Module 1/Nature of Production

Question 1

What is production?

Answer 1

It is transforming raw materials into finished goods.

Question 2

The production process

Answer 2

Input: The raw materials or components of production, it represents the items that a firm is going to convert a finished production

Throughput> The process that raw materials or components go through before being converted into finished products

Output> The outcome of the conversion of inputs (raw materials)

Question 3

Factors of Production

Answer 3

Land
Labour
Capital
Entrepreneurship
Enterprise (Combining all factors of production)

Question 4

Job Production

Answer 4

Job Production> Used when a single product is produced to meet individual specifications.

Chacteristics: Focuses on customer not market, product is high priced, only 1 product is made at a time

Advantages: Product is tailore to the needs of the customer
Easier to isolate any problems
Product is of high quality

Disadvanatges:
Very high per unit cose
High spending of machinery and equipment
Products are very expensive

Question 5

Batch Products

Answer 5

Products go through the same process at the same time before moving on. Examples: Soft drinks

Characteristics: skill level of labour force is relativiley high, appropriated for repeated customer orders and produces standardies products

Advantages:
Lower machinery requirement
Takes less time to complete orders
Lower per unit costs because of large production scale

Disadvantages:
Cash may be tied up in work in progress
Machinery equipment down time as the firm switches betwene batches
Level of motivation may be low

Question 6

Flow Production

Answer 6

This is a very high demand, suitable method to use. It involves products going through a line of processes, unlike batch production, each item can move along without needing to wait on others. It has a very high capital outlay but costs can be recovered due to the profit of mass production.

Advantages: Lower per unit cost
Large amount of goods
Meets market demand

Disadvantages: If something is wrong with a line its over bro
Usually inflexible if market demand changes
High cost to set up :(

Question 7

Types of Flow production

Answer 7

Mass production> Produces identical products on a large scale

Continuous> Product goes through a continuous series of processes (Links with process production)

Process Production> Involves the product going through differences until its complete, also used to convert raw materials into finished products. (OIL.)

Question 8

Cellular production

Answer 8

Also known as cellular manufacturer, divides the factory into different cells where each cell is responsible for assembling parts of the product.

Advantages> Quality is improved, team work leads to increased motivation, less floor space due to cells

Disadvantages> Level of output may be less than if using a flow method
>Capital and equipment costs is very high.

Question 9

Factors that influence production methods

Answer 9

Nature of goods
Expected Sales
Market Size
Stage of the product lifecycles
Level of Tech
Initial Capital Outlay

Question 10

What are Quantitative factors that may affect the location of a business

Answer 10

Site costs- Usually fixed and should be the main concern of the business, site costs include purchasing property, payment of rent or lease, modification etc

Transport costs
Labour costs
Government incentives- Some governments may help a firm relocate and even grant then tax breaks, holidays, custom free shipment

Question 11

What are some Qualitative Factors that may affect a firms location?

Answer 11

Infrastructure-A firm must consider the level
of infrastructural development in the area in which it wishes, to locate. It should consider factors such as communication,
quality of transportation system and quality of the physical
infrastructure such as roads and bridges.

Environmental and planning consideration

Question 12

What is a Forecasting technique

Answer 12

An estimate of the possible future of sales, stock or production

Question 13

What are some Quantitative Forecasting Techniques?

Answer 13

Time Series Analysis- Time series analysis forecasting is a statistical method that uses historical data to predict future events by analyzing trends

Consumer/Customer Survey- Consumer survey is a form of marketing research that is used to ascertain the level of potential demand for a firm’s
product.

Question 14

What are some Qualitative Forecasting Techniques?

Answer 14

Sales force composite technique-Relies on the sales force of the firm to make projections of the future levels of demand for the firms product.

Delphi Method-uses experts anonymous to each other so they dont get influenced by each other’s opinions

Jury of experts- This technique combines the sales forecast of the executives and is averaged to ascertain a final prediction. They are taken from departments such as finance, marketing, production, or purchasing.

