Theme 2.4 Resource Management (Productivity (Importance (Efficient…
Theme 2.4 Resource Management
Methods of production
One single product is made before the production starts again.
Mass produced, identical products are continuously made.
High level of automation
Product is passed through each stage of production.
Products of particular colours, flavours, sizes etc. are made together.
Worker has specific job that they repeat.
Having the flow production line split into a number of self-contained units.
Team members are skilled at a number of roles - job rotation.
Each team has a significant of the finished product.
Factors to consider when choosing production methods
Type of product being made
Some products are specific to individual needs (job)
Group orders can use batch and alter at the end e.g. t-shirts
Everyday standardised products can be produced by flow.
Size of market
Small firms in service sectors produce low quantities of individual products (job)
Retail industries produce varieties of the same type of product (batch)
Mass market products produce in large quantities.
Large firms will look to reduce labour costs (flow/batch)
Businesses in countries where labour is cheap they will use more staff (job)
'Output per unit of input per time period.'
Recognises that some production/operation lines use machinery instead of staff.
Businesses want to check they are producing products and services quickly and efficiently.
Output / no. staff/machines
Customers are willing to pay more for better quality products.
Efficient production can lead to more profit
Money isn't tied up in excess stock
More automation can lead to increased production - economies of scale - more profit per product
Give a business competitive advantage
Employees can improve skills required to work more efficiently.
More motivated staff will produce greater output for the same effort.
Better quality raw materials
Go further if needing to store them.
Reduces amount of time wasted on rejected products
Quality of overall product will be improved leading to a possible increased selling point.
To produce most efficiently, it needs to produce goods at minimum average cost.
Factors influencing efficiency
Level of labour intensity
Labour intensive - needs lots of labour to produce goods/services
Higher cost per unit due to high proportion of wages.
Capital intensive - lots of automated processes so fewer employees are needed.
Where a business chooses to manufacture its products/deliver its service
Cheaper rent and travel costs
Place of manufacturer may be essential to identity
Want to retain skilled workforce - some places other very clone like staff members
Can sometimes remove USP if move the business elsewhere
Reduce customer service
Examines to what extent the business is making full use of its resources.
Actual output / maximum output x100
Link between capacity utilisation and efficiency
As production increases, total costs per unit reduce
The fixed costs are being spread over a larger number of products.
Higher capacity utilisation - higher contribution per unit.
In service industries, low capacity utilisation decreases attractiveness
e.g. if a restaurant is empty, why is it empty?
Problems of high CU
Operating with spare capacity
Used as deterrent to potential entrants into the market.
New businesses will fill they can cut prices and take over the existing CU but will result in loss of customers
Products in introduction stage will need to deal with increased demand if it is successful
Operating at full capacity
May have happened due to reduction in price - contribution per unit lower, raising break even output.
Can't cope with seasonal demands when CU is low - can't pay fixed costs.
Always working on full effort for long time - tiring and bored.
Employers may not be able to give them a break due to it being so busy
Illegal and staff may leave.
Varying importance of high CU
Business with high fixed costs
Important - fixed costs spread over more units.
Not important - don't need to worry about costs rising.
High CU for whole market
Important - business has already got loyal customers.
Businesses with clear seasonal changes
Not important in low demand seasons - have really high CU in peak times to use on fixed costs.
Can use low CU times for maintenance and training.
Items held by a company to enable it to quickly meet the needs of customers.
1) Raw materials
The materials needed in order to make a good.
2) Work in progress
Goods that have started being made but are note yet finished
May be a significant amount for some business
If production process is quick there will be little work in progress.
Products that have been completed and are ready to go to customers
Stock control diagrams
Used to plan the ordering, delivery and reordering of stock.
Minimum amount of stock held at any one time.
The level at which stock must be ordered to avoid falling below the buffer stock level.
Maximum amount of stock a firm can hold or wants to hold at any one time.
Time between ordering more stock
Holding buffer stock
Customers expect products quickly
Demand isn't predictable
Products can spoil or go out of fashion
Poor stock control
Too much stock
Cash flow problems - working capital tied up in stock.
Too little stock
Delays in production lines
Just In Time (JIT) approach
Involves holding minimal/no stock and ordering shortly before it is required - arrives just in time before its needed.