What are the methods of production?
- Job (employing all factor to complete one unit of output)
- Batch (completing one operation at a time on all units before performing the next)
- Flow (large-scale production of a standard product where each operation on a unit is performed continuously one after the other, usually on a production line)
- Cell (producing a family of products in a small self-contained unit within a family)
What are the advantages and disadvantages of job production?
Advantages: - high quality due to skill - motivated workers due to variance - custom made products - production easy to organise Disadvantages: - high labour costs due to skill - production may be slow - long lead times - wide range of specialist tools need - expensive
What are the advantages and disadvantages of batch production?
Advantages:
- Workers likely to specialise in one process
- low unit costs as output is higher
- production is flexible as different orders can bet met
- more use of machinery
Disadvantages:
- complex machinery needed
- careful planning and coordination needed
- less motivation due to specialise
- batches are small, costs will still be high
- money tied up in work-in-progress
What are the advantages and disadvantages of flow production?
Advantages:
- Low unit costs due to economies of scale
- output produced quickly
- modern machines allow for flexibility
- production speed varies according to demand
Disadvantages:
- Products too standardised
- Huge set-up costs before production can begin
- Low worker motivation due to repetitive tasks
- Breaks in production are expensive
What are the advantages of call production?
- Floor space
- product flexibility improved
- lead times are cut
- movement of resources and handling time reduced
- less work-in-progress
- teamwork encourages
- safer working environment
What is productivity?
Output per unit of input per time period
What factors influence productivity?
- specialisation and division of labour
- education and training
- motivation
- work practices
- labour flexibility
- capital productivity
What is efficiency?
To produce at minimum average cost
What factors effect efficiency?
- Introducing standardisation
- outsourcing
- lean production (reduction of resource usage)
- kaizen (continuous improvement - new ideas)
- just in time (reduce amount of stock)
What is capacity utilisation and how is it measured?
The use that a business makes of its resources.
Capacity utilisation = current output
————————————– x 100
maximum possible output
What are the implications of under-utilisation?
Drawbacks:
- Not making the most of its resources
- operating inefficiently because its unit costs aren’t maximised
- effects morale of workers - business struggling
- workers become accustomed to light workload
Advantages:
- business can cope with sudden increases in demand
- less work-related stress ; reduced absenteeism and sickness
What are the implications of over-utilisation?
Drawbacks:
- strain on resources
- if business uses flow production - breakdown is expensive
- unable to respond to sharp increases in demand
- insufficient time to train staff
Advantages:
- low average costs as fixed costs are spread across more units of output
- motivated staff - secure in their jobs + opportunities
- improved company image - more confidence
How might a business improve capacity utilisation?
- reduce capacity (rationalising)
- Increase sales
- increase usage (pricing strategies)
- outsourcing
What are buffer stocks?
Emergency stock held in case there is a stock shortage
What are the implications of poor stock control?
- Holding too much stock results in unnecessary costs (storage costs, opportunity costs, spoilage costs, administrative and financial costs, shrinkage - stealing)
- Holding too little stock results in inability to cope with unexpected increases in demand (unable to cope with unexpected shortages of materials, raise ordering costs, miss on discounts from buying in bulk)
What are the advantages of Just In Time for stock management?
- improves cash flow (money isn’t tied up in stocks)
- reduced wast
- links with and control of suppliers improved
- improved motivation - responsibility
What are the disadvantages of JIT management for stock management?
- Over reliance on flexibility of suppliers
- ordering and admin costs
- advantages of bulk buying lost
- vulnerable to breakdowns
- difficult to cope with sharp increases
- Loss of reputation with customers
How might a business minimise waste?
- Stock rotation
- Perishable goods refrigerated
- Use computers to manage stock
- Adjustable pricing strategies to minimise waste
- creative methods of disposing goods passed their sell-by date (charities)
How might a business ensure quality?
- Quality control (inspectors check work after production)
- Quality assurance (stop problems before they occur)
- Quality circles (small groups of workers who meet regularly to study and solve production problems)
- Total quality management (prevent errors from happening, investigated at every stage)