Question 15

Steps for customer surveys

Answer 15

Problem Definition
Creating a research plan
Collecting and Analysing data
Interpreting and reporting findings

Question 16

Disadvantages and Advantages of CUSTOMER SURVEYS

Answer 16

Producers can acquire first-hand information from the
prospective users of the product
The use of a representative sample gives producers the
opinions of buyers from a wide cross-section

Dis-

The intentions of buyers may not transcend into actual
purchase of the product
It may be difficult for some buyers to forecast their
future needs
The result may reflect the subjectivity of a bias research
team.

Question 17

Disadvantages and Advantages of SALES FORCE COMPOSITE

Answer 17

CHEAP to get info
Readily available
Have direct contact with customers

dis-

May be underestimated :(
Based on opinions
May not have sufficient time to develop an accurate forecast

Question 18

Disadvantages and Advantages of DELPHI METHOD

Answer 18

No need to conduct face to face interviews
Time to think about responses
Opinions not influenced by others

dis-
Possibility of panel members being indirectly influenced
Quality of results= quality of the panel
Time consuming and expensive

Question 19

Disadvantages and Advantages of JURY OF EXPERTS

Answer 19

Cheap
Can be done quickly
Based on knowledge of executives

dis-
Managers may lack some knowledge and experience
Some managers will be influenced by others in their judgement
Based on manages opinion

Question 20

What are some product design strategies?

Answer 20

Modularisation is the process whereby a product is
divided into subsets known as modules, which are used to
assemble the finished product.

Miniaturisation is the development of very small
products that have the same function and use as the larger
products they replaced. It involves the development of smaller
and smaller products over time, using less input of materials.

integration has become of even
greater importance. In order to remain competitive, firms
have to ensure that all the departments involved with the
product play a critical role in both its design and production

Value analysis is defined as a systematic attempt to minimise costs
and/or improve performance of a product either purchased
or produced by the firm. The firm has
to examine everything involved in the production of the
product, including the materials, information systems and processes

(COMPUTER AIDED DESIGN) CAD involves the use of computer systems to create, modify and analyse a product’s design

(COMPUTER AIDED MANUFACTURING) CAM works hand in hand
with CAD. CAM uses computer software and hardware to
convert CAD data and models into instructions to be used
in the manufacture of the product.

Question 21

Disadvantages and Advantages of MODULARISATION

Answer 21

Modules can be made in very large quantities, thus
lowering costs
Makes product repair easier, since the affected module
can be removed or replaced without damaging the
entire product
Adds flexibility to production, since some modules can
be removed from or added to products as consumers
desire

dis-
quality control might be more difficult.

Question 22

Disadvantages and Advantages of MINUTRASATION

Answer 22

Reduction in the cost of raw materials
Increase in the pace of production
Companies can produce large amounts of output

dis-
While there are cost savings on materials, those for
research and development and the cost of technology
might increase
The production process is highly dependent on
machinery and automation.

Question 23

Disadvantages and Advantages of VALUE ANALYSIS

Answer 23

Reduction in material costs
Customer satisfaction can be heightened
Improves employees’ level of motivation.

dis-
If used too widely, it could become time consuming and
expensive
If not properly supervised and organised, it could
become counterproductive.

Question 24

Disadvantages and Advantages of COMPUTER AIDED DESIGN (CAD)

Answer 24

Less human error, as designs are more accurate than
hand-drawn designs
CAD offers the designer the ability to edit and save the
designs
Modification of designs is cheaper and less time
consuming

dis-
It requires the use of other technologies such as
personal computers
The firm may need to conduct training of the staff to
use the software
The initial costs of the software can sometimes be high
and therefore expensive, especially for a relatively small
firm

Question 25

Disadvantages and Advantages of COMPUTER AIDED MANUFACTURING (CAM)

Answer 25

Results in consistency in production – that is, the
products are the same
Improves the level of accuracy in production
Is ideal for speeding up production

dis-
The software tend to be expensive, so the firm could
incur high start-up costs
Not economical for a ‘one-off’ production or product
The firm will have to train employees to use the
software, which is an additional cost.

