2.4.1 Production, Productivity and Efficiency

• Methods of Production

  Job, batch, flow and cell
• Production

  Manufacturing from raw materials to create an output
• Productivity


  Output per worker or output divided by inputs per time period and capital output is output divide by no. of machines
• Job Production


  Producing a unique good for an individual
• Batch Production


  Producing a set number of identical items eg. a bakery produces tiger loaf then cheese bread etc
• Flow Production


  The continuous production of a single item eg. car manufacturing at each step a component is added
• Cell Production


  Organising production into teams less travel time eg. a printing press and a lamination area for printing
• Effectiveness of Job Production


  When every customer wants a unique good, labour costs are low and tailoring adds value
• Effectiveness of Batch Production

  When production has to be split into chunks, when labour costs are too high for job production or when limiting the supply of a good
• Effectiveness of Flow Production

  When there is: consistent high demand, high labour costs and efficiency reduces prices enough to boost sales
• Effectiveness of Cell Production

  When there is: a need for flexibility, but high production volumes, labour contributes to ideas and improves efficiency and a degree of uniqueness adds value
• Factors Influencing Productivity

  MAT: Motivation, ability level and technology
• Motivation

  Highly motivated workers are productive but if it is financially driven their productivity will fall once they are used to their pay
• Ability Level

  Training makes employees more productive and they make fewer mistakes saving the firm money and preventing waste
• Technology

  Changes in technology can lead to mechanisation which can streamline the process and increase output greatly
• Importance of Productivity


  -Measures a firm's performance as it impacts costs

  -Increased productivity reduces labour costs per unit

  -Low labour costs give a competitive advantage

  -Increased productivity means lower prices so higher profit margin
• Ways to Raise Productivity


  -Train staff

  -Financial incentives eg. a raise

  -Machine maintenance

  -Improving working practices
• Efficiency

  When costs per unit are at its lowest when economies of scales are maximised
• Capital Intensive Production


  Uses machinery and technology in the production of goods/services

  e.g. Large-scale production in developed countries
• Difficulties Increasing Productivity

  Managers only think of production in the short term for profits so they do not implement more efficient strategies
• Ways to Raise Competitiveness

  -Undercut competitors' prices

  -Gain market share

  -Improve brand recognition

  -Increase profit

  -Invest in ways to improve productivity
• Efficiency


  The ability of a firm to use its resources cost-effectively is calculated using total costs/ total units of output
• Labour-intensive production

  Uses physical labour to produce goods/services

  e.g. Delivery services, small-scale production or countries where labour is cheap
• Maximum Efficiency

  Efficiency is maximised when: costs per unit of output are the lowest they can be, EOS are maximised, costs are spread across an optimum level of output and diseconomies of scale are minimised