C18: Production of goods & services

• What is labour intensive?

  wage is low, more workers and fewer machines
• What is capital intensive?

  labour cost is high, use more machines/robots and employ few workers
• Ways to increase productivity & efficiency?

  • Improve employee motivation
  • Introduce new technology
  • Use machines to do more jobs
• Why increase productivity/efficiency?

  • Lower costs per unit
  • Fewer workers needed - lower wage costs
  • Higher wages for workers - higher motivation
• Why Businesses hold inventories?

  • Businesses must keep enough levels of stock
  • If inventories are kept too high - will cause cash flow problems
• What is lean production?

  Techniques used by businesses to cut down on waste, to increase efficiency
• Types of wastes

  • Overproduction
  • Transportation - goods are moving around
  • Unnecessary inventory - takes up space
  • Over-processing - high tech machines only used for simple task
  • Defects - faulty goods that required rework
• Advantages of lean production

  • Less storage
  • Quicker production
  • No need to repair defects
  • Improved health and safety
• Ways to achieve lean production

  • Kaizen
  • Just In Time inventory control
  • Cell production
• Advantages of kaizen

  • Increased productivity
  • Reduced space for production process
  • Work-in-progress reduced
  • Improved layout of the factory
• What is Just-in-time inventory control?

  reducing or eliminating the need to hold inventories of raw materials or unsold inventories
• Advantages of Just-in-time inventory control

  • Reduces cost of holding inventories
  • Warehouse space is not needed
  • Finished products sold quickly
• What is cell production?

  When the production is divided seperately each making a part of the product.
• Advantages of Cell Production

  • Improves the morale of employees and makes them work harder to be more efficient.
• Methods of productions

  • Job production
  • Batch production
  • Flow production
• What is job production?

  A single product is made at a time & specifically to order
• Advantages of job production

  • Suitable for personal services
  • Worker have more varied jobs
  • Motivates workers - increase efficiency
  • Flexible - used for high quality goods, can charge higher prices
• Disadvantages of Job Production

  • Skilled labour is often used
  • Costs are higher (labour intensive)
  • Production often takes a long time
  • Material have to be specially purchase - higher costs
• What is batch production?

  Producing multiple of the same products at the same time, in a batch
• Advantages of batch production

  Flexible, production can be changed quickly
• Disadvantages of batch production?

  • Expensive
  • Warehouse space needed - costly
  • Machines have to reset - delays production
• What is flow production?

  Large quantities of a product are produced in a continuous process.
• Advantages of flow production?

  • High output
  • Costs are low
  • Easy for capital intensive productions
  • Low average costs
• Disadvantages of flow production

  • Boring, motivation of employees decrease
  • Capital costs are high
  • If one machine breaks down, the whole production is ruined