Methods of operations (09) Flashcards
(22 cards)
SUMMARY
In summary, the following are covered in this topic:
1. The three main production processes are job, batch or flow production method.
2. Job production involves producing a one-off item specially designed for the
customer. It is suitable for high variety and low volume type of demand.
3. Batch Production involves producing a limited number of identical products,
each item in the batch passes through one stage of production before moving
on to the next stage.
4. Flow Production method involves producing items in a continually moving
process and is often used for production of large numbers of standardised units
of product.
5. The operations manager need to take into account the nature of the product
and the size of the market in considering the choice of the production method.
6. A business is capital intensive when it employs more machinery relative to
labour.
7. Businesses that are labour intensive use a larger proportion of labour than
machineries.
8. The nature of the product, size of market, relative cost of labour and capital and
the quality and quanity of education in the country influence the decision of the
business to be more capital or labor intensive.
What is a Production Strategy?
A production strategy is an approach in transforming resources into goods and services.
The goal is to build a production process that is able to fulfil customer requirements effectively and efficiently amidst other managerial constraints.
The production strategy selected will have a long-term effect on efficiency and flexibility of production, as well as on costs and quality of goods and services produced.
What are the two elements that will determine the production strategy?
There are two key elements that will determine the production strategy;
1) Variety; and
2) Volume.
If the demand for variety is high, the need for the production process in terms of personnel and equipment, to be flexible is also high.
On the other hand, if the volume required is high, the production process in terms of personnel and equipment will tend to be more specialised and inflexible.
Thus, the need for flexibility of personnel and equipment is directly related to the level of variety and volume.
What are the three main production processes?
The three main production processes are;
1) Job production;
2) Batch production; and
3) Flow production.
What is Job Production?
Job production involves producing a one-off item specially designed for the customer.
The products are made to order, one-off and unique.
It is suitable for high variety and low volume type of demand.
Each individual product has to be completed before the production of the next product begins.
Job production usually involves a contract to produce goods in single complete units and customised to the
customer’s own specifications.
Examples include wedding and birthday cakes, a tailor-made suit or building ships.
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To meet customer’s requirement, job production usually requires a considerable amount of pre-planning, scheduling and organising especially if the project is big as in the case of building a ship.
It requires high degree of skills and flexibility from the labour force.
What are the advantages of Job Production?
The advantages of job production are:
It saves on stock holding costs as thee business will not carry inventory of finished goods, since products are made to order and delivered.
It motivates workers as they are usually involved in the product from start to completion, and they can take pride in this.
It enables the business to undertake specialist projects or jobs that are often with high value added, and this allows the business charge a price premium.
What are the disadvantages of Job Production?
The disadvantages of job production are:
Under utilisation of machinery as only a small portion may be used in the completion of a specific job.
A high proportion of total production time is spent setting up and adjusting the machines, fitting parts to products. This result in high instances of idling time.
Involves short production runs with high level of highly skilled labour involvement. This invariably leads to high per unit production costs, especially if each job is unique and different.
Wide range of tools and equipment is required to perform the different tasks, and this can be costly for the business.
What is Batch Production?
Batch Production involves producing a limited number of identical products, with each item in the batch passing through one stage of production before moving on to the next stage.
It involves the production of products in separate groups, where the products in the batch go through the entire production process together.
The next operation does not start until all units of the product have passed through the preceding one.
The layout of the factory is arranged in a logical sequence in order to minimise the time and cost of movement of products between operations.
Businesses use batch production when the demand for goods or services is regular rather than one-off.
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Unlike job production, which requires highly multi-skilled workforce and general purpose plant and equipment, batch production requires some degree of labour and plant specialisation with some flexibility to be able to switch to making batches of different designs, if needed.
The workforce is usually skilled in one aspect of production while machines are also becoming more specialised in nature.
This is because in a batch production process, there is less variety in the product produced.
The efficiency of the production process will increase as both plant and workforce become more specialised.
