Unit 5 - Business Operations (Production and Productivity) Flashcards
Production
Involves transformation of resources into final product (goods or services) - provided to satisfy the needs and wants of people.
Businesses use different production methods.
Job Production
Where a business produces one product from start to finish before moving onto the next. Each item produced is likely to be different. Used when orders are small. Suitable when demand is low.
Skilled workers, varied work, high motivation and longer lead times
Batch Production
When demand for a product increases, businesses may switch to batch production. Business makes a number of products to same design or specification (a batch) and then changes production to another product with different specifications.
Production usually divided into a number of operations or processes.
Can be produced in large or small batches depending on level of demand. Larger production tends to lower the unit or average cost.
Flow production
Large-scale production of a standard product, where each operation on a unit is performed continuously one after the other, usually on a production line.
Reduce unit price significantly, delays can be expensive.
labour-intensive production
Production methods that make more use of labour relative to machinery.
Capital-intensive production
Production methods that make more use of machinery relative to labour.
Productivity
Rate at which goods are produced, and the amount produced, especially in relation to the work, time and money needed to produce them.
Labour productivity
Output per worker in a given time period.
LP = total output/number of workers
Capital productivity
Measure the productivity of its capital by calculating how much unit of capital produces.
CP = total output/capital employed
Increasing labour productivity
Can improve in following ways:
- Government invests more in education and a business could provide more training and improve quality of existing methods.
- People are better motivated at work.
-Labour is organised and managed more effectively.
- Labour is more flexible.
Increasing capital productivity
Increases when new tech in introduced among other things like:
- Downsizing
- Relocation
- Outsourcing
- Lean production
Downsizing
Improve efficiency by downsizing
- reducing capital by laying off workers and closing unprofitable divisions
Advantages of downsizing
- cost savings
- increased profit
- leaner more competitive operation in profitable parts of the organisation that do not unprofitable ones
Relocation
Improve efficiency and take advantage of cheaper resources, such as lower rent, lower wages, lower transport costs
Outsourcing
Contracting out of work that otherwise might have been performed within in the organisation to other businesses.
Outsourcing specific business activities - businesses give work to a specialists who can do the same work at lower cost.
Lean Production
Improving productivity in a business involves the amount of resources used.
Impact on Business of Productivity Improvements
When a business tries to improve productivity a number of effects are likely to occur:
- Financial Impact
- Competitiveness
- Workforce
- Customers
Financial Impact
Improving productivity should have positive financial impact on the business.
- if more output produced with same resources, costs will be lower, leading to higher profitability and greater returns owners
- some measures used to improve productivity may cost money - business borrowing to invest - could have impact on cash flow
Competitiveness
More efficient helping the business to secure a competitive edge - increase market share and higher profile in the market.
Workforce
Measure to improve labour productivity - workers affected depending on nature of measure introduced:
- financial incentives improve motivation
- non-financial - jobs become more interesting
Could have negative impact:
- machinery introduced could mean some workers may lose their jobs
- if business downsizes or relocates to improve productivity
Customers
Likely to benefit if improvements in productivity - lower productivity costs means lower prices, better product or services