Question 26

What is Design Capacity?

Answer 26

Design capacity refers to the total achievable capacity if
all equipment and processes are working in perfect order

Question 27

What is Efficiency Capacity?

Answer 27

Effective capacity refers to the estimated capacity that
would result in the efficient operation of the business

Question 28

What is Economies of Scale?

Answer 28

economies of scale is the reduction
of costs as the business grows.

Question 29

What is Diseconomies of Scale

Answer 29

Diseconomies of scale occur when a business expands so much that the costs per unit increase.

Question 30

Cause of EOS

Answer 30

Purchasing
Businesses can negotiate better prices with suppliers when they buy materials in bulk.

Managerial
Businesses can increase managerial specialization. For example, in large firms, workers are hired to perform specific tasks, which can lead to higher labor productivity.

Financial
Businesses can borrow money at lower interest rates because they are larger.

Marketing
Businesses can create standard product designs that sell worldwide, which allows for globalized production and cost savings
.
Technological advancements
Businesses can use advanced technologies and automated processes to produce more efficiently, lower labor costs, and simplify procedures.

Division of labor
Businesses can increase efficiency and productivity by allowing individuals and organizations to focus on specific roles and tasks.

Question 31

Causes of DOS

Answer 31

Poor communication
Communication is key in any organisation, as managers
have to ensure that their line of communication is working. However, the expansion of the business might make the communication process long and bureaucratic.

Demotivation
Over time, workers may become discouraged if they are not treated
fairly and properly.

Lack of control and coordination
As a business grows, the span of control widens and it is
more difficult to manage. Managers may find it difficult to
ensure that all employees are working towards the goals
of the business and operating to their full potential. As the
business loses control and coordination, its costs of operating
may rise and diseconomies of scale set in.

Question 32

What factors affect BUSINESS LAYOUT’s?

Answer 32

The available space within the facility
The possible level of demand that the product will have
on each piece of machinery in the layout
The amount of space that each machine or equipment
will occupy
The amount of distance that must be travelled between
each piece of machinery in the layout

Question 33

What are some BUSINESS LAYOUTS?

Answer 33

Process (functional) layout
In a process layout, machinery and equipment
that are similar or have the same function are
grouped together in specified areas of the facility
and the product being produced is transported
to the different areas.

Product layout is a type of layout that facilitates flow or
mass production. It is one where the machinery and
equipment are organised according to the progressive steps
that the product will go through during its production (Think of baking a cake!)

In the fixed-position layout, the product remains at
a specific location while all the tools, machinery and
equipment are carried to that location to work on the
product. (Think of construction)

Cellular layout is based on a concept called ‘group
technology’, where dissimilar machines and equipment are
grouped into a single work centre known as a ‘cell’. Each cell
produces parts of the product with similar shape and that use
similar processing requirements in manufacturing the product. (Think fof them..making shirts and one cell produced buttons)

Question 34

Advantages and Disadvantages of PROCESS LAYOUT

Answer 34

Low start-up cost in terms of investment in machinery
and equipment, since machines will be reused on a
number of products
If one machine breaks down, it does not halt the entire
production process
Relatively low overhead costs

dis-
The constant backtracking of unfinished products can
increase material handling costs significantly
Skilled labour is required, which also adds to the
production costs
Unless properly organised, process layout can result in
serious production delays

Question 35

Advantages and Disadvantages of PRODUCT (FLOW SHOP) LAYOUT

Answer 35

Better use of the available floor space
Time lags are minimised and output can be produced at
a faster pace
The operation usually flows uninterrupted

dis-
The initial capital outlay is usually very high
If one machine along the production line breaks down,
the entire process is halted
There is little flexibility in terms of variations to a
particular product

Question 36

Advantages and Disadvantages of CELLULAR OR GROUP LAYOUT

Answer 36

Workers’ expertise is improved due to repetitive tasks
Offers better quality control.
Since workers work in teams, their morale may improve

dis-
There may be a need for greater training and scheduling
of workers
Higher costs to set up production, since more capital
investment is needed
Some cells may have a higher production volume than
others and so there might be poorly balanced cells.