Examples of batch production include bakeries that produce bread, cakes, or cookies in batches.
Other examples of products that lend themselves to batch production are paint, ice cream, soft drinks and beer.
What are the advantages of Batch Production?
The advantages batch production are:
It is able to produce reasonably large quantity with a certain degree of variation.
Each batch can be customised and this allows the business to increase its range of offerings.
Employees are able to focus on one operation instead of the entire task.
There is division of labour and specialisation in a particular operation.
This reduces the need for skilled employees which are more costly.
It uses lesser variety of machinery. Each specialised machine or equipment will perform its specialised function. As a result, they operate at their most efficient level which reduces cost per unit and thus achieve some economies of scale.
It results in holding inventories of partly finished goods or finished goods. This means that the business is able to quickly respond to an urgent orders by processing a batch quickly through the final stage of production.
What are the disadvantages of Batch Production?
The disadvantages of batch production are:
It requires careful planning and coordination to ensure minimal idling time for both labour and equipment. Idling time occurs when machines and workforce have to wait for a whole batch to complete before starting work on them.
There is often a need to clean and adjust machinery settings before the next batch can be produce, which can result in delays.
It usually requires technologically advanced equipment and machinery. This means that the business may need to take up financing to invest in such assets which result in higher financing costs.
It requires the workforce to perform repetitive work at their station since they have to repeat operations on every single unit in the batch. This may result in boredom and reduce their motivation to work.
The danger of using batch production is that if the orders for the batches are small in quantity, it will not achieve economies of scale. In this case, the unit costs will remain relatively high.
It results in the business having to hold a high level of inventory at each stage of production. This results in increased stock holding costs for the business.
What is Flow Production?
Flow production method involves producing items in a continually moving process.
In the flow production environment, individual products move from stage to stage of the production process as soon as they are ready, without having to wait for any other products.
It is often used for production of large numbers of standardised units of product such as bottled drinks manufacturing.
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This continuous and uninterrupted operation means that the entire process must be synchronised, closely monitored and delicately balanced at each stage to prevent bottleneck situations.
The preceding and succeeding operations must be kept in step with each other to ensure that the output of preceding operation seamlessly flow as input of the succeeding operation.
Any delay or hiccup at a particular part of the operations will create bottleneck situation.
As such, more manpower or machines may be added to potential bottleneck areas to regulate the flow.
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Businesses that adopt flow production are usually financially able as flow production requires high capital investment in specialised manufacturing lines and machines in order to achieve a high level of production and utilisation of plant and labour.
Production schedule and specifications must be strictly followed since plant and machinery are inflexible.
These specialised machine and equipment are set out in line formation in a logical sequence to minimise time and cost of movement and the methods, tools and materials used are often highly standardised.
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Flow production involves long production runs with minimal time spent on adjusting machine settings.
The quality of the output tends to be consistent with quality checks at various points throughout the production process.
Workforce are specialised and man the different stations spread across the manufacturing line taking care of the different machines and equipment.
The workforce’s skill requirements can range from low to high, depending on the complexity of the
equipment and machines and the expertise workers need.
Generally, if equipment is highly specialised, worker skills can be lower.
As each worker is only required to perform a narrow range of repetitive task, the work may be boring and demotivating.
However, the high output means lower unit cost of production.
What are the advantages of Flow Production?
The advantages of flow production are:
Low per unit costs due to machines working at optimal level, high labour productivity and low material costs as a result of bulk discounts.
Business could pass cost savings to customers in the form of lower prices and this could increase demand.
It is highly automated and controlled by robotic technology and computers, resulting in non-stop production and consistent quality.
The reputation of the business will thus be enhanced.
There is lesser need for large number of workforce to be involved in production.
The workforce needed are mostly quality supervisors. As a result, the business will save on labour costs.
What are the disadvantages of Flow Production?
The disadvantages of flow production are:
It requires very high set-up costs. A huge amount of investment in plant and equipment is needed and this will result in high financing costs.
Unless the business is confident of constant and high demand for its products, it should not use flow production.
