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 e.g an employee becomes specialised in the preparation of the cake mix

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-