2.4.1 production, productivity & efficiency

methods of production

• job production: producing one item at a time, as ordered by the customer

  • advantages: high quality product, motivated & highly skilled workers, customised products can be producd

  • disadvantages: production is slow, labour costs are high

• batch production; groups of the same products are produced before moving on to a group of different products

  • advantages: workers can specialise, production can take place as the previous batch starts running out

  • disadvantages: requires careful coordination to avoid shortages, money is tied up in stock, as completed products need to be stored

• flow production: continuous manufacturing of standardised products, usually on a production line

  • advantages; low unit costs due to economies of scale, rapid production

  • disadvantages; customisation is difficult, capital equipment can be expensive o purchase

• cell production; involves workers being organised into multi skilled teams, with each team responsible for a particular part of the production process

  • advantages: more efficient as workers share their skills and expertise, motivation is high as employees work as a team

  • disadvantages: requires extensive reorganisation of production processes, teams efficiency may be reduced by weaker workers

calculating productivity

• labour productivity: output / number of workers

  • a measure of the output per worker during a specified period of time

• capital productivity: output / number of machines

  • a measure of the output of capital employed during a specified period of time

factors that influence productivity

• employee motivation: motivated workers tend to be more productive due to financial and non financial incentives

• skills, education and training staff: well trained ed workers are likely to be able to make useful contributions to decisions that improve productivity

• business organisations and working practices: flexible and adaptable workplaces can improve the commitment of workers and allow a business to respond to changes in demand

• investment in capital equipment: increased automation can improve levels of output and quality, well chosen materials less likely to make mistakes than humans and can operate for long periods without a break. properly maintained

efficiency

• efficiency: the ability of a business to use its production resources as cost effectively as possible

• average cost per unit = total costs / number of units

• maximum efficiency is achieved when the cost per unit is at its lowest

factors influencing efficiency

• standardisation of the production process: occurs when all staff use the same components and techniques in the production process

• relocation or downsizing: moving products to a cheaper or smaller location can reduce fixed costs

• investment in capital equipment: purchasing or upgrading machinery and technology can increase the rate of output, lower costs and improve quality

• organisational restructuring: reducing the levels of staff or reorganising staff can better match labour to output needs which can increase motivation as they have opportunities to take on new roles which will develop their skills

• outsourcing: tasks may be given to other specialist businesses that can complete them at lower costs

• adoption of lean production techniques; production that involves the reduction of all types of wastage

  • kaizen; improvements are made continuously

  • just in time; holding little or no stock which minimises storage costs

capital intensive vs labour intensive production

• labour intensive; uses physical labour in the production of goods/services

  • adv: low cost production where labour costs are low, provides opportunities for workers to be creative, workers are flexible

  • disadv: workers may be unreliable and need regular breaks, incentives may be needed to motivate staff, training costs can be expensive

• capital intensive: uses machinery & technology

  • adv: low cost production where output is high, machines are consistent & accurate and can run without breaks

  • disadv: high set up and maintenance costs, breakdowns can delay production, may not provide flexibility in production