Production of Goods and Services

Labour Productivity

Output/Number of employees

Importance of Efficiency and How to Increase

1. Introduce Automation

2. Train Labourers

• Lower input required

• Lower labour costs

• Higher wages can be paid increasing motivation

• Lower wastage

Lean Production

When businesses try to produce efficienty with the lowest wastage

JIT

When businesses purchases raw materials only when required by the production process

Advantage

• Reduces Money tied up to the inventory

• Reduces inventory costs

• Prevents overproduction

Disadvantages

• Business may not be able to adapt with sudden change in demand

• If businesses dont match customers demand they might lose customers

• Overrelies on suppliers arriving on time

Kaizen Method

When workers come together to discuss how to improve the production process

Advantages

• Workers are more familiar with the production process

• Improves motivation if workers see their ideas being used

Disadvantages

• May increase training costs

• Workers may not be willing to adapt

Factors Affecting Business Inventory Hold

1. Warehouse space

2. Cost of Warehouse space

3. Type of Product

4. Demand of Product

5. Liquidity of Business

Why business hold inventory

• To use in the production process

• To benefit from economies of scale

• To quickly satisfy customer demand and orders

• Maintain and increase production

Job Production

Production of one good at a time

Advantages

• Higher Quality, Unique Products

• Can charge Higher prices

• Improves worker motivation

Disadvantages

• More time consuming

• Cannot benefit from economies of scale

• Higher costs

Batch Production

Production of groups of similar products, one group goes through a stage of production before the next one

Advantages

• More Flexible

• High output

Disadvantages

• May take time switching between machines

• May be repetitive and boring

• Increased inventory costs

Job Production

Continous production of one type of products

Advantages

• Lower labour costs

• Can work 24/7

• Economies of scale

Disadvantages

• Dismotivate employees

• High Capital costs

• Break in one stage can disrupt production