Question 37

What is Capacity Planning

Answer 37

Capacity planning is a process that helps businesses determine if they have the resources needed to meet customer demand.

Question 38

Importance of Capacity Utilization

Answer 38

The utilisation of capacity is important for the firm, as:
It will result in lower ‘per unit’ fixed costs
It will help the firm to cater for the volume needs of the
market
The firm may be faced with stiff competition and losing
market share

Question 39

Methods to increase capacity utilization

Answer 39

The business can increase sales through promotional activities such as advertisements or sales promotion
Reduce ‘down’ times of machinery and equipment.
Employ seasonal or part-time workers – this is often
used when there is high seasonal demand, as it helps
the firm to produce more
The firm may also outsource aspects of its production
process in order to boost production

Question 40

CAPACITY UTILIZATION FORMULA :D

Answer 40

The units and per day in a work week is multiplies together

Total potential output

example:

For example, a manufacturing company is able, with
its current resources and facility, to produce 500 units of a
product per day in a five-day work week. In a particular week it was able to produce 1 800 units of the product. Its capacity utilisation would be:

1 800
————– × 100 = 72%
2 500

Question 41

What are DIRECT COSTS and the other extra broken down things?

Answer 41

Direct costs are those costs that can be directly identified with
the production of a product or the rendering of a service.

Direct materials
Direct materials are those used in the production of a
product and which can be apportioned to such a product.

Direct labour or wages
Direct labour is the wage, whether in terms of
salaries or wages, that is paid to the workers who have
worked on the production of a particular product or service.

Direct expenses
Direct expenses are those incurred in the production of a
particular product, such as the rental of a machine to work
on a particular product.

Question 42

What are INDIRECT costs, and the other lil extra things broken down?

Answer 42

Indirect costs include all costs that cannot be classified as
direct costs.

Indirect materials
These are materials that make production possible but that
are not directly related to the production of the product,
including materials such as lubricant for the machines,
cleaning material and protective apparel.

Indirect labour or wages
This includes the payment for labour which is indirectly
linked to production and cannot be traced directly to a
product – for example, the factory supervisor’s salary,
maintenance workers’ wages and the cleaners’ wages.

Indirect expenses
Indirect expenses are costs that are not directly linked to a specific product or service, but are incurred while operating a business.

Question 43

What are FIXED COSTS

Answer 43

Fixed costs are costs that do not vary with the level of
output – that is, they remain constant regardless of the level
of production or output

This is the level of fixed cost per unit of output. It is
calculated as fixed costs divided by output.

Question 44

What is the Breakeven Analysis

Answer 44

Break-even analysis is a financial calculation that determines the point at which a business’s total costs and revenue are equal, or “even”

Question 45

Advantages and Disadvantages of BREAKEVEN ANALYSIS

Answer 45

Its calculation is fairly simple
It highlights the profit or loss at different levels of
output
It shows how a firm’s profit or sales will be affected by
changes in price or cost

dis-
Results can be misleading, since it assumes that all
output is sold and so there is no closing stock
To construct a breakeven chart takes time
There are a number of businesses that produce multiple
products at varying costs and prices

Question 46

What is Inventory management?

Answer 46

Inventory management is the process of ordering, storing, using, and selling a company’s inventory. It includes managing raw materials, components, and finished products, as well as warehousing and processing of such items

Question 47

Why do firms do Inventory Management??

Answer 47

Reducing Waste

Holding stock ensures that materials are readily
available when needed for production

The firm can respond to changes in demand quickly.
As stated above, the firm also holds a stock of finished
goods. If there is a sudden increase in demand then
the firm would be able to meet that demand while
producing additional units

Question 48

Management must be aware of four important concepts when inventory managing these are?

