Unit 4 Flashcards
What is production?
The process of converting inputs such as land, labour and capital into saleable goods, for example shows and cell phones.
What must operations management do?
- Use resources in the most cost-effective way.
- Produce the required output to meet consumer demand.
- Meet the quality standard expected by consumers.
What is productivity?
A measure of the efficiency of inputs used in the production process, especially labour and capital.
How is the productivity of labour is measured?
Total output /
Number of production employees
How does a business improve labour productivity?
- Increasing output with the same number of employees.
- Keeping output at the same level but with fewer employees.
How do you increase the productivity of employees?
- Improving the skill level of employees.
- Improving the motivation of employees.
- Introducing more automation and more or better technology.
- Improving the quality of management decisions.
What is the main reason for improving productivity?
To reduce unit costs, so the increase in output must be greater than the increase in costs.
What do businesses hold inventories of?
- Raw materials and components.
- Work-in progress.
- Finished goods ready to be sold or sent out customers.
What are inventories?
The stock of raw materials, work-in-progress and finished goods held by a business.
How does holding inventory add to a businesses cost?
- Warehousing costs.
(Rent and purchase of a warehouse). - Handling costs.
(Inventory needs to be moved in and out). - Shrinkage costs.
(Damaged, lost or stolen inventories = replaced). - Insurance costs.
(Will cover the costs lost from shrinkage). - Obsolescence.
(Unable to sell out-of-date goods) - Opportunity cost.
(Working capital is ‘tied-up’ in inventories which could be used more profitably by the business)
Why do businesses hold inventories even when they are costly?
- The production process needs raw materials or components.
- If the business does not have finished goods in stock, then customers’ orders cannot be met and the business will lose sales.
- Businesses often benefit from economies of scale when they buy inventories in large quantitites because they reveive a discount from the supplier.
What is lean production?
The production of goods and services with the minimum waste of resources.
What are lean production techniques?
- Just-in-time inventory control.
- Kaizen.
How can the introduction of these techniques benefit us?
- New products can be brought to the market more quickly.
- Qualities improved.
- Wastage of time and other resources is reduced or eliminated.
- The cost of holding inventories are eliminated.
- Unit costs are reduced, which will increase the profit made on each unit sold or enable a business to reduce its prices and be more competitive. This will increase sales, revenue and profits.
What is just-in-time business control?
The just in time inventory control system means that no inventories are held by the business. Raw materials and components arrived from suppliers just as they are needed by the production process. As soon as finished goods leave the production process, they are delivered to the customer.
What are some advantages of just-in-time?
It reduces business costs by removing the cost of holding inventories.
What are some disadvantages of just-in-time?
- Preventing over-production.
- Minimising waiting times and transport costs.
- Saving resources by streamlining your production systems.
What is Kaizen?
The Kaizen approach gives all employees the opportunity to make a suggestions about how to improve quality or productivity. It is an approach to create continuous improvement based on the idea that small, ongoing positive changes can reap significant improvements.
What are the main methods of production?
- Job production.
- Batch production.
- Flow production.
What is job production?
The production of items one at a time.
What are advantages of job production?
- Unique, high-quality products are made
- Employees are often more motivated and take pride in their work.
What are disadvantages of job production?
- Use a skilled labor rather than machinery, so selling prices are usually higher.
- Production can take a long time and can be expensive, for instance if special materials or tools are required.
- Economies of scale are not possible, often resulting in a more expensive product.
What is batch production?
The production of goods and batches. Each batch passes through one stage of production before moving on to the next stage.
What are advantages of batch production?
- Since larger numbers are made, unit costs are lower.
- Offers the customer some variety and choice.
- Materials can be bought in bulk so they are cheaper.
What are the disadvantages of batch production?
- Employees are often less motivated because the work becomes repetitive.
- Goods have to be stored until they’re sold, which is expensive.
What is flow production?
The production of very large quantities of identical Goods using a continuously moving process.
What are the features of flow production?
- Large quantities are produced.
- Standardised procedures.
- Employees are relatively unskilled.
- High degree of automation.
- Large inventories of raw materials and work in progress.
What are the advantages of flow production?
- More Capital intensive than job or batch production, which lowers the labor cost.
- Materials can be purchased in large quantities, so they are often cheaper due to bulk buying economies of scale.
- Large number of goods are produced.
What are the disadvantages of flow production?
- Requires very large capital investment in production line technology.
- Employees are not very motivated, since their work is very repetitive.
- It is not a very flexible method as production lines are difficult to change.
- If one part of the production line breaks down, the whole production process will have to stop until it is repaired.
- High levels of raw materials, work in progress and finished goods are held. This increases business costs.
What is capital intensive?
Production process that uses a high quantity of capital equipment compared with labour input.
How do you decide which is the most appropriate method of production?
- The size of the market.
- The type of good being made.
What are the advantages of technology to businesses?
- Reduces the costs and time taken to design new products.
- Increases productivity.
- Reduces cost of production.
- Improves quality and reduces waste.
What are the disadvantages of technology to businesses?
- Can be very expensive.
- When technology is rapidly changing it will need to be changed often if the business is to remain competitive.
- May need to spend money training employees, which increases costs.
What are the advantages of technology to consumers?
- Better quality products.
- Lower prices.
- Products with more features are easier to develop and produce.
What are the disadvantages of technology to consumers?
- Products may become out of date more quickly.
- When the product develops a fault it can be expensive to repair.
What are the advantages of technology to employees?
- Technology complete simple and repetitive tasks that employees find boring.
- The work is easier with the aid of Technology.
- A business that uses the latest technology is likely to be more successful so provides job security.
What are the disadvantages of technology to employees?
- Technology often reduces the need for employees, resulting in redundancy.
- Technology could make the work less interesting.
- A smaller Workforce reduces opportunities for promotion.
- The development and manufacture of new technology products provide employment opportunities.
How are costs classified?
- Fixed costs.
- Variable costs.
- Total costs.
- Average costs.