It produces only standardised products and cannot offer a wide range to cater to the different needs of the customers.
This may result in missed earnings opportunities when there are changes in tastes and preferences.
However, technologically advanced but costly machineries are now able to overcome this limitation.
As flow production is highly automated, the workers may only be involved in a very small part of the production process.
Furthermore, they may feel threatened by the prospect of retrenchment due to technological advancement
and automation.
As a result, workers’ morale and motivation may be low, resulting in high labour turnover and absenteeism rate.
As the whole production process is interdependent, a breakdown in one stage will cause the entire operation to a stop, until the breakdown is rectified.
During this period, the entire plant including the workforce will remain idling.
Thus, any breakdown in a flow environment is costly to the business, including failure to meet customer deadline.
What are the factors affecting the choice of production method?
1) Nature of product
The nature of product is often the key determinant on the choice of production method.
This could be in terms of standardisation of design or length of shelf life.
Typically, the more standardised a product’s design, the more likely a business would use flow production.
For example, the size and shape of a soft drink can are unlikely to change and should remain the same for a long time.
Hence, a beverage manufacturer would likely use flow production method to manufacture soft drink
cans and bottles.
On the other hand, an apparel manufacturer is likely to use batch
production to manufacture clothes and apparel due to the different clothes sizes as well as the prints on the clothes.
At the other extreme would be a tailor who makes cheongsams, where each cheongsam is highly customised according to the customer’s body size and shape.
Thus, it makes sense for a cheongsam to be made
using job production.
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The length of shelf life of a product would also determine the production method.
Typically, a product with a long shelf life would be manufactured using flow production.
This is prevalent in products such as soap and candies, where the same
product is sold in supermarkets and convenience stores for over a decade with no change.
Products such as bread in general, would be produced using batch
production as its shelf life is relatively short, lasting only a few days.
Thus, bakeries would use not use flow production due to a limit on demand, where they do not
want to end up with an inventory of unsold bread.
For once-off product such as a
concert event, the event management company would most likely use job production as every concert event has many variables.
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2) Size of Market
If the market size is very small, such as for designer clothes or tailor-made suits and wedding gowns, then job production is likely to be used.
In contrast, flow production is used, with high efficiency, when the market for similar or identical products is very large and consistent throughout the year, in the case of bottled or canned drinks.
The large market size also justifies investments in technologically advanced automated manufacturing process.
Flow production is always accompanied by mass-marketing methods to ensure high sales volume of the products manufactured.
Batch production may also by adopted in a market for mass-produced items, such as salon cars, which has a large market size.
This is because there may be market gaps or niches that will allow smaller manufacturers to survive by making one-off products or batches of identical goods before changing the design or style for another model.
In addition, if the market demands a large number of units, but at
different times of the year, for example textbooks at the start of the academic year, then batch production might be most appropriate.
When can a business be counted as capital intensive?
A business is considered capital intensive when it employs more machinery relative to labour.
Industries that supply mass-produced goods are mostly capital intensive because of the nature of the production process involved.
For instance, car manufacturing can only be economically undertaken by using expensive capital-intensive manufacturing plants.
Some businesses choose to be capital intensive even though labour-intensive production is still possible.
An example would be in the baking of bread.
All over the world, craft bakers who bake bread in traditional ways still exist, using simple and relatively inexpensive capital tools.
However, on a large scale, it is possible to bake thousands of loaves a day in highly automated factories with an absolute minimum of staff. An example is Gardenia Pte Ltd.
What are the advantages of Capital Intensive methods?
The advantages of capital intensive methods are:
It offers substantial opportunities for economies of scale and low unit cost of production due to its large-scale capital utilisation of the plant, and lower employee wages paid.
As the products are manufactured using machines, quality of output would be more consistent and standardised.
Unlike human labour, machines are able to work continuously without the need to rest. Thus, operations and product could be ongoing all the time.
What are the disadvantages of Capital Intensive methods?
