Productivity Chapter 37

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What is Production?

Production is the change of raw materials into 'products'

There are 3 type of Production:

Job Production: A Job Production involves in the production of a single product at a time. It is used when the orders for products are small.

Advantages:

High quality products

Workers are well motivated

Products can be custom made

Production is easy to organise

Disadvantages:

Production can be expensive due to high skilled labour

Production maybe slow

A wide range of tools may be needed

Batch Production: A Batch Production is more regular than a 'one offs', these type of production can be divided into number of operations so that when one one operation is done it is moved to another operation.

Advantages:

Workers are likely to specialise in one section or operation

Unit costs are lower because output is higher

High use of machinery

Its a flexible method since production can change

Disadvantages:

Complex machinery are used

Careful planning co-ordination is needed

Workers can get less motivated because they specialise

Batches are small therefore costs will be high

Flow Production: These type of Production involves in a continuous sequence of operations. Only one type of product is made.

Advantage:

Can produce a lot of the same product at a small amount of time

Very low unit costs due to economies of scale

Modern plant and machines can allow some flexibility

Production speed can vary according to demand

Disadvantages:

Workers may be unmotivated

Breaks in production can be expensive

Huge set up costs before production can begin

Products maybe too standardised

Productivity: Productivity is the amount of output that can be produced with a given amount of input resources

Labour Productivity: Output per employee

Capital Productivity: Amount of output per capital employed

Factors influencing productivity:

Specialisation and division of labour

Education and training

Motivation of workers

Working practices

Labour flexbility

Capital productivity

Efficiency: Efficiency means using the best use of the resources available.

Production is said to be efficient if the average cost are minimised

If a business can minimise average costs then the business will be more efficient.

Factors influencing efficiency:

By introducing standardisation: Means producing uniform product- same product through out the whole process.

Outsourcing: A task in a business can be specialise by someone outside the business with lower costs.

Relocating: Relocating into a cheaper area with lower costs for rents, transportation and such.

Downsizing: By reducing capacity through making workers redundant/ cutting off unprofitable divisions.

Advantage :

Improves profit and saves costs

More competitive operation

Removal of unprofitable or inefficient part of a business

Profitable business no longer subsidising unprofitable ones

Delayering: Involves in cutting off levels of the business hierarchy - making the structure of the business more flatter therefore saving costs for the business. Better communication by the employees.

Investing in new technology: More accurate and reliable. Its also alot more quicker in production processes. It can carry out complex tasks that a normal human cant do.

Lean production: It aims to use less of everything, including space from factory, materials, stocks and such.

Advantage:

Raises productivity

Reduces costs and cuts lead times

Reduce the number of defective products

Improves reliability and speed of product design

Kaizen: Continuous improvement

Just-in-time production: Minimising the amount of stock held by the business and it reduces all of the costs associated with stock holding.

Labour and Capital production:

Labour intensive production involves in using more labour than capital.

Capital intensive production involves in using more capital involved materials such as machinery.

Factors influencing the mix of labour and capital

The nature of the product

The relative prices of the two factors

The size of the firm

Advantages of Capital intensive strategies

More cost-effective if large quantities are produced

Machinery is often more precise and consistent

Machinery can operate 24/7

Machinery is easier to manage

Disadvantages of Capital intensive strategies

Huge set up costs

Huge delays and costs if machinery breaks down

Can be inflexible- highly specialised

Often poses a threat to the work force and could reduce morale

Advantages of labour intensive strategies

Generally more flexible than capital

Cheaper for smaller scale of production

Cheaper for a larger scale in countries such as china or india

People are creative and can therefore solve problems and make improvements

Disadvantages of labour intensive strategies

People are more difficult to manage than machines

People need motivation

People can be unreliable

People cannot work without breaks or holidays

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