2.4.1. Production, Productivity and Efficiency

• Production

  The transformation of resources into goods/service
• Job production


  Producing a one-off item specially designed for the customer e.g. a custom dress
• Pros/cons of job production

  High quality

  Workers are well motivated - interesting work

  
  

  BUT

  
  

  high labour costs - skilled workers

  Production can be slow - long lead times
• Batch Production

  Set number of identical items are produced e.g. making bread
• unit/average costs

  Total costs / output
• Pros and cons of batch production

  Workers specialise in one process

  Unit costs are lower

  
  

  BUT

  
  

  more complex machines are needed

  Care planning

  Less motivation
• Flow production

  When operations are performed continuously after each other - also called mass production
• Flow production pros/cons


  Very low unit cost (economies of scale)

  Output is produced quickly

  
  

  BUT

  
  

  Huge set up costs

  Low worker motivation
• Cell production


  Producing a 'family' of products in a small self-contained unit within a factory
• Pros of cell production

  Flexibility is improved

  Handling time is reduced

  Teamwork is encouraged
• Productivity


  The output per unit of input per time period
• Labour productivity


  Output per wokrer
• Capital productivity formula

  output/capital employed
• productivity does not equal

  Total production
• Factors influencing productivity

  Specialisation/division of labour

  Education and training

  Motivation of workers

  Working practices

  Labour flexibility

  Capital productivity
• Lower prices leads to

  More customers + higher market shere
• Efficiency


  Producing a level of output, where average cost is minimised
• Production is considered efficient if

  Average costs are minismised
• Cost curve structure

  U shape

  Expensive then cheap then expneisve
• Factors affecting efficiency

  Standardisation

  Outsourcing

  Relocating

  Downsizing

  Investing in new technology

  Lena production

  Kaizen

  JIT production
• Standardisation


  Using uniform resources of producing a informs product
• Outsourcing


  Giving work to sub-contracters
• Downsizing


  Reducing capacity (usually by laying off staff)
• Lean production

  An approach that focuses on the reduction of resource usage
• Labour intensive production


  Makes more use of labour than machines
• Capital intensive production


  Makes more use of machines of labour