2.4 (MR F)

Capacity utilisation

• how best to use those resources for the benefit of the business

• current output / maximum possible output X 100

underutilisation

• not using resources to benefit their business

• advantages- provides flexibility, can respond to sudden increase in demand

• disadvantages- impact on brand image

over utilisation

• the excessive use of recourses

• advantages- minimise total costs, increase in business competitiveness

• disadvantages- not flexible to new orders, mistakes made so quality suffers

stock that businesses can hold

• raw materials

• work in progress- partly finished goods

• finished goods

factors influencing stock control

• demand - businesses must carry enough stock to cover unexpected demand

• external shocks

• costs of holding stock

buffer stock

• a quantity of goods kept in case of stock shortages

• advantages- can meet sudden increase in demand, acts as safety net, brings competitive advantage

• disadvantages- waste of products, higher storage costs

approaches to managing quality

• quality control

• quality assurance

• quality circles

• total quality management

quality control

• involved ins peacetime quality at end of production process

• advantage- in expensive

• disadvantages- wasteful, don’t figure out cause of faults

quality assurance

• inspect quality throughout production

• advantages- issues identified early so avoids waste, focus on cause of faults so avoids future mistakes

• disadvantages- time consuming, requires training so labour costs may increase

quality circles

• groups of workers meet regularly to solve quality problems

• advantages- motivated workers as involved in decision making

• disadvantages- need trust in workers, need regular meetings

total quality management

• every worker is responsible for quality

• advantage- improved efficiency, high quality means satisfied customers

• disadvantages- training needed

kaizen

• continuous steps to improve productivity through the elimination of all type of waste

• small but continuous changes

just in time stock

• a process which raw materials are not stored on site, they are ordered “just in time” for production

• advantages- storage costs minimised

• disadvantages- unreliable suppliers, delivery issues

why can waste occur?

• stock can become obsolete

• stock can perish

• stock can be damaged

lean production

• aim to reduce recourses used in production

consequences of changed in inflation

• INFLATION IS GENERAL RISE IN PRICES

• increased costs of higher wages, raw materials, stock

• consumers change spending habits

exchange rates

• the value of one currency expressed in terms for any

• appreciation- means the pound can buy MORE foreign currency

• depreciation- the pound can buy LESS foreign currency