A-Level Business Studies 2.4 UNFINISHED

What are the 5 types of Production?

1. Job

2. Batch

3. Flow

4. Process (based on flow)

5. Cell

What is Job Production?

Making one-off, niche, bespoke products usually made by specialist businesses:

E.g. Plumbers, tailors, sole traders etc.

What are the Pros of Job Production?

• Customer can fully customise product

• Usually higher quality due to specialist staff used

• Staff motivated due to making things they’re good at (product orientation)

• Flexible

What are the Cons of Job Production?

• High prices

• Often labour intensive = high labour costs

• Require close connection w/client

• IF specialist staff isn’t in, you can’t make product quickly

What is Batch Production?

Making similar products at the same time in the same process

What are the Pros of Batch Production?

• Costs savings from buying in bulk

• Allows customers some choice like w/job production

• Products worked on by specialist staff/equipment

• Firm can handle unexpected orders

What are the Cons of Batch Production?

• Takes time to switch from one batch to another

• Requires the firm to maintain higher stocks of raw materials and stock

• Tasks may be boring/repetitive - reduces motivation

• Size of batch depends on capacity allocated

What is Flow Production?

Making a product as it moves through the production process:

• When one task is done, the next task must start; time taken must be the same

What are the Pros of Flow Production?

• Economies of Scale from improved work & material flow

• Suitable for producing large quantities

• Capacity intensive = can work constantly

• Less need for training and skills

What are the Cons of Flow Production?

• Long time to set up: reliant on high quality machinery

• High raw materials and finished stocks unless lean production used

• Goods mass produced - less differentiation for customer

• Production shut down when flow stops

What is Process Production?

Involves a series of processes which raw materials go through, leading to a large quantity of finished product:

E.g. oil refining and cement

What are the Pros of Process Production?

• Processes normally automated - reduced unit costs

• Large quantities can be produced

• Ideal for products w/consistent quality needed

What are the Cons of Process Production?

• Heavy investment required in process design and production equipment/facilities

• Hard and disruptive if production must be stopped

• Little opportunity to make different version of the product

What is Cell Production?

When production is organised into teams that make product as it moves through assembly line

What are the Pros of Cell Production?

• Responsibility given to teams = motivation

• Specialisation from workers = higher quality; know what they’re doing

What 4 things do we need to consider when choosing a Production method?

1. Target market - is there mass demand?

2. Technology - can it be automated?

3. Resources - does firm have finance and people to use this method?

4. Standards - what quality is needed?

What 3 ways can we measure Productive Efficiency?

1. Measure relationships between inputs and output (e.g. output per worker at X time)

2. Calculate the unit costs - falling ratio indicate efficiency is improving

3. See what idle resources there are - workers left w/doing nothing, are machines being used part time? More idle resources = inefficiency

Why is looking at Productive Efficiency vital for businesses?

• Will lower costs and so lower prices

• Can be more competitive

• Investing in production assets is costly - a firm must maximise its return on them

What is Productivity?

A measure of efficiency

How do we calculate Productivity?

Total Output/Total Input

How do we calculate the Average Unit Cost?

Total Production Costs in period (£) / Total Output in period (units)

What is Capacity?

A measure of how much output can be achieved in a given period

Why is Capacity dynamic?

• Input amount can differ output amount

  • IF a machine is being repaired, capacity is reduced

  • Capacity linked to labour - more productivity = increased capacity

• Capacity must take into seasonal/unexpected changes in demand:

  • Easter egg production increases at Easter

  • Trends can increase capacity

What is Capacity Utilisation?

The percentage of a firm’s capacity that is actually being sued over a specific period

How do we calculate Capacity Utilisation?

(Actual Level of Output / Maximum possible output) x 100

Why is Capacity Utilisation important?

• It’s a useful measure of productive efficiency (identifies idle resources)

• Higher utilisation = economies of scale

• High capacity utilisation = business is competitive

• High capacity needed if firm has high break even

What are the 3 key costs of Capacity?

1. Equipment - machinery

2. Facilities - rent, insurance etc.

3. Labour - wages, salaries etc.

Why do most firms operate below 100% Capacity?

• Lower unpredicted market demand

• Loss of market share

• Seasonal demand

• Recent capacity increase

• Maintenance and repairs = lower capacity

What are the dangers of operating at a Low Capacity?

• Higher unit costs = impact competitiveness

• Less likely to reach break even output

• Capital tied up in idle assets

Can a business work at over 100% Capacity Utilitsaiton?

YES - possible for short term by:

• increasing working hours

• Sub-contract some production tasks

• Reduce time spent maintaining production equipment

What are the Cons of working at High Capacity?

• Negative effect on quality (maybe)

  • Production is rushed

  • Less time for quality control

• Staff suffer:

  • Added workload and stress

  • Demotivating if sustained for too long

• Loss of sales:

  • Less able to meet sudden or unexpected increase in demand

  • Production equipment may require repair