The disadvantages of capital intensive methods are:
The initial costs tend to be high due to the purchase cost of machinery and equipment, as well as the related financing costs.
The business needs to incur scheduled maintenance will are costly, as well as employ skilled engineers and computer programmers to monitor and adjust the performance of the capital plant.
Technology changes can instantly render the latest production equipment and computer system obsolete and inefficient.
Any breakdown in machinery or equipment would cause the entire production process to stop, and this could be costly to the business.
However, these potential drawbacks are unlikely to slow the trend towards capital-intensive production in most industries due to the benefits offered.
When can a business count as Labour Intensive?
Businesses that are labour intensive use a larger proportion of labour than capital.
For example, a furniture manufacturer that prides itself in handcrafting furniture will require many skilled craftsman.
Though the business is able to increase its efficiency by using machines to saw and shape the wood, it may insist on maintaining a high degree of labour intensity.
This is because majority of customers
will be willing to pay a premium for ‘hand-made’ products.
What are the advantages of Labour Intensive methods?
The advantages of labour intensive methods are:
It allows greater flexibility as workers can be retrained to cater to the changing tastes and preference of the customers whereas machineries are inflexible.
This also allows the business to easily make customised products.
It is cost effective for businesses who manufactures in countries such as China or India, to be more labour intensive as the cost of employing the workers are much cheaper than investing in technologically advanced equipment and plants.
Unlike machines, human beings can use their own initiative and solve problems on their own.
What are the disadvantages of Labour Intensive methods?
The disadvantages of labour intensive methods are:
Human beings are much more difficult to manage than machines. Management
has to deal with issues like motivation, absenteeism, conflicts, etc. This can be
draining for the management who would rather spend time on strategic issues.
Workers can make mistakes due to tiredness or distraction while machineries
do not have such issues. The quality of products can also vary due to the
different expertise of workers.
It takes time to train skilled workers, and employing skilled workers will cost
more than employing unskilled workers.
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Despite the disadvantages, as long as consumers are willing to pay for traditional craft-made goods that create a sense of distinction, labour intensive methods will continue to remain profitable for businesses in some industries.
What are the factors affecting choice of capital or labour intensive approaches?
1) Nature of Product
Everyday products such as soap, washing detergents or confectionary products are in high demand and are mass produced, thus this would require the heavy use of
plants and equipment.
On the other hand, handcrafted shoes or tailored clothes are
generally more labour intensive. A business might also choose to be labour intensive despite the option to use machines, if it wishes to establish a product image of being a ‘hand-made’ product and market its products as such.
2) Size of Market
If the market size is small, it does not justify investments in expensive capital equipment.
However, as the size of the market grows, oftentimes together with the
size of the business, the scale of production increases.
As such, more capital intensive equipment will be needed to meet the orders of customers.
If the market size is large, such as the automobile industry, car manufacturers will inevitably
invest in capital intensive machinery to fulfil customers’ demand for consistency and quality of car performance.
3) Relative cost of labour and capital
The relative prices of labour and capital influence the operations manager decision.
If labour costs are high and rising, it is more justified to use more capital equipment.
For example, in countries like China, India or Vietnam where labour costs is relatively low, labour intensive production methods are preferred.
However, in most developed economies like Japan or Singapore, labour is more expensive and it
is more cost effective to be more capital intensive, especially for manufacturing businesses.
4) Quality and quantity of education in a country
A business should consider the level of literacy, technical skills and minimum years of education of the population in a country.
This is will determine the ability of the workforce to understand instructions and comprehend the operational manual to use the equipment.
As some of the equipment are technologically advanced, the
workforce must have a certain level of education or technical competency to operate them.
Otherwise, mishandling of the equipment will result in expensive
repairs, or worse render them unusable.
In many European countries, skilled
craftsmanship are highly valued by consumers, and products made by craftsman are a symbol of luxury.
The education system there includes apprenticeship to train and
groom master craftsman.
For that reason, many industries in Europe continue to be labour intensive.
