Production of goods and services
Production
- Production is the provision of a product of to satisfy consumer wants and needs.
- Adds value to raw materials and components
- A competitive business should combine factors of production efficiently in the right proportions
Operations department
- The role of the operations department in a business is to take inputs and change them into outputs for customer use.
- The operations manager is responsible for making sure raw materials are provided and made into finished goods.
- A factory manager
- A purchasing manager
- A research & development manager
Productivity is the output measured against the inputs used to create it.
Productivity = Output / Quantity of input
Labor productivity = Output / Number of employees
How to improve efficiency and productivity:
- Improve the quality of product and inventory control to reduce waste
- Replace employees with machines
- Improve training to increase employee efficiency
- Introduce new technology
Benefits of efficiency and productivity:
- Reduced inputs needed for the same level of output
- Lower costs per unit
- Fewer workers may be needed, may lead to lower wage bills
- Higher wages might now be paid to workers, which increases motivations
Inventory
The buffer inventory level is the inventory held to deal with uncertainty in customer demand deliveries of supplies.
Lean Production
Lean production is a term for those techniques used by businesses to cut down on waste and therefore increase efficiency.
Wastes that can occur:
- Overproduction
- Waiting
- Transportation
- Unnecessary inventory
- Motion
- Over-processing
- Defects
Benefits of lean production
Costs are saved, THROUGH:
- Less storage of raw materials and components
- Quicker production
- No need to repair defects
- Better use of equipment
- Cutting out some processes
- Less money tied up in inventories
- Improved health and safety of workers
Kaizen
Kaizen is a Japanese term meaning continuous improvement through the elimination of waste.
Advantages of Kaizen:
- Increased productivity
- Reduced amount of space needed for production
- Work-in-progress is reduced
- Improved layout of the factory floor may allow some jobs to be combined.
Just in time inventory control
Just in time is a production method that involves reducing or virtually eliminating the need to hold inventories of ray materials or unsold inventories of the finished product.
- This reduces the costs of holding inventory
- The finished product is sold more quickly, so cash inflow is faster
Cell production
Cell production is where the production line is divided into separate, self-contained units, each making an identifiable part of the finished product.
- Better morale for workers
Methods of Production
| Method | + | – |
| Job production is where a single product is made at a time. | Skilled labor is often needed Costs are higher as labor-intensive Any errors can be expensive to correct Materials have to be especially purchased in small quantities | Skilled labor is often needed Costs are higher as labor intensive Any errors can be expensive to correct Materials have to be especially purchased in small quantities |
| Batch production is where a quantity of one product is made, then a quantity of another item will be produced. | Flexible way of working Production can be easily changed Allows more variety of products to be produced Not greatly affected by machinery breakdown | Can be expensive as semi-finished products will need to be moved around High storage costs Machines have to be reset between batches. |
| Flow production is where large quantities of a product are produced in a continuous process. (Also called mass production) | High output of standardized product Low average costs Automation possible No need to move goods around | Boring system for workers High storage requirements High set up costs due to lot of machinery If one machine stops working, the production will be halted. |
Factors affecting which method of production to use:
- Nature of the product
- Size of the market
- Nature of demand
- The size of the business
How technology has changed production
- Automation
- Mechanisation– production done by machines but operated by workers
- CAD (computer-aided design)- allows items to be designed online and be tested rather than drawing
- CAM (computer-aided manufacture)- computers monitoring the production process
CIM (computer integrated manufacturing)– total integration of CAD and CAM
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