2.3 Making Product Decisions

Question 1

What are the three methods of production?

Answer 1

• job production
• batch production
• flow production/ mass production

Question 2

Define job production

Answer 2

Making one thing at a time, usually by a skilled worker that is made to the customer’s taste

Question 3

What are the advantages of job production?

Answer 3

• one off orders to customer demands
• high price can be charged
• specifications can change even after production has started
• workers more likely to be motivated as there is a variety of work and skills required (job enrichment)

Question 4

What are the disadvantages of job production?

Answer 4

• expensive due to high skill of staff = high wages
• wide variety of tools/ equipment required
• lead times can be lengthy
• one-off creations means it is unlikely to reach economies of scale (more expensive cost per unit)
• high R&D, administration and transport costs

Question 5

Define batch production

Answer 5

• combination of job and flow production
• groups of the same product are produced in a batch

Question 6

What are the advantages of batch production?

Answer 6

• reduces unit costs = higher profit margins
• less waste than job production
• can still address specific customer needs (eg: size, weight, style)
• use of specialist machinery & skills can increase output and productivity

Question 7

What are the disadvantages of batch production?

Answer 7

• time lost between switching batches - machinery may need to be reset
• need to keep stocks of materials
• potentially de-motivating for staff

Question 8

Define flow production

Answer 8

Continuous manufacturing of standardised products, usually on a production line

Question 9

What are the advantages of flow production?

Answer 9

• costs are spread over a large number of goods
• cost per item is reduced - economies of scale
• bulk discounts are likely on raw materials helps reduce cost of production further
• huge quantities of goods produced (able to satisfy large demand)
• often automated - lowers labour costs
• machinery can work 24/7

Question 10

What are the disadvantages of flow production?

Answer 10

• huge investment required to set up
• no individualisation for customers
• equipment may be inflexible and only suited for one purpose
• motivation low because work is repetitive
• breakdowns can be costly

Question 11

What is the impact of technology on production?

Answer 11

• lower costs in the long run
• improvement in quality
• improvement in productivity
• improvement in flexibility

Question 12

How can technology reduce costs in the long run?

Answer 12

• initial set up can be high
• but these costs can be made back with the improvement in quality and reduction of wastage
• saving on wages = robots don’t have to be paid

Question 13

How can technology improve quality?

Answer 13

Machinery and robots remove human error

Question 14

How can technology improve productivity?

Answer 14

• robots and machines can work 24/7
• don’t need breaks
• increase production of goods

Question 15

How does technology improve flexibility?

Answer 15

• computers can be programmed to do anything: used to control, monitor and adjust tools in manufacturing
• means business producing products can be more flexible

Question 16

What influences productivity?

Answer 16

• education and training
• wages : eg higher pay or perks
• laws and regulations at work eg: good health and safety
• job enrichment
• technology

Question 17

Define stock

Answer 17

Materials that a business holds - raw materials, work in progress and finished products ready to sell

Question 18

Why do businesses hold stock?

Answer 18

• to use in the production process
• meet customer demands
• provide customer service
• meet unexpected orders
• provide greater flexibility

Question 19

What is the stock holding problem?

Answer 19

Stock needs to be paid for, often before they are used in production or sold to customers

Question 20

What is the cost of holding stock?

Answer 20

• storage costs
• payroll costs
• interest costs: loans, insurance
• obsolescence costs

Question 21

What are the consequences of holding too little stock?

Answer 21

• dissatisfied customers
• production may stop (not enough raw materials)
• delivery standards might drop

Question 22

What are the consequences of holding too much stock?

Answer 22

• increase in storage costs
• cash flow problems
• stock may become obsolete

Question 23

What is a bar gate stock graph?

Answer 23

Illustrates the flow of stock into and out of a business over a period of time

Question 24

What are the components of a bar gate stock graph?

Answer 24

• maximum stock levels
• minimum stock levels
• buffer stock
• lead time
• re-order level

Question 25

What is the maximum stock level on a bar gate stock graph?

Answer 25

The maximum stock that a business is able to hold in a certain amount of time

Question 26

What is the minimum stock level on a bar gate stock graph?

Answer 26

The least amount of stock that a business can hold in a certain amount of time

Question 27

What is the buffer stock on a bar gate stock graph?

Answer 27

Holding safety stocks in case demand suddenly rises

Question 28

What is the re-order stock level on a bar gate graph?

Answer 28

Level at which the business must re-order with their supplier

Question 29

What is the lead time?

Answer 29

Length of time between the stock being ordered and being delivered

Question 30

What is just-in time?

Answer 30

A stock management system wherein the stocks are only delivered when they are needed by the production system and so no stocks are kept by the business

Question 31

What are the advantages of JIT?

Answer 31

• lower stock holding decreases storage space which decreases rent and insurance costs
• JIT is very reliable method of production, so very useful in ever-changing markets
• As stock is only obtained when required, less working capital tied up in stock
• less likelihood of stock perishing, becoming obsolete or out of date
• less time spent reworking the product of others as the emphasis is on getting the work right the first time

Question 32

What are the disadvantages of JIT?

Answer 32

• no room for mistakes as minimal stock is kept for re-working faulty product
• staff underpressure = demotivating
• production is very reliant on suppliers and if the stock is not delivered on time, the production schedule is delayed
• no spare finished product available to meet unexpected orders = all product is made to meet actual orders

Question 33

Define procurement

Answer 33

Process by which businesses buys/purchases raw materials, products, services and other resources from suppliers to produce their own products and services

Question 34

What are the factors affecting the role of procurement?

Answer 34

• quality
• delivery
• availability
• cost
• trust

Question 35

Define logistics

Answer 35

The organisation and transportation of good

Question 36

What is the impact of carefully planning logistics?

Answer 36

1. decreased costs - transport costs reduced
2. improved brand image - business could have a good reputation for providing a fast and efficient service
3. customer satisfaction: customers happy because goods are delivered and recieved on time + in right quantities