Answer 48

Maximum stock level is the maximum amount of
stock that the business can hold, based on its objective
or storage space

Reorder level is the point at which a new order will be
placed to replenish the stock. This is done to prevent the
firm from running out of stock entirely before the new
order arrives

Reorder quantity is the amount that is ordered once
the stock level reaches the reorder level.

Minimum stock level is the lowest amount of stock
the firm would want to hold at any given time. This is
done to prevent production ‘down’ times due to holdups in stock deliveries

Question 49

What are some disadvantages of Inventory Management?

Answer 49

Wastage as a result of spoilage
Increased cost of storage
Liquidity problems, since cash is tied up in stock
Stock may become outdated.

Question 50

What are some Inventory Management Models?

Answer 50

‘Just in time’ model
This technique is one where very little stock, if any, will be
held at the firm. An order for raw materials will then be
made when they are needed for production just in time.

Fixed time period model
This inventory control system is one where
each unit of stock is counted at specified times
– for example, daily, weekly or monthly. When
the amount of the current stock is ascertained,
an order will be made to replenish the stock if necessary (Common in supermarkets and school cafeterias)

Question 51

For JUST IN TIME to be effective, what are some elements that must be present?

Answer 51

Standardisation
This involves the production of a variety of goods using the
least possible variety of raw material, tools, part and processes.

High-quality raw materials
Poor-quality raw materials can be detrimental to any form of
production, but the risk is even greater with ‘just in time’. A
firm that stores finished goods may find it easier to correct a
defect with those goods, since they are not sold immediately

Vendor certification
In order for the firm to have a highly rated product, quality
has to be built into the product from the stage of raw
materials. In addition, since raw materials are delivered just
when needed, there may not be sufficient time to scrutinise
and assess materials properly. With this in mind, firms using
this strategy may seek to purchase items from suppliers who
are certified

Responsibility of the workers
Workers play a significant role in the ‘just in time’ strategy.
They must be fully aware of the firm’s quality standards and
adhere to these standards in the production of goods and
services.

Question 52

Advantages and Disadvantages of JUST IN TIME

Answer 52

Fewer funds being tied up in stock
Space previously used for storage will be freed up
Stockholding costs are reduced significantly
It emphasises quality control among key stakeholders

dis-
The reliance on suppliers to maintain quality can be
risky
The firm may have difficulty in meeting any sudden
increase in demand for the final product
If machinery should break down it might be detrimental
to the firm since no stock of finished goods is kept.

Question 53

What is Lean Production, and how is it linked to Inventory Management?

Answer 53

Lean production is a management technique that aims to reduce waste while maintaining quality

Lean production and inventory management are linked because lean production principles help drive effective inventory control

Question 54

What are some dimensions of quality??

Answer 54

Performance
This dimension deals with the primary operating
characteristics of the product. It is what the product was
created for.

Features
This dimension includes the secondary aspects of the
product’s performance. The features are the characteristics of
the product that are used to supplement its basic functioning
or performance.

Reliability
A product’s reliability is judged against the possibility of it
malfunctioning or breaking down within a specified period
of time

Conformance
This measures the extent to which the product’s design and
operating characteristics adhere to the established standards.

Durability
Durability is a measure of the expected lifespan of the
product. It measures the product’s life in terms of economic
and technical dimensions. Technical durability refers to the
amount of use the consumer gets from the product before it
deteriorates

Serviceability
This measures the speed, courtesy, capability and ease of
repair of the product. Most consumers are aware that the
product will break down at some time but a greater concern
would be whether or not it can be repaired and the length
of time it will take

Aesthetics
This dimension is subjective in nature and relates to how
the product looks, feels, sounds, tastes or smells. Unlike the
other measurable dimensions, aesthetics is based on the
judgements and preferences of the individual consumer.

Perceived quality
This is the perception of the consumer at the initial contact
with the product – that is, what comes to mind the first
time the product is seen.

Question 55

What is Quality Assurance

Answer 55

Quality assurance is a guarantee to maintain an agreed or
established set of quality standards. In doing this, the firm’s
suppliers must also be involved, since poor-quality raw
materials lead to poor products

Question 56

What is Quality Control

Answer 56

Quality control is the process of ensuring that the product
meets its established quality standards. The main objective
of quality control is to ensure that products being produced
and sold are free of defects.

