2.4 Resource Management

• Job Production

  • making a one-off individual item
  • normally made to customers' personal specifications
  • undertaken by small, specialist businesses
  • associated with high quality

  Examples:

  • Architects and builders
  • Plumbers
• Advantages of Job Production

  • Higher quality
  • Highly skilled staff
  • Better motivated employees - more job satisfaction
  • Firms can then charge higher prices
• Disadvantages of Job Production

  • Individual cost of 1 unit may be high
  • often labour-intensive which will mean higher costs
  • requires close consultation with client and requires excellent customer service
  • productivity tends to be low
• Batch Production

  • Similar products produced together
  • Each batch goes through 1 stage of production process before moving onto next stage
  • As a higher quantity of items are being made, firms can invest in specialist machinery

  Examples are bakeries, clothing and food manufacturers
• Advantages of Batch Production

  • costs savings achieved because of bulk buying (economies of scale)
  • Allows customers some choice
  • Products can be worked on by specialist staff of equipment at each stage
  • Increased productivity because firm becomes more efficient - more products being made
• Disadvantages of Batch Production

  • takes time to switch production of one batch to another
  • requires the business to maintain higher stock
  • tasks may become boring (repetitive) which reduces motivation
• Flow Production

  • Standardised, identical products produced on an assembly lines
  • Products move continuously through the production process
  • When one task is finished the next task must start immediately
  • Workers focus on 1 stage of production only

  Example: personal hygiene products mass production
• Advantages of Flow Production

  • costs per unit are reduced
  • very high productivity levels are achieved
  • capital intensive
  • workers become specialised in one stage - less need for training
• Disadvantages of Flow Production

  • long set up time
  • reliant on high quality machinery
  • production is shut down if flow is stopped
  • goods are mass produced - less differentiation for customer
• Cell Production

  • work is organised into teams
  • teams are given responsibility of doing part of production process as it moves through assembly line

  Leads to improved productivity due to:

  • Increased motivation (team spirit and added responsibility)
• Factors to consider for choosing type of Production:

  • Target Market
  • Technology
  • Standards
  • Resources
• Ways to improve Productivity

  • Training
  • Improved motivation
  • More capital equipment
  • Better capital equipment
  • Improved organisation - less wastage
• Economies of Scale

  • arises when unit costs fall as output increases
• Labour vs Capital intensity

  
• Examples of labour industries

  • food processing
  • hotels and restaurants
  • hairdressing

  Examples of capital industries

  • oil extraction and refining
  • car manufacturing
  • web hosting
• Capacity Utilisation

  The proportion (percentage) of a business' capacity that is actually being used over a specific period
• Why Capacity Utilisation matters:

  • useful measure of productivity since it measures any idle (unused) resources in the business
  • average production costs tend to fall as output rises - so higher utilisation can make a business more competitive if they have lower unit costs
  • 100% utilisation minimises unit costs
• Capacity Utilisation Rates

  • Most businesses aim for 85-95%
  • allows them to have some spare capacity in order to meet sudden increases in demand
  • there is also ability to maintain and service machinery
• Over-utilisation

  • when a business is operating above full capacity
  • can be possible in the short-term by increasing workforce hours e.g overtime or temporary staff
• Problems Working at High Capacity

  • negative effect on quality
  • production is rushed and less time for quality control
  • Employees suffer
  • Added workload and stress
  • de-motivating if sustained for too long
  • Loss of sales
  • less able to meet sudden or unexpected increases in demand
• Main Influences on amount of Stock held

  • need to satisfy demand
  • need to manage working capital
  • risk of stock losing value or being wasted
• Example of a Stock Control Chart

  
• Key Parts of Stock Control Charts

  
• Factors affecting when/how much stock to re-order

  1. lead-time for the supplier
  2. how long it takes for supplier to deliver
  3. higher lead times may require higher reorder level
  4. implications of running out (stock-outs)
  5. if stock-outs are very damaging, then have a high reorder level and quantity
  6. demand for the product results in high reorder levels
• Advantages of Low Stock Levels

  • lower stock holding costs (e.g storage)
  • lower risk of waste
  • less capital (cash) tied up in working capital - can be used elsewhere in business
• Advantages of High Stock Levels

  • production fully supplied - no delays
  • potential for lower unit costs by ordering in bulk
  • better able to handle unexpected changes in demand or need for higher output
• Just-in-time Production (JIT)

  • stock required for production arrives just as it is needed
  • minimal capital tied up in stocks
• Implications of JIT production

  • no need for buffer stocks
  • stock holding costs are minimised
  • lead times are very short
  • requires highly reliable suppliers and IT systems to work properly
• Benefits of Greater Quality

  • Customer Satisfaction
  • Repeat Purchase
  • Customer Recommendation
  • Lower marketing costs
  • Higher customer loyalty
• Quality includes the whole customer experience

  1. Buying process
  2. Product reliability
  3. After-sales service
  4. Cost of ownership
• Examples of Poor Quality

  • Product fails - unexpected error
  • Product doesn't perform as promised
  • Product is delivered late
  • Poor instructions/directions for use
  • Unresponsive customer service
• Costs of Poor Quality

  • lost customers (expensive to replace)
  • cost of reworking or remaking product
  • costs of replacements or refunds
  • wasted materials
• Quantity Management

  Concerned with controlling activities with the aim of ensuring that products and services are fit for their purpose and meet the specifications
• Quality Control

  The process of inspecting products to ensure that they meet the required quality standards
• Quality Control

  • traditional way of managing quality
  • concerned with checking and reviewing output
  • can be a very costly process
  • mainly about detecting defective products rather than preventing it
• Quality Assurance (process)

  ensure production quality meets the requirements of customers
• Quality Assurance vs Quality Control

  
• Total Quality Management (TQM)

  • essentially an attitude
  • whole business understands need for quality and seeks to achieve it
  • quality is ensured by employees and not inspections
• Advantages of TQM

  • puts customer at heart of production process
  • motivational since workers feel more involved and are making decisions
  • less wasteful than throwing out finished defective products
  • eliminates cost of inspection
• Disadvantages of TQM

  • requires strong leadership
  • lots of investment in training and support
  • may become bureaucratic
  • disruption and costs may outweigh benefits