2.4 Resource Management

• job production


  businesses produce items that meet the specific requirements of the customer
• advantages of job production

  1. can charge a premium price due to added value

  2. often associated with higher quality

  3. lead to increased job satisfaction and motivation

  4. flexible method of production
• disadvantages of job production

  1. unit costs are higher

  2. labour intensive - higher labour costs

  3. time consuming

  4. difficult to recruit staff due to expertise required
• batch production


  businesses produce many identical or similar items together
• advantages of batch production

  1. flexible method of production - still allows customers some choice

  2. lower unit costs as more products can be produced

  3. greater use of machinery in production process

  4. workers can specialise in one area
• disadvantages of batch production

  1. takes time to switch production from one batch to another

  2. requires the business to hold high levels of inventory

  3. the work can be repetitive - decrease motivation
• flow production


  businesses produce a continuous movement of items through the production process
• advantages of flow production

  1. low unit cots - EOS

  2. quicker method of production compared to job and batch

  3. less need for skilled employees

  4. capital intensive - work can be done constantly
• disadvantages of flow production

  1. products are standardised with less differentiation for the customer

  2. expensive to set up

  3. reliant on high quality machinery

  4. delays in production can stop it as a whole
• cell production


  business split production into several self-contained units, each responsible for a part of the finished product
• advantages of cell production

  1. improved motivation - more responsibility and variety of work

  2. workers become multi-skilled and more adaptable to future needs of the business

  3. lead to higher quality of the products
• disadvantages of cell production

  1. more emphasis on recruitment and training - higher costs

  2. machinery may not be used as intensively as flow production

  3. work allocation important - has to be a balance of work in each cell
• productivity


  measures the relationship between inputs into the production process and the resultant outputs
• efficiency


  a business makes the best possible use of its resources
• competitiveness


  refers to the ability of the business to maintain or grow its sales and market share given the presence and actions of rivals
• economies of scale


  reduction in the average costs of products as output increases to its optimum level
• diseconomies of scale


  increase in the average costs of production as a result of output increasing beyond its optimum level
• labour intensive production


  high proportion of its costs related to the employment of people
• advantages of labour intensive production

  1. unit costs are low in low-wage locations

  2. labour is a flexible resource via multi-skilling and training

  3. can help with continuous improvement
• disadvantages of labour intensive production

  1. greater risk of problems with employee/employer relationships

  2. high costs of labour turnover

  3. need to continually invest in training
• capital intensive production


  low labour costs, buts high costs arising from the extensive use of equipment
• advantages of capital intensive production

  1. greater opportunities for EOS

  2. significantly higher productivity

  3. better quality

  4. consistency
• disadvantages of capital intensive production

  1. significant investment initially and continually (updates and maintenance)

  2. reduced competitiveness due to obsolescence

  3. may generate resistance to change from the workforce
• standardisation


  using uniform resources and activities or producing a uniform product
• capacity


  a measure of how much output it can achieve in a given period of time
• capacity utilisation


  measures the extent to which capacity is used during a specific period of time
• over utilisation


  position where a buses is running at full capacity and straining resources
• under utilisation


  position where a business is producing less than full capacity
• stock


  the raw materials, work-in-progress and finished goods held by a business to enable production and meet customer demands
• stock control diagrams

  
• buffer stocks


  the amount of stock held as a contingency, in case of unexpected rises in demand
• advantages of buffer stocks

  1. allows a business to meet sudden increases in demand

  2. allows production to continue in the event of supplier delay

  3. can result in less deliveries needed to be made - lower costs
• disadvantages of buffer stock

  1. cost of storing and securing stock is expensive

  2. stock could deteriorate (especially if its perishable)

  3. cash flow implications of having money tied up in stock
• just in time (JIT) management of stock


  stock is delivered just before it is needed for production or for sale
• advantages of JIT


  1. less storage space requires - less fixed costs, allows more selling and production space

  2. reduces change of stock going out of date/obsolete - waste minimisation

  3. better cash flow as less money is tied up in unused stock
• disadvantages of JIT


  1. increased delivery and supply costs as orders are placed more often

  2. little room for mistakes as no spare stock held

  3. supplier delay could result in production slowing down or stopping
• re order level


  level of stock when new orders are placed
• re order quantity


  amount of stock ordered when an order is placed
• stock control


  optimum quantity of goods a business holds for the purpose of production
• stock rotation


  the flow of stock in and out of storage