
. Cash flow is improved as less money is tied up in stock
. Less waste
. Cash freed up for better, more efficient use i.e investment
. Better flexibility
JIT disadvantages
. Needs to be monitored carefully
. Need a good relationship and trust with the supplier
. Less likely to benefit from economies of scale, higher costs of production
. One delay in the system can cause a factory wide delay
Waste Minimisation
Seeks to increase productivity by examining every stage of production or operations to see if they can be improved, so efficiency increases
Lean Production
A general term given to any form of production that focuses on trying to minimize waste during the production process
Key Features of Lean Production
. TQM - Trade Quality Management
. Kaizen - Continuous improvement
. Flexibility
. Lead time - the time between the idea of the product to being made
. Lean Suppliers - Suppliers of components and other materials that also operate a lean production system to ensure high quality and low efficiency
. Waste minimalization
. JIT
Quality Control
Refers to traditional methods of checking that a product is of a good enough standard
Quality Assurance
Takes into account customers needs and involves employees in looking at every aspect of the business in an attempt to improve the quality of a product or service
Quality Circles
Small groups of employees that meet regularly to look at how quality can be improved and workplace issues are discussed, any recommendatons are passed to managment
Total Quality Management
All employees are involved in quality control and make a combined effort to help reduce wastage and improve quality to help reduce costs whilst improving motivation
TQM Advantages
. Reduced costs through less wastage of materials and better use of labour
. Less time spent on customer care and replacing faulty products
. Enhances reputation and gives a competitive advantage
. Creates customer loyalty
. Better motivation of staffthus improved productivity
TQM Disadvantages
. Can be costly to set up
. No real guarentee that it will work
. Will cause disruption to production until its put in place
. Workers and managment may be initially resistant to the change
