Unit 4.1 - production of goods & services Flashcards
(21 cards)
How can businesses reduce costs?
Become more efficient to reduce waste or use labour in developing countries where average wages are low.
Production vs productivity + formula
Production - using resources to provide goods/services to satisfy customer needs & wants
Productivity - how efficient the production process is; Quantity of outputs/quantity of inputs
Formula for labour productivity
outputs (over a period of time)/number of employees
4 benefits of improving productivity
- less materials & equipment needed for production which reduces business costs
- automation & fewer employees reduces wage costs
- reducing average costs helps the business become more competitive by lowering prices on the market
- fewer employees can allow them to be payed higher wages, increasing motivation
State & explain 2 principles to improve productivity
- Producing more with the same materials & labour by using available resources in efficient way, training employees to increase their skills, etc
- Producing the same quantity with fewer materials & less labour by introducing automated production process
What 5 things can inventories hold?
Components of goods, raw materials for production, spare parts for machinery in case of breakdown, partly finished good & finished goods
5 reasons why businesses store inventories
- Customers receive orders faster, which is important for staying competitive
- Business can respond to unexpected rise in demand of their products
- Suppliers may not always deliver inventory on time
- Buying in bulk may allow business to benefit from economies of scale
- Limited delays in production process if all raw materials are available
What is lean production?
Manufacturing method based on maximizing productivity/efficiency and reducing waste. Also aims to reduce product development time so that product reaches the shelves faster.
4 types of waste that can occur during the production process
- Transportation - damaged goods
- Inventory - having too much stock due to overproduction results in high storage costs
- Motion - unnecessary movement of employees results in waste of time & energy
- Over-processing - using complex machines to complete simple tasks
What is just-in-time inventory control + pros & cons?
Inventory control strategy in which companies receive the exact amount of inventory they need, right when they need it (low inventory levels). For this to be successful, there must be efficient coordination with suppliers. The goal is to retain little to no excess inventory.
+ money isn’t wasted on unused materials & components; production costs lowered due to less storage needed; encourages staff to be more careful & avoid errors;
- economies of scale benefits may be lost; high risk of production delays due to poor communication with supplier; business cannot respond to unexpected increase in demand; suppliers must be conveniently based close to producer
What is Kaizen + 3 examples?
Continuous improvement by constantly introducing small changes in a business in order to improve quality/efficiency and eliminate waste. Includes everyone from CEO to employees.
E.g. getting rid of piles of inventory, reducing amount of time needed for employees to walk between workstations; improving layout of factory
What is cell production?
Production process is organized in separate self-contained units called cells. Each cell is responsible for making a part of the finished product.
What is job production + examples + pros & cons?
Method of production where products are made according to customer specification, making each product unique. Usually, one item made at a time.
+ service/product is personalised; employees have variety in their work which may increase motivation; product meets customer wants; very high quality
- employees need to be highly skilled; high costs due to skilled workers & special material; long production process; expensive errors;
E.g. wedding cake
What is batch production + examples + pros & cons?
Products are made in groups of the same item & they go through the production process together.
+ easily switched from one batch to another; employees have some variety in their tasks; variety of products gives choice to consumers; can experience economies of scale
- increased production costs due to moving of semi-finished products; machines need to be adjusted between batches which wastes time;
E.g. bakeries, fast-food, clothes
What is flow production + examples + pros & cons?
Producing a large number of standardized products in a continuous process, along a production line. Capital-intensive & usually automated. Often sold to mass market.
+ very high output level; reduced labour costs & high efficiency; economies of scale benefit; low average costs; automated production lines allow production to happen 24/7, so it’s very quick
- needs complex equipment, so initial investment is very high; little job satisfaction or variety for employees; high storage costs due to high inventories of finished products; machine breaking down will stop entire production process; very difficult to change/not flexible
E.g. soft drinks, television sets, car assembly plant
4 factors affecting which production method should be chosen
- Size of market
- Nature of product - personalized or standardized
- Nature of demand for product
- Size of business
CAD vs CAM (examples of technology used in production)
CAD - computer aided design; use of specific software to design programs
CAM - computer aided manufacturing; computers monitor the production process & control the machines.
What is R&D?
Research and development - improving existing products and testing & developing new products to gain a competitive advantage.
What is disruptive technology?
New products/processes that completely change the way businesses produce & operate.
4 technologies used in retail businesses
- EPOS - electronic point of sale; operator scans code on the product at the supermarket to register the price
- Electronic payments
- Online banking
- ATM - automated teller machines - where customers can withdraw money
Pros & cons of technology in production
+ productivity is improved; increased employee training increases motivation; better quality products are produced; communication is quicker & more efficient
- job loses among low-skilled workforce; new technology becomes outdated very quickly, needing to be updated regularly which is expensive; not all employees embrace new technologies
