O LEVEL BUSINESS STUDY CHAPTER 23

Chapter 23: Factors affecting production

What is meant by production?
Production is the provision of a product to satisfy wants and needs. The process involves businesses adding value to their products. E.g. The production process of matches involve cutting wood into matchsticks, putting phosphorus ends on them and packaging them to sell.



Productivity
Productivity is the outputs measured against the inputs used to create it. This is measured by:

Output (over a given period of time)/Number of employees

If a worker makes more products in the same amount of time, his productivity increases. Firms aim to be productively efficient to be able to make more profits and compete against their competitors.

Methods of production
Job production

• Goods are made individually, by one person.
  
• Goods are usually specialized, no two goods are the same.
  
• Usually made to order.
  

Pros

• The product meets exact requirements of the customer.
• The workers have more varied jobs.
• More job satisfaction for workers.

Cons

• Skilled labour is needed.
  
• Slower and more expensive than other methods of production.
  
• Usually labour intensive.
  

Batch production

• Products are made in batches according to order.
  

Pros

• It is flexible. You can easily change from making one product to another.
• Still gives some variety to workers jobs.
• Production is not too affected by machinery breakdown.

Cons

• Expensive to move products around the workplace.
• Storage space will be needed to store raw materials. Expensive.

Flow production

• Large quantities of a product are produced in a continuous process.
  
• Uses specialization.
  
• Benefits from economies of scale.
  
• Is capital intensive.
  

Pros

• Low costs. Low prices. High sales.
• Increased efficiency.
• Little training is needed.
• Goods are produced quickly and cheaply.
• Goods do not need to be moved around like batch production. Saves time.
• Quality is high and standardized (courtesy to Muhammad Hassaan Ayyub)

Cons

• Boring for the workers. Little job satisfaction.
• Needs a lot of capital to set up.
• If one machine breaks down then the whole production process stops.

Which type of production should be used?
The type of production that should be used varies with how the product is demanded:

• Job production: Unique and individual service is required.
• Batch production: Demand is higher but products will not be sold in large quantities. Batches are made to orders.
• Flow production: Demand for the product is high and steady.

Stock control
Stock control is important so that a business will not
run
out of stock and be unable to satisfy demands. When stock levels get to a certain point, more goods need to be reordered for the stock level to reach its maximumagain. If more goods are not reordered, stocks could run out because of anunexpected
surge in demand. However, keeping a lot of stock costs money, so the level of stock in a company should always be balanced. The following graph demonstrates how stock can be controlled:

 
Lead production

• Focuses on cutting down waste, increasing efficiency.
• It tries to reduce the time taken to produce a product and transport it the selling point.
• Includes the following methods:
  • Kaizen.
  • JIT production.
  • Cell production.
  • Kanban.

Kaizen

• Continuous improvement through the elimination of waste.
  
  • Ideas of workers.
    
  • Regular meetings of workers to discuss how to increase efficiency.
    
• The advantages of Kaizen:
  
  • Increased productivity.
    
  • Reduced amount of space needed for the production process.
    
  • Work-in-progress is reduced.
    
  • Improved layout of the factory floor may combine jobs of some employees, freeing others to do other things.
    

Just in time production

• Eliminating the need to hold stocks.
• Goods are delivered to the selling point just when they are needed.
• JIT production needs:
  • Reliable suppliers.
  • Efficient system of ordering raw materials.

Cell production

• Production line is divided into cells.
• Each cell makes an identifiable part of the finished product.
• Boosts morale.

Kanban

• A system of ordering used with JIT production.
  
• Operates with two component bins.
  
• When one is emptied, production begins to fill it.
  
• The other one is then left to be emptied.
  
• The first one is filled up when the second one is emptied.

Improvements in technology
Here are some things that technology does in the production process:

• Automation: Equipment in the production process is controlled by a computer. 
• Mechanisation: Tasks are done by machines operated by people.
• CAD (computer aided design): Used for designing 3-D objects.
• CAM (computer aided manufacture): Computers control machines in the production process.
• CIM (computer integrated manufacture): CAD and CAM are used together. The computer that uses CAD is directly linked with the one that controls the production process.

Here are some things that technology does in shops:

• EPOS (electronic point of sale): When products' bar codes are scanned and the information is printed out on a receipt. Data is also sent to a computer to keep track of stocks.
• EFTPOS (electronic fund transfer at point of sale): When the cash register is connected to the retailer's main computer and banks. The customer's credit/debit card is swiped and the money is debited from the customer's bank account. A receipt is printed out to confirm the transaction.

The advantages of new technology 

• Increased productivity.
• Boring jobs done by machines. Boosts motivation.
• Training is needed to operate new machines. Workers become moreskilled.
• Better quality.
• Better stock control.
• Quicker communication and reduced paperwork.
• Info is available faster, resulting in faster decision making (for managers).

The disadvantages of new technology

• Unemployment
• Expensive
  • To invest in new technology.
    
  • To replace outdated technology.
    
• Employees are unhappy with changes in the workplace.
  

Quality control 
There are three ways to control quality:
Quality control

• Involves checking and removing faulty products at the end of the production process.
  
• Wastes a lot of money.
  

Quality assurance

• Involves inspecting during and at the end of production.
  
• Aim to
  
  • Stop faults from happening.
    
  • Set a quality standard that all products have to achieve.
    
• Need teamworking and responsibility.
  

Total quality management

• Encourages everyone to concentrate on quality.
  
• Quality is the main aim for all staff.
  
• Products need to satisfy all customer needs.