2.3

• Business Operations


  The day-to-day activities needed for continued business functioning
• Job productions


  Individual products made one at a time to meet specific customer preferences eg tailor-made suits
• Batch productions


  Making a set quantity of identical products. Eg bread or cupcakes
• Flow production


  Continually making identical product - allows for production to be heavily automated
• Advantages of Job production

  - High profit margins for bespoke products

  - Employees may gain enjoyment from using their specialist skills

  - Customers get exactly what they want
• Disadvantages of Job production

  - High wages need to be paid to the highly skilled staff required

  - High costs can push up the price, making it too high, putting customers off who are looking for value for money

  - Expensive tools and machinery may be required, which often lie idle during different jobs

  - Lead times can be lengthy meaning customers cannot walk in and purchase the product

  - Materials may need to be ordered for each different job, so the business misses out on bulk buying discounts
• Advantages of Batch production

  - Can make variety of sizes and flavours

  - Can be partially automated

  - Produce somewhat large quantities
• Disadvantages of Batch production

  - Not as flexible regarding customers' tastes as job production

  - As batch production is not fully automated, costs may be higher than in flow production
• Advantages of Flow production

  - Able to make larger quantities

  - Consistency in production means products are identical and customers know exactly what they are buying

  - Highly automated, don't need as many skilled workers
• Disadvantages of Flow production


  - Profits can be low in competitive markets with similar mass-produced goods

  - Customers may prefer products that are specifically tailored to them

  - Expensive to purchase all of the machinery for automated process
• Measures of productivity


  Products per worker, per month, per year
• How can a business improve productivity?

  - Invest in up-to date m,achingly (more products produces in same period of time

  - Provide incentives for employees to work eg potential promotions

  - Provide training to staff so they can work more efficiently

  - Encouraging staff to come up with time-saving ideas that allow them to work more efficiently

  
  

  Being more productive enables businesses to keep their costs per unit low.
• Technology's impact on cost

  Costs money to purchase technology but deducted the cost of producing products. Using machinery to complete dangerous tasks means people won't have to be paid higher wages for risky jobs.
• Technology's impact on productivity

  Using machinery to mechanise or automate increases productivity
• Technology's impact on quality

  Businesses need to be consistent in quality, technology can improve this
• Technology's impact on flexibility


  Businesses need to balance technology with human flexibility. Automation is good for mass production but is poorly for products that need to meet customer's needs.
• Stock can consist of

  - Raw materials

  - Work in progress

  - Finished stock to be delivered
• procurement


  Getting the right supplies from the right supplier
• Consequences of high stock

  - High storage costs

  - Increased waste if products are perishable

  - Reduced income if businesses need to sell off excess stack at a reduced price
• Maximum stock level


  The highest amount of stock to be kept by a business
• Minimum stock level/buffer stock


  The lowest amount of stock a business can store on site while still being able to operate effectively
• Lead time


  The amount of time between the recognition that an order needs to be placed and the arrival of the needed merchandise at the seller's store, ready for sale.
• Reorder level


  The level at which stock has to be reordered
• Just in time stock control


  - JIT

  - No stock is stored

  - When raw materials are required they are delivered to the business at exactly the time they are required
• Advantages of JIT


  - Allows production to be lean (all stock is used in production)

  - No money is tied up in stock, improving cash flow and working capital

  - No warehouse is required, saving on storage costs

  - The business is more responsive to changing external factors

  - Reduces production costs, allowing businesses to price their products more competitively
• Disadvantages of JIT


  - If deliveries are late then the business will face the negative consequences of understocking

  - Requires excellent relationships with suppliers to work effectively, which can take time to develop

  - Relies on good infrastructure between the business and suppliers (e.g. roads)

  - No room for error in production
• Just in case (JIC)


  A situation where a company keeps a small stock of components (or complete items) or ones that take a long time to make, just in case of a rush order.
• Advantages of JIC


  - Ability to deal with fluctuations in demand

  - Reduces chances of production stopping if there are any problems with suppliers

  - Allows company to negotiate bulk discounts and switch suppliers easily
• Disadvantages of JIC


  - Stock might be wasted

  - Cost of storage

  - Risk of over-production/Over-stocking
• Key facts a business needs to consider when trying to build relationship with supplier

  - Cost, if a business gets supplies cheap, it keeps variable cots low

  - Quality, to ensure customers will want to purchase

  - Delivery, late deliveries will interrupt production. Businesses want minimal lead time

  - Availability and capacity, need to be able to meet an unexpected increase in demand

  - Trust, many businesses use trade credit
• Logistics


  Making sure the correct products are produced and that they will drive when needed
• Logistics and cost


  Cost can be lower if production is quick, delays can limit cash flow
• Quality control


  Process of inspecting products and services to ensure that what customers receive is a high standard (at the end of manufacturing)
• Feedback


  can take the form of customer questionnaires, conducted either at the point of sale or electronically, to ask about the service customers received from the business.
• Factory inspectors


  Often used at the end of production to ensure that products are of the required standard before they reach customers.
• A one hundred percent inspection system

  Often used in high-end restaurants. In this method of quality control, all food is checked by the head chef before it is given to the customer.
• Disadvantages of quality control

  - Doesn't prevent mistakes from being made

  - Individuals aren't accountable for quality of work

  - Lack of quality culture

  - Products may be wasted if they cannot be sold cheaply due to poor quality, increases costs with no return

  - Expensive to pay wages for a quality control department
• Quality assurance


  Business employees take steps at every stage of manufacturing to maintain quality - all workers are responsible for quality.
• Advantages of quality assurance

  - It makes everyone responsible for quality - this can be a form ofjob enrichment.

  - Self-checking and making efforts to improve the quality increases motivation.

  - The system can be used to 'trace back' quality problems to the stage of the production process where a problem might have been occurring.

  - It reduces the need for expensive final inspection and correction or reworking of faulty products.
• Disadvantages of quality assurance

  - Expensive to train employees to check the product or service

  - Relies on employees following instructions of standards set