Business Operations

3 types of production

Primary

Extracting raw materials e.g farming, fishing, mining

Secondary

Takes raw materials and turns them into finished/semi finished products, involves manufacturing e.g building and construction

Tertiary

Providing/selling services or goods to consumers e.g banking and retail

Production


The creation of goods and services for customers. Production activity in business is important because without it, there would be no products or services available

De-industrialisation 


when trend moves away from primary and secondary sectors towards employment in the tertiary sector

Changing trends across the types of production


Countries at the lowest level of development- primary production with far fewer secondary or tertiary industries

As countries develop- primary production decreases and secondary production will increase

In most developed countries- tertiary dominates with little primary production

Reasons for changing trends

services (tertiary)

There is more demand for service such as education, personal banking therefore increasing numbers of employees are needed in these areas

Farming (primary)

Has become more mechanised and fewer people are needed to work the modern machinery than in previous years when work was done manually

Increased technology

Increased technology in manufacturing industries requires fewer workers

Decrease in natural resources

Local natural resources are decreasing e.g fishing therefore there are less jobs available

Trends in Primary

only 2% of workers are employed in the primary sector, shift away from employment in primary production

Impact of changing trends in primary production on N.I

high levels of unemployment due to shift in employment away from primary production

Trends in Secondary

only 18% work in the secondary sector

Impact of changing trends in secondary production on N.I

high levels of unemployment due to shift in employment away from secondary production

Trends in Tertiary

80% of workers employed in tertiary, less people work in primary

Impact of changing trends in Tertiary production on N.I

increased opportunities for employment, better quality of services provided for customers

Methods of Manufacturing

Job, Flow, Batch, Process

Job Manufacturing

1 single item manufactured at a time, tends to be labour intensive and it suits small scale production

examples of job manufacturing

birthday cakes, wedding dresses

advantages of job manufacturing

Customer Satisfaction- Each item is customised to meet the exact requirements of the customer therefore leading to high levels of customer satisfaction

Less Complaints-The quality of the goods is very high therefore leading to a reduction in the number of complaints and the time and cost associated with dealing with the complaints

Disadvantages of Job Manufacturing

Cost- business is unable to buy in bulk and therefore cant benefit from reduction in cost per unit, therefore this leads to increase in costs and may impact on profit

Time Consuming:

The work is very time consuming therefore this reduces the number of orders the business can accept and therefore this limits the sales of the business

Batch Manufacturing

involves manufacturing a number of identical/similar products together in a batch e.g bread, books

Advantages of Batch Manufacturing

Machinery- the same machinery may be used to make different products therefore reducing machinery and labour costs and as a result increasing profits

Specialisation- workers become specialised in specific areas, they’re able to develop their skills. Therefore finished products will be of higher quality and the business may charge higher prices

Cheaper- Labour costs are reduced because less manual work is involved so there may be saving of labour costs in the business

Disadvantages of Batch Manufacturing

Cost- The business may need larger stocks of raw materials and therefore the business will need additional space to store the products which costs money for storage and cash is ‘‘tied’’ up in stock

Unable to customise- goods cant be customised to meet the specific requirements of the individual customer therefore they cant charge a higher price

demotivated staff- the work is less interesting than in job manufacturing and can be reptitive, this can lead to workers being demotivated and therefore may lead to poor quality products

Flow Manufacturing

Involves one product being manufactured continuously and in large numbers. Product is manufactured along an assembly line, it’s normally used in the manufacturing of a standardised product e.g cars and toys

Advantages of Flow Manufacturing

Large Quantities- large quantities can be manufactured quickly therefore the business has the potential to sell larger quantities than job or batch production and will generate higher levels of sales and profits

Less labour- the production process is highly ‘‘capital intensive’’ therefore reducing the need for high levels of labour therefore reducing the costs of the business and allowing for 24/7 continuous production

Disadvantages of Flow Manufacturing

Identical products- products produced are all identical and therefore can’t be customised to meet the needs of the individual customer

Downtime- if the machinery break down this halts the production and therefore orders may not be met and customers may go elsewhere e.g the closest competitor

Process Manufacturing

the manufacturing of goods that cant be taken apart and the process is continuous, it involves a combination of ingredients e.g drinks and plastics

Process Manufacturing Advantages

large quantities- can be manufactured quickly therefore the business has the potential to sell larger quantities and therefore generate higher levels of sales and profits

reduction in unit costs- processes can normally be automated which reduces unit costs, this means overall costs within the business is reduced and as a result maximises profit

consistent quality- this manufacturing method is ideal for products which have to be of a consistent quality, this means that all items will be of the exact same quality, therefore satisfying customers and generating sales

process manufacturing disadvantages

heavy investment- large investments are required in order to process design and manufacturing equipment/facilities therefore its very capital intensive this means it could have a negative impact on the cash flow of the business

identical products- little opportunity to make different versions of the product this means there’s no flexibility to change a product and therefore all batches will be exactly the same and cant be suited to someones specific needs

manufacturing breakdown- if the manufacturing process e.g machinery has to be stopped its very difficult to continue with manufacturing and fulfilling customers order’s this means dissatisfied customers who may go to the closest competitor and therefore impact on sales and profit

why choose batch over flow manufacturing

Cost- large capital investment is required for flow manufacturing, a small/new business may not be able to afford the machinery for flow manufacturing

