Section 9 - Resource Management

    Cards (39)

    • Production Methods

      Four methods you need to know about
    • Unit costs

      Higher prices for products, economies of scale as they can buy smaller batches
    • Batch production

      Produces identical products in batches, requires less equipment than flow production
    • Flow production

      Continuous production, products move along a production line, equipment is highly specialised
    • Businesses may switch between production methods depending on demand
    • Productivity
      The amount of output produced per unit of input (e.g. per worker, per machine)
    • Machinery
      • Can increase productivity
    • Human workforce

      • Can also be used to increase productivity
    • Efficiency is about producing the minimum average cost
    • Ways a business can increase efficiency

      • Labour-intensive production
      • Capital-intensive production
      • Balancing people and machines
    • Labour-intensive firm

      Very people-heavy, labour is relatively cheap
    • Advantages of labour production

      • Flexible, can respond to changes, lower capital costs
    • Disadvantages of labour production

      • Less consistent quality, harder to control, more difficult to scale up
    • Capital-intensive firm
      Lots of machinery, machinery is cheaper than labour
    • Advantages of capital production

      • Higher quality, more consistent, easier to scale up
    • Disadvantages of capital production

      • High capital costs, machinery can break down, risk of being made obsolete
    • Businesses need the right balance of people and machines
    • Capacity
      Maximum output with the resources currently available
    • Capacity utilisation

      The extent to which a business is using its capacity
    • Increasing capacity utilisation too much

      Can lead to over-utilisation
    • Problems with over-utilisation

      • Equipment breaks down, quality suffers, staff become overworked
    • Ways to increase capacity

      • Increase working hours, hire more staff, invest in new equipment
    • Under-utilisation is inefficient and increases unit costs
    • Stock
      The sum of raw materials, work-in-progress, and finished goods
    • Buffer stock
      Extra stock held to cope with fluctuations in demand or supply
    • Advantages of buffer stock

      • Helps retain customers, economies of scale in purchasing
    • Disadvantages of buffer stock

      • Storage costs, capital tied up, risk of obsolescence
    • Just-in-time (JIT) stock management

      Holding very little stock, relying on frequent deliveries
    • Advantages of JIT

      • Lower storage costs, less risk of obsolescence, more responsive to changes in demand
    • Disadvantages of JIT

      • Risk of stock-outs, less able to take advantage of bulk buying discounts
    • Quality control
      Checking products after they are made or received from suppliers
    • Quality assurance

      Ensuring quality is built into the production process
    • Advantages of quality assurance

      • More motivating for workers, helps prevent defects
    • Total quality management (TQM)

      Approach that assures commitment to quality across the whole organisation
    • Advantages of TQM
      • Lower costs from fewer defects, higher customer satisfaction, improved productivity
    • Quality circles

      Groups of employees who meet to discuss quality improvements
    • Kaizen
      Continuous small improvements made by all employees
    • Advantages of kaizen

      • Engages all employees, leads to gradual quality improvements
    • Disadvantages of kaizen

      • Changes may be too small to have a big impact
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