Unit 3.4 Flashcards
Operational efficiency
measure of how many costs are incurred during production
Lower costs = Greater efficiency
Productivity
output per employee in a given time period
Average unit cost
Average cost of producing one item
Production at minimum average cost
- Efficiency maximised when goods produced at the minimum unit cost
- Production aim’s to operate at minimum average cost per unit - business can therefore take advantage of economies of scale
- The more products produced = lower unit cost
Capacity
maximum possible output of the business
- Capacity under-utilisation = not producing maximum possible output
- Capacity over-utilisation = Producing over the maximum possible output
Capacity utilisation
extent to which a business uses it’s maximum production capacitys
Uses of operational data
- Monitor and react to issues in production
- Speed up operations by showing where the problem areas are
- Improve reliability and quality
Effects of under - utilisation
- higher fixed costs per unit
- unmotivated staff
- may lead to redundancies and the sale of asset’s
Pros
- increases flexibility of the business
Effects of over utilisation
- Too much strain on resources
- Staff are overworked = make more mistakes
Productivity bonus
used to boost productivity of employees as it gives them a financial incentive to increase production
- however this will increase costs of the business may result in reduction in efficiency
Productivity deal
Trade union may organise this for the staff of a business - motivates employees to work harder - still uses financial bonuses
Staff training
- better trained = more productive - however training can be expensive and other employees may be involved in the training process = lower productivity
Investing in new machinery and equipment
- makes the business more efficient with more goods being produced - however new machinery is very expensive meaning it may take years before a positive result can be seen
Factors influencing productivity
- Quality if inputs = faulty parts can stop the production line and thus lose the company money
- Having enough staff - stretched employees are demotivated
- Investment into new technology - robots can work 24/7
Link between productivity and competitiveness
- business = more productive = then it is more economically efficient