3.4 4.1 PRODUCTION 4.2

GREATER PRODUCTIVITY results in. . . 

• INCREASED OUTPUT relative to the inputs required.

• LOWER AVERAGE COSTS as the labour cost per unit will fall. For example, if you pay a worker $10 per hour and they produce 5 units per hour we can say that the average labour cost is $2, if they become more productive and are able to produce 10 units per hour, the average labour cost per unit will fall to $1.

• FEWER WORKERS NEEDED, may mean total labour costs will fall leading to HIGHER REVENUE & PROFIT. 

• HIGHER REVENUE & PROFIT may mean HIGHER WAGES which leads to greater motivation and even more productivity.

• TO AVOID LOSING SALES & CUSTOMERS: Cleary if there is not enough stock available to satisfy customer demand then not only will the firm LOSE REVENUE, but it could end up LOSING THE CUSTOMER to a RIVAL product. Therefore, it is vitally important that a firm carefully controls its stock. 

• DEMAND from customers. More demand = More stock.

• PERISHABILITY of the items. More perishable = More frequent stock.

• AVAILABILITY of STORAGE SPACE.  

• COST of STORAGE.

• COST of DELIVERY. 

• TIME of YEAR: Seasons/celebrations/festivals    

• AMOUNT OF MONEY AVAILABLE (to buy inventory) 

• LEAD TIME, the longer the time, the larger the inventory needed.

• RELIABILITY OF SUPPLIER. The less reliable the more chance less stock

• METHOD  of PRODUCTION (mass may require high inventory)

• STOCK CONTROL SYSTEM – SEE BELOW

ISN'T IT RISKY? Yes especially in manufacturing. At the start of the COVID-19 pandemic and its ripple effect on the economy and supply chain, things like paper surgical masks, toilet paper, and hand sanitizer experienced disruption. This was because inputs from overseas factories and warehouses could not be delivered in time to meet the surge in demand caused by the pandemic.

• LEAN PRODUCTION covers a variety of techniques used by businesses to CUT DOWN ON WASTE and therefore increase efficiency. It tries to REDUCE THE TIME TAKEN FROM DEVELOPMENT TO CUSTOMER by reducing the following 7 forms of wastage, which can best be remembered through the acronym TIM WOOD.

TRANSPORTATION - Refers to the process of moving goods between several different operations. 

HOW DOES IT CREATE WASTE?

• The time of movement costs money.

• There is a possibility of goods misplacement.

• If the product is being moved, no value is added to it.

• The cost of moving the product includes bins, automation, and carts.

• During the movement, product could be damaged.

• Unnecessary loss of energy in moving the product.

INVENTORY — if there is TOO MUCH INVENTORY then this takes up space, may get in the way of production, and costs money. 

HOW DOES IT CREATE WASTE?

• Inventory unnecessarily takes up limited space.

• Money is spent to store any inventory including shelves, carts etc...

• Money spent on the inventory could be used elsewhere.

• ...

MOTION any actions, including bending or stretching movements of the body of the employee wastes time. This also applies to the movement of machines which may not be necessary. HOW TO MAKE SURE PEOPLE & MACHINES, MOVE AROUND AS LITTLE AS POSSIBLE?

HOW DOES IT CREATE WASTE?

• It delays communication.

• It could cause damage/injury as a result of excessive movements.

• It results in too much processing period due to reaching, walking and lifting.

WAITING - when goods are not moving or being processed in any way then waste is occurring. HOW TO MAKE SURE PRODUCTS ARE SOLD IMMEDIATELY AND DIRECTLY TO THE CUSTOMER AFTER BEING MADE?

HOW DOES IT CREATE WASTE?

• This is the dead time amid value-added phases. Waiting adds significantly to the total processing period of the service/product.

• Waiting time cannot be recovered.

• During waiting, money invested in production sits idle.

• Waiting builds up inventory.

• Waiting slackens the delivery of the product to the client and thus getting paid.

OVERPRODUCTION — refers to when a firm produces goods before they have been ordered by customers. 

• WHY IS THIS A WASTE? The extra produce results in STORAGE COSTS and increases the possibility of damage to the goods whilst in storage.(especially so in the case of perishables with short shelf-lives), which will incur REPAIR/REPLACEMENT COSTS.

