2.4.1 Production, Productivity and Efficiency

Methods of Production

Job - individual products made one at a time to meet specific customer needs e.g. tailor made suits. labour intensive

Batch - making a set quantity of identical products (a batch) e.g. a bakery making a batch of 100 white bread rolls then a batch of 100 wholemeal bread rolls.

Flow - where products flow around a factory in a continuous process on production lines e.g, car manufactoring, capital intensive

Cell - where the production of items are organised into teams / cells, each teams is responsible for making different parts of the product

Pros

  • High profit margins
  • Customers get exactly what they want
  • Employees may gain enjoyment for using their specialist skills

Pros

  • Able to make a variety of sizes or flavours
  • Can be partly automated
  • Can produce more than job

Pros

  • Able to make far larger quantities
  • Highly automated process
  • Consistency in production meaning products are identical so customers know what they are buying

Pros

  • Allows for job rotation and multi skilled workers
  • Greater worker motivation
  • Quality improvements as each team has 'ownership' for quality in its own area
  • Teamwork between workers

Cons

  • May not allow a firm to use its machinery as intensively as in flow
  • Allocation of work to cells has to be efficient so they have enough work but not so much they can't cope
  • A firm may have to invest in new materials handling and ordering systems suitable for cell prod.

Cons

  • In competitive markets for similar mass produced products, profit margins can be low
  • Machinery needed for automation is expensive

Cons

  • Not as flexible regarding customers tastes as job
  • Not fully automated so higher costs than flow

Cons

  • Highly skilled staff are required = high labour costs
  • Highly skilled staff may not be available meaning expensive training is needed

Factors Influencing Productivity

Productivity = Output (how much is produced) per unit of input (one worker) per hour

Quality of inputs - the use of high quality labour and machinery is likely to improve productivity as they are able to do there job faster, however this may increase costs

Motivation - motivating workers may be costly financially and will need regular incentives to keep them motivated to increase productivity

Technology - mechanising the production process increases productivity as machines can work 24/7

Link with Competitiveness - increasing productivity is likely to reduce average costs meaning businesses become more competitive as their profit margins increase allowing the business to increase profits or lower prices to drive up demand

Factors Influencing Efficiency

Efficiency - is how effectively a company generates products and services related to the amount of time and money needed to produce them

Quality of inputs - high quality inputs such as skilled staff are likely to make fewer mistakes meaning less waste they can also work faster increasing efficiency

Production - having a lean production approach reduces unnecessary wastage, reducing costs caused by wastage and resulting in an increased efficiency

Management of Staff - better staff organisation and coordination means less time is wasted resulting in a reduction in costs and increased efficiency

Labour vs Capital Intensive

Labour Intensive - labour takes up a high % of total costs e.g. agriculture

Capital Intensive - the majority of production in mechanised e.g. car manufacturing