Unit 15 Flashcards
Importance of lean production:
It reduces the final price of product and allows the business to be more competitive without the business having to worry about a reduction in the quality of the products. This is because lean production aims to lower the cost of production by reducing waste to a minimum while maintaining the quality of the product.
Benefits of using methods like lean production:
○ New products can be brought to market more quickly.
○ Quality is improved.
○ Waste of time and resources are limited.
○ Cost of holding inventory is reduced.
○ Unit cost is reduced.
Benefit of “Just in time” inventory control:
No inventories are held by the business, products are delivered as quickly as produced. This removes the cost of holding inventories.
Requirements of “Just in time” inventory control:
Excellent relationship and good communication with supplier is needed. The required quality and quantity of items must be delivered in time. Employees and machinery used must also be flexible.
Methods of production
1) Job
2) Batch
3) Flow
Benefit of method of production: job
§ Products are unique and high quality.
§ Employees are often more motivated.
Benefit of method of production: batch
§ Unit costs lower.
§ Offers customer variety of choice.
§ Materials can be bought in bulk.
Benefit of method of production: flow
§ Lower labor costs.
§ Cheaper materials due to bulk buying.
§ Large number of goods.
Limitation of method of production: Job
§ Price is higher.
§ Production takes more time and is more expensive.
§ Economies of scale not possible, more expensive products.
Limitation of method of production: Batch
§ Employees are less motivated.
§ Goods store until sold.
Limitation of method of production: Flow
§ Requires large capital investment.
§ Employees are not motivated.
§ Not flexible.
§ If one part of production line breaks, entire production stops.
§ High level of inventories are held.
Benefit of machinery for: business.
§ Saves money and time.
§ Increases productivity.
§ Reduces costs of production.
§ Improves quality and reduces waste.
Benefit of machinery for: consumers.
§ Better quality products.
§ Lower prices.
§ Products with more features.
Benefit of machinery for: employees.
§ Technology completes simple and repetitive tasks.
§ Work is easier with technology.
§ Provides job security.
Limitation of machinery for: business
§ Expensive.
§ Business might need to change rapidly.
§ Employees might need training.
Limitation of machinery for: consumers
§ Products may become out of date quickly.
§ Faults in products can be expensive to repair.
Limitation of machinery for: employees
§ May reduce need for employees.
§ Could make work less interesting.
§ Reduces opportunities for promotion.
§ Provides more employment opportunities.
Reasons for businesses to hold inventory:
1) Raw materials and components needed for production
2) Partly finished goods.
3) Finished goods ready to be sold.
Costs of holding inventory.
1) Warehouse costs.
2) Handling costs.
3) Shrinkage costs.
4) Insurance costs.
5) Obsolescence.
6) Opportunity cost.
Explain cost of holding inventory: warehouse costs.
Businesses will need to rent or purchase a warehouse to store inventories.
Explain cost of holding inventory: Handling costs.
Inventories need to be moved into and out of warehouse.
Explain cost of holding inventory: Shrinkage costs.
Damaged, lost or stolen inventory needs to be replaced.
Explain cost of holding inventory: Insurance costs.
Cover the cost of losses from shrinkage.
Explain cost of holding inventory: Obsolescence.
Business may not be able to sell out-of-date goods.
Explain cost of holding inventory: Opportunity cost.
Working capital is kept in inventories which could be more profitable.
Business’s intention to hold inventory despite the cost.
○ If raw materials and components are not available nearby when needed, it may cause loss of output.
○ If finished goods are not in stock, this results in loss of current and future sales.
○ Business may get discount on purchase for purchasing more at a time.
Benefit of using Kaizen method:
Kaizen means continuous improvement. This means small improvements from employees can result in a big improvement in efficiency.
Main methods of production.
1) Job production.
2) Batch production.
3) Flow prodiuction,
Explain production method: job production.
Individual item created before another one is started. Used for the production of single unique items. This requires highly skilled employees and special equipment.
Explain production method: Batch production
Group of items produced in a single stage of production.
Explain production method: Flow production
Products moving continuously along the production line as additional features are added to the product until it is finished. A large amount of identical standardized products are made to meet customer demand.
Main features of production.
® Produced in large quantities.
® Standardized products.
® Employees are relatively skilled.
® High degree of automation.
® Large inventories of raw materials and work in progress.
Factors to choose method of production
○ Amounts they are likely to sell.
○ Product being made.
○ Cost of production.
○ Variety of goods expected by customers.
○ Size of market.
How does Technology in change production methods
Allows development of products more quickly. Products and designs can be tested using computer technology, saving resources, time and money. Computer controlled robots are also available which can work better than employees. Use of debit and credit cards have also revolutionized methods of payment, making it much faster.
Duties of the operation management:
○ Use resources in most cost-effective way.
○ Produce required output to meet demand.
○ Meet quality standard.
Methods of labor productivity:
○ Increasing output with same employees.
○ Keeping output same with less employees.
○ Improving skill level of employees.
○ Improving motivation of employees.
○ Introducing more automation and better technology.
○ Improving quality of manager decisions.
Define: production.
Process of converting inputs into saleable goods.
Define: Productivity.
Measure of efficiency of inputs used in production.
Define: inventories
Stock of raw materials, work in progress and finished goods
held by a business.
Define: Lean production
Production of goods and services with minimum waste of resources.
Define: Job production
Production of items one at a time.
Define: Batch production
Making products in batches and stages.
Define: Flow production
production of identical goods in a continuous manner.
Define: Capital intensive.
Production using high quantity of capital compared to labor.
Define: Output.
Finished goods and services.
Define: Inputs.
The resources the business possess.
Define: Kaizen.
A method of business that allows employees to make suggestions about how to improve quality and productivity.
Q.48 How is technology an advantage for businesses?
A.48
1) Saves money and time.
2) Increases productivity.
3) Reduces costs of production.
4) Improves quality and reduces waste.
Q.49 How is technology an advantage for consumers?
A.49
1) Better quality products.
2) Lower prices.
3) Products with more features.
Q.50 How is technology an advantage for employees?
A.50
1) Technology completes simple and repetitive tasks.
2) Work is easier with technology.
3) Provides job security.
Q.51 How is technology an disadvantage for businesses?
A.51
1) Expensive.
2) Business might need to change rapidly.
3) Employees might need training.
Q.52 How is technology an disadvantage for consumers?
A.52
1) Products may become out of date quickly.
2) Faults in products can be expensive to repair.
Q.53 How is technology an disadvantage for Employees?
A.53
1) May reduce need for employees.
2) Could make work less interesting.
3) Reduces opportunities for promotion.
4) Provides more employment opportunities.