• This extra production not only costs money to be stored but also INCURRED FACTOR COSTS as raw materials, wages etc... so if it is not sold then more money is wasted.

• HOW TO PRODUCE THE PRECISE QUANTITY THE CUSTOMER WANTS?

• OVER PROCESSING - if complex machinery is being used to perform simple tasks then this is wasteful. HOW TO MAKE SURE WE USE THE TOOLS THAT MATCH THE COMPLEXITY OF THE TASK?

• HOW DOES IT CREATE WASTE?

• The more complex the product, the more likelihood for defects and mistakes.

• The organization invests unnecessary resources into the acquisition of equipment.

• Repairs and maintenance of the equipment and machinery has more downtime and is more costly than smaller equipment.

• It is more challenging to execute a balanced flow of production because the equipment cannot be moved or because the included features further complicates the flow of production.

• The company invests unnecessary resources into the feature of the added product.

• There is unnecessary training & workers qualification for the equipment and added features.

DEFECTS — any faults require the goods being fixed and time can be wasted inspecting the products. HOW CAN WE CUT DOWN ON THE DEFECTS THAT OCCUR?

HOW DOES IT CREATE WASTE?

• Costs are related with re-inspection, MRB and segregating.

• It decreases workers morale due to constant rework & rebuilding.

• The product rework causes excessive delays, time and costs.

• Client’s disappointment in the corrective actions, rescheduling and the producer’s loss of manufacture capacity.

• Scraping the product results in excessive delay, cost and time.

• Lean production is established on a just-in-time production model so as to prevent the waste as a result of excess inventory, waiting and over-production.

LEAN PRODUCTION can result in MULTIPLE COST SAVINGS:

• LESS STORAGE needed for raw materials etc...

• QUICKER PRODUCTION of goods due to less motion.

• NO NEED TO REPAIR DEFECTS or provide a replacement service for a dissatisfied customer

• better use of equipment

• cutting out some processes which speeds up producrian

• less money tied up in inventories

• improved health and safety leading to less time off work due to injury.

• Reduced costs can lead to lower prices for customers, businesses being more

• competitive and possibly also increased profits.

• Lean production might include using the following methods:

• Kaizen

• Just-in-time inventory control

• Cell production.

BMT Explain two ways BMT could achieve lean production. (6)

GKK Explain one lean production technique. Recommend whether GKK should introduce this technique. Justify your answer. (6)

DEPENDS ON...

1) THE NATURE OF THE PRODUCT

"Is its value in its UNIQUENESS or can they all look the same?"  

UNIQUE (JOB)-------------STANDARDISED EN MASS (FLOW)

WEDDING CAKE-------------------------------------------------------------------PAPER CLIPS

2) THE SIZE OF THE MARKET

"Are there enough customers to make mass production worth it?"  

SMALL (JOB)-------------MEDIUM (BATCH)-------------LARGE (FLOW)

MAN CITY MERCH-------------MAN UTD MERCH-------------LIVERPOOL MERCH

3) THE FREQUENCY OF PURCHASE

"Is it bought often enough to make mass production worth it?"  

RARE (JOB)-------------OCCASIONAL (BATCH)-------------REGULARLY (FLOW)

SCULPTURES-----------------------LIMITED EDN.--------------------------NAPPIES

4) THE CAPITAL AVAILABLE

"Do we have enough money to implement mass production?"  

SMALL(JOB)-------------MEDIUM (BATCH)-------------LARGE (FLOW)

MR. SOFTY------------------------OFS--------------------------------APPLE

• What is meant by ‘BATCH production’? (2)

• TWH Identify and explain two possible advantages to TWH of using BATCH production. (4)

• VXH Identify and explain two possible reasons why VXH uses BATCH production. (6)

• IBH Identify and explain two advantages to IBH of using BATCH production (6)

• Define ‘FLOW production’. (2)

• RAFIQ Do you think this business should change to FLOW production? Justify your answer. (6)

• LIST 3 EXAMPLES OF TECHNOLOGY/EQUIPMENT THAT HAS BEEN INSTALLED AT OFS IN THE LAST 5 YEARS.

• WHAT ARE THE PROS AND CONS OF THESE CHANGES?

• HOW HAVE THESE CHANGES IMPACTED EMPLOYMENT, PROFITS, AND THE QUALITY OF THE SERVICE?