Business- Unit 3

Define Production

Production- Process of changing inputs such as labour services into goods and services that can be sold

Define Production Management

Production Management- all the activities in managing the transformation process

Define Job Production

Job Production- method of production in which a product is supplied to meet the exact requirements of the customer

Advantages and disadvantages of Job production

Advantages:
- Each item can be different to meet customer requirements to please them
- High quality products/services to please customers
- High prices can be charged leading to more profit
- Skilled labour used, workers highly motivated

Disadvantages:
- Slow process as business plans and designs each project individually
- Difficult to speed up production process
- High production costs
- Labour costs high as skilled workers are needed

Define Flow production

Flow production- When an item moves continuously from one stage of the process to the other (usually on a conveyor belt)

Examples: car production, petrol refineries, factories

Advantages and disadvantages of flow production

Advantages:
- Large output, low unit cost (leads to economies of scale)
- Don’t lose out on much production time
- Workers can focus on a limited amount of tasks (specialisation)
- Maintain a standard quality

Disadvantages:
- Huge cost of machinery
- Difficult to adjust product line to change product being made
- Few labour skills/Poor worker motivation
- Products may be too similar
- Breakdowns cause major problems

Define Lean production and Batch production and Kaizen

Lean production- an approach to production that aims to minimise wasted resources

Batch production- Production type where things are made in groups eg. pastries

Kaizen- continuous improvement, aims to achieve change from a series of small steps

Why is having and managing stocks important for a business

Having stocks:
All businesses hold stock in some form: Day to day supplies, raw materials etc.
They need them to operate and produce

Managing stocks:
Stocks are an investment: money tied up in stocks when it could be earning interest in a bank
Leftover stock that can’t sell becomes useless (lose money)
Not enough stock makes customers unhappy

Define Just-in-time production and Just-in-case production

JIT Production- Similar to flow production (very automated) but holds as little stock as possible and only produces when orders are made

JIC Production- Holds stock for emergency situations (delays, increase in demand etc.) Bulk purchases made for purchasing economies of scale but fewer deliveries

Advantages and disadvantages of JIT production

Advantages:
- Low stockholding costs due to minimsed stock held
- Does not need much space to store stock
- Less danger of theft or having to reduce price to sell stock (Less money lost)

Disadvantages:
- Not likely to get bulk discounts (Diseconomies of scale) and higher transport costs due to small quantity
- At risk if there are difficulties with suppliers such as delays

Advantages and disadvantages of JIC production

Advantages:
- Can meet sudden increases in demand (more profit)
- Lower risk if there are problems with suppliers
- Bulk discounts and lower transport costs as less frequent deliveries

Disadvantages:
- Holds stock that may go out of date or need price reductions to sell
- Higher stockholding costs due to stocks for emergency situations

Define Procurement and Supply chain

Procurement- Involves selecting suppliers and establishing terms of payment and negotiation of the contact

Supply chain- All the businesses, people and activities that are in production processes from the start until it gets to the customer

Why is the supply chain so complex?

Businesses now trade all over the world and have to decide: what to stock, where to buy from and co-ordinating the orders and deliveries

Define Logistics

Logistics- The movement of goods, services, information and money throughout the production process

Why do suppliers matter? (4 reasons)

- Suppliers have to deliver on time so business has stock to cell
- Quick and reliable deliveries reduces stockholding costs as stock is easy to replace
- Good quality products help the reputation and quality of a business, increasing customers
- Efficient production helps reduce the costs of a business so it can provide products at a better price, increasing profit margins

What are the factors affecting the choice of supplier

Cost
Quality
Range of goods
Speed and reliability and Flexibility of deliveries
Reputation
Payment and contract terms

How do businesses meet customer expectations?

In their business plan, they will set targets to meet customer expectations and hitting these targets will achieve that. Targets depend on the nature of business

How do businesses measure quality and identify problems?

Customers- Many businesses ask customers to complete surveys or have telephone lines/emails for feedback

Mystery visitors- Some businesses employ mystery visitors to use the product in secret to test the quality service and goods. (Workers may feel they’re being spied on)

Staff- Staff can be asked to check the quality of the work done at each stage of the process or at the end
Staff can check for defects or mistakes

Consequences of quality problems

- Customer dissatisfaction- Won’t buy the product again and may even discourage others from purchasing, losing revenue
- Cost of recalling faulty products
- Cost of replacing goods- New items have to be produced to replace old ones
- Cost of waste- Poor quality products have to be scrapped
- Costs of goods that are produced with no demand
- Cost of legal action if a business is sued for poor quality

How does a business maintain consistent quality?

- Make sure suppliers are reliable and of good quality
- Train staff to do their job properly and what the standards are
- Invest in equipment so staff have correct resources
- Inspect products at each stage of the process to get rid of defects
- Involve staff in improving the process

What is Total Quality Management?

TQM is an approach where everyone is focused on preventing errors occurring and ensuring quality
Quality is everyone’s job
Focuses on prevention rather than fixing faults later on (get it right the first time)
+ All workers involved which is more motivating
- Not everyone wants to monitor their own work or work of others

What are the costs of maintaining/improving quality

Costs of inspection and checking (quality control)
Costs of training staff to check their own quality
Costs of selecting better suppliers

What are the problems of achieving constant quality

When companies grow, they may franchise their operations or outsource their production which gives up some control (more difficult to achieve consistent quality)

What are the benefits of maintaining quality

More satisfied customers leads to customer loyalty
Businesses can charge more
Better reputation leads to new customers and customer loyalty
Lower costs as wastage is reduced
Avoids cost of making mistakes

Define customer service and give an example of bad customer service

Customer service- Part of a business’ activities that is concerned with meeting customer’s needs as fully as possible

Example: Boohoo got exposed for lying about their labels (Made in Pakistan but said UK to seem better and more ethical to charge higher prices)

Benefits of good customer service and effects of bad customer service

Good customer service:
+ Seen as better than rivals, more customers
+ Increase market share due to good publicity increasing sales
+ Increase customer loyalty as they feel valued and respected
+ Increase profitability- repeat customers and brand loyalty increases, upping profits

Bad customer service:
- Dissatisfied customers won’t return to buy
- Problems attracting new customers
- Loss of revenue and profits
- Costs: a business would have to refund customers if they get things wrong

How does good customer service occur

Product quality, reliability and good product information
Customer experience and After-sales service
Safety
Well-maintained premises (clean shop)
Variety of payment methods
Meeting customer expectations

How does bad customer service occur

- Promising too much- increases customer expectations
- Poor communication- Not been made clear to customers on what the level of service is
- Bad management- may not manage resources properly despite having the right resources
- External factors eg. delays, war, disease (can’t be helped)

How do websites help with customer service

- Gives customers information about the business/products and can include pictures
- Helps advertise to a much larger group of customers, increasing sales
- Can include answers to FAQs, quick way for customers to answer their questions
- Offer advice to customers if they have problems with their purchase

How does E-commerce and M-commerce help with customer service

- Customers can view products at anytime and anywhere
- Can view other people’s reviews of the products
- Can ask questions through online support system
- May benefit from lower prices due to no high street rent to pay
- Social media used to access large numbers

How does data analysis help with customer service (4 ways)

- Information gathered useful to make decisions
- Tailor advertisements to products you’re more interested in
- Recommend products you will like based on shopping and browsing history
- Change the price to encourage you to buy products