Boredom- flow manufacturing would be boring for workers which could lead to mistakes being made that would impact upon quality, this means customer satisfaction would be reduced, therefore may impact on sales and profit for the business

Variety- Batch manufacturing produces groups of identical products whereas flow manufacturing produces all identical products. It would be important to have a variety of products as this would appeal to different segments of the market and therefore increase sales.

division of labour

when the manufacturing of a product is divided into a number of small stages e.g a cake is divided into two stages the preparation and icing, employees become specialised in a particular stage

specialisation

when an employee concentrates on one particular operation and does it all the time

4 types of specialisation

product, process, function, country

advantages of division of labour/specialisation

more economic- tools and machinery are used economically

quality- each worker becomes very good at a particular task, this means employees work at jobs which suit their skills and therefore become experts, as a result this improves the quality of the final product therefore reducing the number of complaints and improve the corporate image

speed- time is saved as workers do not need to move between jobs, they work at jobs that suits their skills and therefore have the ability to work at a faster speed therefore leading to increased output and therefore increased efficiency

reduced costs- reduced costs of producing products will reduce prices for the customer therefore increasing sales

disadvantages of division of labour/specialisation

absenteeism- employees have a limited skills set therefore reducing the flexibility of the business to cover absenteeism/holidays, also due to limited skills there is a lack of employability for the workers if they are made redundant

demotivated- employees may be demotivated as a result of boring and repetitive tasks therefore leading to mistakes and consequently an increase in wastage and costs as wells as the corporate image

isolation- workers can feel isolated from each other and this can create demotivation within the workspace

delays/strikes- delays or strikes can halt production therefore decreasing output and efficiency

inventory control

involves minimal levels of stock (raw materials/components and finished goods) but being able to satisfy the demand from customers. Efficient inventory control ensures that a business isn’t holding large stocks of goods for long periods of because this would tie up finance which could be invested in other areas of the business

good inventory control will help a business

avoids cashflow problems- ensures a business is not holding large amounts of stock for long periods of time therefore avoiding cash being tied up in stock and as a result lead to cash flow problems

meet demand- enables the business to always meet customer demand therefore the business doesn’t have to refuse customers/ turn customers away and as a result they can gain a competitive advantage over other businesses ensuring the repeat customer and potentially increasing market share

poor inventory control will

out of date/obsolete stock- stock may become obsolete (outdated) or may go out of date and as a result the business may need to sell the stock at a reduced price or lose money through wasted stock therefore reducing the overall profit of the business

lose customers- if the business does not have enough stock to meet customer demands, customers may go elsewhere e.g local competitors. The business may lose customer loyalty and potentially decrease their share of the market allowing competitors to gain an advantage

methods of inventory control (Just in time)

products are manufactured just in time for them to be sold, the business holds zero stock, raw materials are delivered ready to use directly into the production process, the business needs less factory space because it holds smaller amounts of stock

advantages of just in time

capital- capital isn’t tied up in unused stock or raw materials, therefore reduced waste and capital can be used elsewhere in the business

cheaper products- due to the reduced costs finished products should be cheaper as a result therefore gaining a competitive advantage over competitor, and increase in sales and profit

freshness- some stock may be fresher as they are being delivered just on time for production, therefore improving the overall quality and freshness of products

disadvantages of just in time

pressure on suppliers- it puts pressure on suppliers who have to deliver on time and they must work closely with the business

costs- there may be an increase in costs with constantly transporting stock rather than storing goods

output- output may be halted if the wrong goods are delivered, therefore may have a negative impact on customer service

batch control definition

used for batch production. A business ensures they have the right level of inventory to produce one batch of goods, before moving onto production of the next batch

advantages of batch control

meet demand- a business ensures they have the right level of inventory to produce a batch of products, this enables the business to always meet demand

reduction in wastage- a business is likely to reduce wastage of inventory if they produce in batches. This means they will not need large quantities of stock to make one batch of goods, therefore reducing waste and costs

reduced costs- As stocks are held in batches, this will lead to a reduction in costs for storage and security of stock therefore increasing the profit of the business especially for a business with bulky items

batch control disadvantages

lose customers- mistakes made by suppliers in delivery of raw materials/components/finished goods could hold up the production of a batch therefore delaying the entire production process and as a result not satisfying the demand of customers

damage reputation- if there is poor relationships between the business and the supplier this method of stock control may not work, the business will become less efficient, this will damage the reputation

first in first out definition

a system to ensure that perishable stock is used efficiently so that it doesn’t deteriorate or go out of date before being sold. Stock is identified by the date received and moves on through each stage of production in strict order

first in first out advantages

reduction in wastage- this method will ensure older stock is used first and therefore reduces the amount of perishable goods

reduced costs- reduction in costs therefore increasing the profit of the business

quality- when stock is rotated often this means higher quality goods are displayed to customers, therefore satisfied customers which will improve the reputation of the business and gains customer loyalty

