2.4.1 Production, Productivity, and Efficiency

Job production

involves the manufacture or delivery of one-off or a small number of items

↳ labour-extensive and expensive

benefits of job production

• Can charge higher prices

• Products tailored to customer needs

• Motivated workers

disadvantages of job production

• High costs

• Slow production

• Inconsistent work load

Batch production

involves the production of small quantities of identical products

↳ production is sped up making it less expensive

benefits of batch production

• unit costs are lower because output is higher

• production is flexible as each batch can vary

• more use of machinery

disadvantages of batch production

• more complex machinery needed = expensive

• workers may be less motivated as they tend to be specialised in one process

Cell production

involves dividing the production into multi-skilled teams (cells) each responsible for a particular part

↳ combined elements of job and flow production

benefits of cell production

• closeness of cell members should improve communication

• workers become multi-skilled and more adaptable for future needs

• greater work motivation

• quality improves

disadvantages of cell production

• workers may feel they are too pushed

• may not allow a firm to use machinery as intensely as traditional flow production

• the allocation of work : cells has to be efficient so they can cope

Flow production

involves the production of a large volume of identical products

benefits of flow production

• economies of scale

• quality stays consistent

• high output efficiency

disadvantages of flow production

• high initial machinery costs

• machines can break

• repetitive tasks may lower worker motivation

production

the level of output achieved by a business i.e. the total number of products produced in a given time

productivity

• Productivity, on the other hand , is a measure of the rate of production

• It is the amount of output that can be produced with a given input of resources

Factors influencing productivity of machinery

• Age of machinery and maintenance

• Training of operatives

• Quality of inputs e.g. a high quality printer can jam if cheap paper is used

• Hours used versus downtime

• efficiency of programming

• Unforeseen events e.g. power cuts

labour productivity

Labour productivity will be influenced by a  number of factors including

• Training and skills of the workforce

• Motivation

• Complexity of the product

Operational efficienc

involves maximising the output achieved from given inputs including machinery, materials and people

Efficiency can be improved using a number of methods, these include

• Increasing capacity utilisation

• Increasing labour productivity

• Lean production techniques

• Choosing the optimal resource mix, labour v capital intensive

• Using technology

capital productivity

target productivity

percentage difference for target productivity

Increasing labour productivity

• lowers labour cost per unit (assuming employee costs stay the same) and hence unit cost

• therefore it is important to use workers efficiently

labour productivity can be increased in a number of ways

• Training

• Increasing motivation e.g. financial or non - financial rewards, job design

• Implement new technology

• Better working practises

• Improved recruitment and selection

why do firms want to increase productivity

• to lower cost and increase profits

• this makes them more competitive in the market

ways to improve productivity

• specialisation and the division of Labour

  • Workers focus on specific tasks, increasing efficiency and output quality

• Recruitment, selection and training

  • Hiring the right people and developing their skills boosts productivity

• Motivation of workers

  • Motivated employees work harder and more efficiently

• Working practises

  • efficient systems e.g. flexible hours or teamwork improve workflow and output

• labour flexibility

  • Flexible workers can adapt to different roles, reducing downtime and increasing efficiency

• technology

  • Automation and digital tools speed up production and reduce human error

If businesses can raise their productivity they will be able to produce more output with the same input resources. This will mean that cost will be lower. This enable businesses to be more competitive?

Lower costs mean the firm can reduce prices or increase profit margins. This allows the farm to compete better on price or reinvestment in quality or innovation

difficulties in increasing labour productivity

• May impact negatively on quality and customer satisfaction

  • Damage to long term reputation

  • Increase waste affecting unit cost

• Employees may feel exploited

  • Working harder for the same pay, may work with unions to negotiate higher wages

  • Business benefiting but not the employees

  • Increased workload leading to stress and demotivation

efficiency

this is about making the best use of a company’s resources

Operations management

involves combining the four factors of production or resource inputs:

• Land

• Labour

• Capital

• Enterprise

the optimal resource mix

the best way of combining the factors of production in order to meet these requirements within financial constraints

costs

often used to measure efficiencya

average unit costs

factors influencing efficiency

• outsourcing

  • Hiring external firms can reduce costs and improve focus on core activities

• relocating

  • Moving operations can lower labour or rent costs and improve access to resources

• downsizing

  • reducing staff cuts costs and removes inefficiencies but may risk lower morale

• delayering

  • Removing management layers speeds up communication and decision making

• investing in new technology

  • Modern equipment boost speed, accuracy, and lower long term costs

• lean production

  • minimising waste and maximising value improves efficiency and reduces costs

labour intensive

• uses a relatively high proportion of labour i.e. workers in the production of a good or service

• Production relies on human workers than machines

• common in service industries or tasks needing personal input

• tends to occur in the tertiary sector

capital intensive

• uses a relatively high proportion of capital such as machinery in the production of a good or service

• Production relies more in machinery and technology than Labour

• Often used in mass production or automated industries

• tends to occur in the secondary sector of economy i.e. manufacturing

advantages of capital intensive

• Increased productivity

• Improved quality and speed

• Reduced labour costs

• Greater opportunities for economies of scale (the benefits to a business of producing on a large scale that lead to a fall in unit costs)

disadvantages of capital intensive

• High investment outlay

• Lack of human initiative

• Greater resistance to change by workforce e.g. retraining to use new equipment

advantages of labour intensive

• Often cheaper, especially when produced in low wage locations

• Workforce can easily adapt to change, especially if multi-skilled

• Continuous improvement through workforce can benefit the firm e.g. new ideas

• Government funding often available to protect jobs in the economy

disadvantages of labour intensive

• Industrial relations can be a problem e.g. strikes

• Lack of skilled workers in some industries

• HRM costs can be very high e.g. recruitment, selection and training