2.4

• Production


  When resources such as raw materials or components are changed into products
• Job production


  Involves the production of a single product at a a time. Used when orders, used when orders for products are small. Organised where 'job' is completed at a time.
• Advantages of job production


  Quality is high

  Products can be custom made
• Disadvantage of job production


  Expensive

  Production may be slow
• Batch production


  Used when demand for a firms product or service is regular rather then a one-off. Production id divided in a number of operation
• Flow production


  Production of a standard product which each operation on a unit is performed continually one after the other, Can also be known as mass production where
• Advantage of flow production


  Low unit costs

  Production speed can vary depending on demand

  Output can be produced quickly
• Disadvantage of flow production

  Huge set up costs

  Workers motivation can be low as they may have repetitive tasks

  Breaks can be expensive in production
• Cell production


  Dividing the workplace into cells, where each cells occupies an area on of the product family. A product family is where a group of products which require a sequence of similar operations
• Productivity


  the amount where an output of a product can be produced with a given input of resources
• Labour productivity


  output per worker per period of time
• Factors affecting productivity


  Specialisation and division of labour

  Education and training - Government can help improve quality of labour with better education

  Motivation of workers

  Working practices - EG: productivity increased if the factory layout changed

  Labour flexibility - Workers trained to do different jobs

  Capital productivity - productivity increased due to new technology
• Productivity and competitiveness


  Higher productivity = higher output

  Meaning costs will be lower and make the business to become more competitive in the market
• Efficiency


  Making the best possible use of all the business resources
• Factors effecting efficiency


  Standardisation: using uniform resources and activities to produce a uniform product

  Outsourcing

  Downsizing - Reducing capacity. Unprofitable divisions

  Delayering - Reducing staff. Directed at certain parts of the business

  New technology

  Lean production - use fewer resources in production

  Kaizen: Japanese term for continuous improvement

  JIT - minimising the amount of stock held by a business
• Labour intensive


  Production methods which make more use of labour relative to machinery
• Capital intensive


  Production techniques which involve employing more machinery relative to labour
• Factors depending on labour and capital

  Nature of product

  Relative prices of the two

  Size of the firm
• Nature of the product

  High demand such as newspapers are capital intensive, while modern economies an increase in a number of products are labour intensive
• Relative prices of the two factors

  If labour costs are high then it would be needed to employ more capitlal instead.
• size of the firm


  As a firm grows, scal of production increases so it tends to employ more capiital then labour
• Capacity utilisation


  The use that a business makes out of its resources
• Implications of under utilisation


  Drawbacks - wont be making the most of its resources

  Benefits - Be able to cope with an increase in demand a lot easier, less work related stress, reduces sickness and absenteeism
• Implications of over utilisation


  Drawbacks - Pressure on full capacity can lead to a strain in resources and causing sickness to the workforce and increasing the risk of people taking time off and machines being overworked.

  Benefits - Average cost will be lower and the fixed cost will be spread out.
• Ways of improving capacity utilisation


  Reduce capacity - Reducing excess capacity by getting rid of resources that the business can do without

  Increase sales

  Increase usage

  Outsourcing

  Redeployment - if there is too much resources in one part of the buiness, maybe possible to deploy them in another part
• Stock


  Where a business purchases raw material, semi finished goods and components
• Raw material


  Purchased from suppliers before production
• Work in progress


  Partly finished goods
• Finished goods


  Main reason for finished goods is to adapt to a change in demand
• Stock control


  Maintain the right levels of stock, so that costs of holding them is minimised
• Factors influencing stock control


  Demand

  Stockpile goods

  Cost of holding goods

  Cost of stock holding

  Type of stock

  Lead time

  External factors
• Interpretation of stock control

  
• Buffer stock


  Emergency stock which is held in case there is a stock shortage or if there is a sudden change in demand. if they cant meet a surge in demand then they will miss out on opportunities
• Buffer stock

  
• Implications of poor stock control

  Holding too much

  • Storage cost
  • Opportunity cost
  • spoilage cost
  • Unsold stock
  • Shrinkage

  Too little stock

  • Cope with unexpected demand
  • Less able to cope with a shortage in materials
  • Very low stocks may have to place more orders
• Just in time management of stock


  Where orders more material or any stock was needed would be ordered hours before. This reduced the need for high levels of of working capital and improved the financial performance of the business
• Advantages of JIT


  Improves cash flow as its not all in stock

  More factory space is available

  Cost of stock holding is reduced a lot
• Disadvantages of JIT


  Advantages of bulk buying is gone

  Difficult to cope with a increase in demand

  Increased ordering and administration cost
• Ways to minimise waste from JIT


  - Perishable goods may have to be stored in refrigerated units.

  • Stock rotation - First in, first out
  • Perishable goods may have to be transported immediately
  • Use computers to manage stock control
• Competitive advantage from lean production


  Raise productivity

  Cut lead times

  Lower the numbers

  Improve reliability