first in first out disadvantages

damaged reputation- if this method of stock control isn’t managed appropriately this could lead to lower quality stock being displayed to the consumer, therefore leading to a bad reputation and lower sales

loss of customers- if the business can’t manage this system effectively customers are unlikely to return to the business and therefore this will decrease sales and in the long term profits

impact of technology on manufacturing

motivation

redundancies

quality

positive impact of technology on manufacturing for a business

new products- allows for the development of new techniques and new products within the business therefore increase in product range and improved customer satisfaction

output- increased output due to potential for 24/7 production as machinery doesn’t need a break therefore there is a potential to increase the level of sales and increase the level of profit

communication-communication will be faster throughout the business and between the business and the customer, therefore improved efficiency

negative impact of technology on manufacturing for a business

boredom- work can become boring and may impact on staff motivation as a result mistakes may be made impacting on efficiency

costs= specialist machinery will be expensive to buy and may require funding, therefore reducing the profit level of the business

breakdowns- computer/machine breakdowns can lead to customers waiting longer for products and therefore reduce customer satisfaction

advantages of technology on manufacturing

new products- allows for the development of new techniques and new products therefore increasing sales

efficiency- increased efficiency throughout the business therefore producing higher quality goods and services

quality- can ensure good quality as product can be made to a higher specification therefore improving customer satisfaction

disadvantages of technology on manufacturing

training- new machinery needs to allow for training of staff, this can be disruptive and costly to the business in terms of time and money

increase in costs- machinery and computer equipment need to be maintained therefore costly and time consuming

expensive- specialist machinery will be expensive to buy and may require funding therefore may impact profit

quality assurance definition

quality assurance is having structures and procedures in place to constantly provide a high standard of product or service. It’s the monitoring and evaluation of a product or service to ensure standards are of high quality are met, it encourages and enables getting things right first time with zero defects

quality assurance is important

good corporate image which attracts customers and therefore increases sales

quality standards definition

the recognition that assures members of the public that the business has met high standards of quality

examples of quality standards EFQM

European Foundation for Quality Management, aim to encourage European businesses to improve their standards in order for them to be world leaders and achieve total advantage over their competitors, includes:

leadership, people, processes

investors in people

a recognised standard to achieve better people management through employee empowerment and working towards continuous improvement of staff, IIP is assessed issues include improving skills, resolving people issues

customer service excellence standard

the government developed for public service organisations to improve their effectiveness and efficiency e.g delivery of service and constant measurement of the service

main aims of the customer service excellence standard are to

encourage continuous improvement in the delivery of public service

reward organisations which deliver good services based on customers needs

why would a business want to have a quality standard

profit- it’s important because it leads to successful working practices and therefore increased profit

increase price- the business may have the ability to increase price of their product or service as customers trust the product or service more than a business with no standard in place

competitive advantage- it’s important because it could give the business competitive advantage over it’s competitors and therefore increase sales and profit of the business

benefits of obtaining quality standards

reputation- by achieving quality standards this improves the reputation of the business and therefore leads to attracting more customers and increasing sales

motivation- by achieving quality standards this should improve the motivation of the workforce by recognising their hard work and valuing their efforts therefore they will have a sense of pride and work harder

enhances corporate image- the quality standards logo can be used on headed paper or advertisements to improve the image of the business and be used as a promotional tool for the business

drawbacks of obtaining a quality standard

time- it takes a significant amount of time to obtain the quality standard awards e.g scheduled visits therefore disrupts the normal operations of the business and possibly reducing the productivity for that time frame

cost- it may be costly to set up new procedures and to train staff to achieve and maintain the award this could consequently reduce the level of profit achieved by the business

Health and Safety Executive (HSE)

is a public body which encourages, regulates and enforces occupational health and safety in NI

main roles of the HSE

it regulates health and safety legislation in NI

controls risks to peoples health and safety arising from work therefore preventing unecessary accidents and incidents within the workplace

How the HSEs work would affect a business

would provide information and advice on health and safety

provide statistics of incidents

investigate any health and safety incident

employers role/responsibilities of employers/management in H+S

provide protective equipment and clothing when necessary, therefore avoiding unnecessary incidents/accidents

provide health and safety training for all employees, therefore to ensure the safe use of substances and equipment and avoid unnecessary incidents/accidents

employees role/responsibilities in H+S

employees are required to undertake health and safety training

employees are expected to use the machinery carefully and wear the clothing provided

employees are expected to co-operate and attend all meetings relating to health and safety matters

all employers are expected to

remove waste facility

maintain all machinery

carry out regular fire drills

ensure work place is well ventilated

all employees are expected to

report any accidents

use equipment safely

report any dangers or faults

attend the training sessions provided

ISO 9001

looks at how the business has implemented quality assurance in the areas of facilities, people, training, services and equipment/different processes it looks at how the business:

trains its staff

uses its resources

advantages for the business having ISO 9001

increased customer satisfaction

successful working practices

disadvantages for a business applying for ISO 9001

costly in getting the award and retaining the standard

process can be very time consuming