4. Any production method relies on efficiency – this can be
viewed in different ways:
Productivity – a measurement of output per unit of the
factor used (labour, capital or land)
Total Output
Productivity = -------------------
Units of Factor
Technical Efficiency – output produced using the
fewest possible inputs
Productive Efficiency – output produced at the lowest
possible cost
5. Production decisions involve deciding methods
for new production runs and analysis of existing
methods.
Decisions may include:
◦ Substitute machinery for labour?
◦ Use of new technology?
◦ Organisation of the production layout?
◦ Change of production method?
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Whilst all output can be
classed as production,
different production
methods may be more
appropriate for different
products or services.
Agriculture tends
to be very land
intensive –
efficiency could
be measured in
terms of output
per acre/hectare
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As technology and
analysis of production
methodology has
improved, methods
have changed
dramatically – what
used to be labour
intensive production
methods are now
capital intensive
8. California Oil is Source of Wealth and Fear
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Textile factory
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Bottle production line
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The choice of
production method
and the factor
inputs depends on
such things as:
• the nature of the
product
• factor costs
• the scale of
production
9. Which method? Type of Product
One-Off Order?
Mass Market product?
Batch?
Market size and
Segment
Factor Costs –
Land, Labour and
Capital
Complexity of design
10. Job Production – One-off production -
each item might have particular specifications
Flow Production – suitable for mass
market products that are identical
Batch Production – each stage of the
production process has an operation
completed on it before moving on to the next
stage – allows modifications to be made to
products that otherwise are the same
11. Which is more efficient?
Operation 1 2 3 4 5
6
7
891011
Finished
Product
This?
12. Operation 1
1a 1b 1c 1d
2a 2b 2c
3a 3b 3c 3d
4 Finished
product
Or this?
14. Answer – it could be any of them!
The design of the production space can influence:
◦ Output levels
◦ Factor use
◦ Efficiency
◦ Cost levels
◦ Quality assurance procedures
15.
16. Japanese concept – not made redundant by the
decline of the Japanese economy which may be
due to other institutional factors!
Focus on gradual and continuous improvement
A whole business philosophy
Importance of EVERYONE buying into the
concept and the vision
17. Great attention paid to
customer requirements and
needs
•Efficient stock
control methods help
reduce costs and
improve cash-flow
•Flexible working
practices and
empowerment – help
increase efficiency,
reduce costs and
improve motivation
•Leadership seen as vital.
Ability to communicate a
clear vision, take people
along with the vision and
to think about where the
company needs to be in
5, 10, 15 and 20 years
time
•Fundamental principles –
often characterised as ‘lean
production’ – reducing waste,
zero defects, high quality
control measures at all stages•Punctuality in all aspects – delivery,
supply, manufacture, etc.
18. Six Sigma Methodology
◦ Coined by Motorola Engineer Bill Smith
◦ Now a major influence on production methods and
quality assurance
◦ Data and statistical driven approach to eliminate
defects in production
◦ Aims to improve processes and reduce variations
in quality
◦ Necessitates organisational change, training and
planning
