3 - Business Operations

• Job production is the manufacture of an individual good which is unique to a customers needs such as specific clothing or art pieces
• Production is changing inputs into goods and services that can be sold
• Job production

  • Advantages - Unique to the customer, can charge higher prices due to more skilled work, builds personal connections with customers, workers are more motivated
  • Disadvantages - Skilled workers are required so higher wages, time-consuming process, labour intensive work so less opportunities to introduce technology, high cost of raw materials
• Batch production is when a group of items go through one stage of the production process at at time before moving on, preferably used when a identical goods are needed in a small quantity
• Batch production

  • Advantages - Costs per unit are lower, production is more efficient as workers are specialised, specialist machinery can be used, can benefit from economies of scale
  • Disadvantages - Machines have to be reset before producing another batch, goods lack individuality, materials and goods need to be stored which is expensive
• Flow production is when goods are produced continuously on a large scale
• Flow production

  • Advantages - can produce large quantities of goods and benefit from economies of scale, production is quick as all products are the same, products are usually cheaper from customers
  • Disadvantages - Factories and machinery are expensive to set up, large quantities of stock may be stored, errors in machinery can stop the whole production line, workers may be demotivated performing the same tasks
• The production department would make sure the correct number of items are produced on time, decide the production methods used and manage the product quality
• Quality involves meeting a standard for a good or service to meet customer needs
• The quality of raw materials and machinery will influence the quality of the end product and poor quality materials may harm consumers
• Quality can be achieved by employing the right people and making sure they have the right skills and motivation which wshould reflect in the goods
• Quality can be achieved by training employees
• Quality can be achieved by implementing quality assurance and quality control
• Quality can be achieved by interacting with customers and asking for feedback
• Quality control is inspecting goods at the END of the production process and scrapping goods that haven't met the standard
• Quality Control

  • Advantages - Reduces risk of faulty product reaching consumer, problem areas can be identified, avoids bad brand image
  • Disadvantages - Waste levels can be high, requires specialists which are expensive
• Quality assurance is inspecting goods THROUGHOUT the production process to make sure standards are met
• Quality assurance is when quality is the responsibility of every worker as each employee treats the next worker as if they are a consumer to ensure quality
• Quality assurance

  • Advantages - Motivated staff as everyone has responsibility, less waste from scrapping finished goods, quality is assured throughout the whole production process
  • Disadvantages - training must be provided, productivity can be reduced
• Large-scale production can make it more difficult to manage quality
• Quality is important as it satisfies customer expectations, promotes return customers, increases sales, reduces waste and allows businesses to charge higher prices
• Consequences of bad quality include legal action if products harm consumers, increased costs for recall and replacement of faulty products, dissatisfied customers
• Total Quality Management is creating quality through continuous improvement of systems
• TQM comes from managing quality chains between employees, by teamwork and benchmarking
• Benchmarking is setting standards of quality based on the best that competitors offer to differentiate a business
• Quality can be achieved by selling well-designed products such as using CAD and investing in up-to-date machinery
• Bad quality causes excess stock which can expensive to store
• A supply chain is the system of businesses, resources and information involved in moving goods from source to customers
• Procurement is obtaining goods and services used in production from an external source
• During procurement, businesses will reach out to suppliers to find out prices of raw materials and if they are bulk discounts available, about their quality, its reputation and possible ethical policies and their reliability when delivering
• Supply matters as businesses need stock on time to meet the demand and can cause problems if their prices are too high or keep changing
• Chossing a suitable supplier involves

  • The cost and quality of raw materials
  • Their speed of delivery
  • Their contract terms - if there's compensation for late deliveries
  • Their reputation
• Logistics is the flow of materials from where they are stocked to where they are needed in the right condition including transportation or warehousing
• Logistics

  the buyer paying for the materials → agreeing a delivery date → organising transportation → organising storage → distributing the goods
• Transportation depends on how quickly the goods are needed, how far they need to be transported, the cost of transportation and the durability of the goods
• Holding stock is important to have supplies to keep production going and to meet unexpected customer demands
• JIC stock (Just in case) stock is holding stock incase there is a delay from suppliers or an unexpected increase in demand
• JIT stock (Just in Time) is stock being delivered when it is required to reduce holding stock
• JIC stock

  • Advantages - Stock is readily available so production wont be held up, bulk discounts, quality of stock can be checked as delivery is made, stock can be kept in right environment
  • Disadvantages - Warehousing costs, stock needs to be moved from warehouse to factory, materials may deteriorate, labour costs of looking after stock
• JIT Stock

  • Advantages - Reduces warehousing costs, materials likely to be in good condition, stock is only delivered when needed so less chance of damage, reduces cash-flow problems, little waste
  • Disadvantages - Deliveries are in smaller quantities so no bulk discounts, may be delivery delays, dependent on suppliers