Production efficiency

Question 1

Labour productivity -
Formula =

Answer 1

• this measures the output per employee in a given period of time
  = total output / number of employees

Question 2

What influences labour productivity (3)

Answer 2

1. Train employees
2. Organise employees
3. Reward system

Question 3

Unit average costs -
Formula =

Answer 3

• measures the cost per unit (and is sometimes called the ‘average costs’)
  = total costs / total output

Question 4

What influences unit average costs (4 + conclusion)

Answer 4

1. Suppliers
2. Resources
3. How to be more effective
4. Reduce waste
   (-> cheaper resources or less flexibility may affect the customer’s experience of the product)

Question 5

How to improve efficiency (5)

Answer 5

1. Increasing capacity utilisation to spread FC
2. Choosing the optimal mix of resources
3. Increasing labour productivity
4. Introducing lean production
5. Using technology

Question 6

Using capacity efficiently - (2)

Answer 6

• Is determined by the resources it has at any given moment; that is the amount and quality of its employees, capital and land => determines max that can be produced
• Marketing wants to increase sales to use max capacity, however, might not be able to handle a rise in demand

Question 7

Low capacity utilisation (2)

Answer 7

1. Try to improve marketing to boost sales
2. Reduce it’s capacity (rationalising or downsizing)

Question 8

High capacity utilisation (2)

Answer 8

1. Outsource to other products
2. Find a way to reduce demand in the short - term

Question 9

Why increase labour productivity?

Answer 9

Higher labour productivity -> lower labour costs per unit

Question 10

To increase labour productivity (4)

Answer 10

1. Invest in technology
2. Improve training
3. Change the way the work is organised and the design of the jobs
4. Change the way employees are rewarded

Question 11

Difficulties with increasing labour productivity (3)

Answer 11

1. Lower quality of service provided
2. Methods might be resisted by employees -> possible redundancies as fewer staff is needed so people will try to retain their jobs
3. Demand for higher pay -> offset any efficiency gains

Question 12

Choosing optimal mix of resources (3)

Answer 12

1. Land
2. Labour
3. Capital

Question 13

Combination of resources depends on (2)

Answer 13

1. The process itself
2. What is affordable and achievable

Question 14

Lean production -

Answer 14

• occurs when managers reduce waste and therefore operations become more efficient

Question 15

Reducing waste in lean production (4)

Answer 15

1. Improving quality and reducing the number of items that need to be reworked
2. Reducing the amount of inventory held as this reduces costs of protecting and storing it; also reduces the risk of inventory going out of date before being sold or not sold at all
3. Reducing the time items are waiting for something to happen to them
4. Reducing the time when items are moving from one stage of process to another

Question 16

Methods in lean production (3 + conclusion)

Answer 16

1. Kaizen: an approach which emphasises the value of continuous improvement; employees are encouraged to work in kaizen groups to focus on their area of work and come up with ideas or how processes can be improved and made leaner.
2. Andon: on a production line an andon cord is present above the process, if there is a problem the cord is pulled and the production stops -> evolves transparency and ensuring that when a problem occurs everyone in the organisation learns from it and becomes more efficient as a result.
3. Changes to the layout of a store or factory and changes to the process used to make it more efficient.
   => lean organisations try to ensure that the systems and the rules are the essential ones, that meetings are productive and do not take up too much time and that there is not so much communication that people spend most of their time responding to emails.

Question 17

Difficulties with lean production (3)

Answer 17

1. Makes the business more vulnerable to unpredictable events
2. Can be complex: employees are expected to take a more active role, need to be engaged, have the skills and training to improve the quality
3. Requires excellent links with suppliers -> investment in communications and technology

Question 18

Using technology to improve efficiency (3)

Answer 18

1. Be more flexible to customer needs
2. Reduce costs by having more efficient processes with less errors
3. Be innovative

Question 19

To efficiently use technology managers have to (4)

Answer 19

1. Have the finance to invest
2. Have the training to use it effectively
3. Understand and manage the impact on other functions -> could change employees’s jobs
4. Be able to judge which technology will be useful in the long term rather than trying to adopt every new development that comes along

Question 20

Labour intensive -

Answer 20

• needing a large workforce; business that mainly relies on employees

Question 21

Capital intensive -

Answer 21

• high automation; business that operates with a large amount of machinery

Question 22

Automation -

Answer 22

• the use or introduction of automatic equipment in a manufacturing or other process or facility