Question 57

What are the concepts integral in quality control?

Answer 57

Zero defects
This concept involves the production of products that are
free of faults and which adhere to the standards.

Question 58

What is BENCHMARKING?

Answer 58

Benchmarking is another
method for improving quality. It is the process whereby
a firm identifies the best practices of another firm then
implements them to improve its own product.

Question 59

What are the steps in BENCHMARKING?

Answer 59

Identify the area for improvement
Choose the right company
Gather information
Analyse the information gathered
Implement and evaluate the findings

Question 60

Advantages and Disadvantages of Benchmarking

Answer 60

Brings about faster awareness of important innovations
and how to implement them successfully
Can improve the competitiveness of the firm both
locally and internationally
Gives the firm a better understanding of its consumers
and how to keep them satisfied.’

dis-
While possible, what works for one firm may not
necessarily work for the another
Needs qualified experts to make comparisons that will
be meaningful. This can be a very costly exercise.
The search for a suitable firm to benchmark can be a
very tedious process, as not all firms will want to share
information

Question 61

What is Outsourcing?

Answer 61

Outsourcing is a business practice where a company hires an outside party to perform services or create goods that were previously done by the company’s own employees

Question 62

Advantages and Disadvantages of OUTSOURCING

Answer 62

The firm’s focus can be on its core products
Usually results in cost savings, including labour costs
Improvement in efficiency and quality
Can boost productivity and competitiveness

dis-
Loss of managerial control, since the outsource firm has
its own management.
The firm’s financial success may be tied to that of
another company
Can be a potential source of conflict, as the firm’s own
workers may be laid off with the outsourcing of aspects
of the business

Question 63

What is a Quality Circle??

Answer 63

These are groups of lower-level workers who meet
regularly to analyse and critically review the design
and production of a product

Question 64

What is Kaizen?

Answer 64

Kaizen is a Japanese concept of continuous improvement.
The approach is based on the notion that the improvement
of a product should be a never-ending process. As a result,
improvements should be made on a small and gradual basis
over the life of the product.

Question 65

What are some LIMITATIONS OF KAIZEN

Answer 65

Some of the changes that are required cannot be done
regularly
Its success is heavily dependent on the culture of the
organisation and leadership style of management
Employees may feel pressurised into continuously
coming up with new ideas
There is little room for stability since things are always
changing.

Question 66

What is TQM? (Total Quality Management)

Answer 66

TQM is a management philosophy
which ensures that quality is maintained in all areas of the
organisation in order to meet customers’ expectations

Question 67

What is PRODUCTIVITY?

Answer 67

It is a measure of how well a business
is using its resources.

Question 68

What is the formula for PRODUCTIVITY?

Answer 68

Productivity = 5,000/(25 × 2 × 20)
= 5 gifts per labour hour

Productivity = Total Output / Total Input

Question 69

What are some factors that affect Productivity?

Answer 69

Labour–management relations
This refers to the relationship that exists between
management and the workforce.

Required investor returns
People enter into business to make profit and if this is not
happening, it is more than likely that they will leave the
business.

(External)-

Technology
Technology is always changing and improvements are made
at regular intervals. This could offer significant benefits to
firms if they are able to make use of such improvements.

Market demand
A product with a high demand usually generates a high level
of productivity

Competition

Question 70

What are some Methods of improving productivity??

Answer 70

Good working environment

Profit-sharing plans are an incentive for hard work done.
They can also be used to encourage workers to put in extra
effort in carrying out their responsibilities

Training
This can also be a vital way to improve productivity, especially
for organisations with large percentages of unskilled labour.

Question 71

What is Project Management?

Answer 71

Project management is the process of planning, organizing, and executing the tasks needed to turn an idea into a product, service, or deliverable

Question 72

What are the dimensions of Project Management?

Answer 72

cost, quality and time)