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Unit 3.4


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Unit 3.4

  1. 1. Unit 3.4 SG Business Management
  2. 2. Ingredients needed to start a new business <ul><li>The Factors of Production: </li></ul><ul><li>Land </li></ul><ul><li>Labour </li></ul><ul><li>Capital </li></ul><ul><li>Enterprise </li></ul>
  3. 3. Land <ul><li>Natural resources </li></ul><ul><li>Quantity of land is limited by nature </li></ul><ul><li>Quality of land can be improved </li></ul>
  4. 4. Labour <ul><li>The efforts of the workers, managers, support staff </li></ul><ul><li>Amount of labour can be improved by changing hours worked and employing more staff </li></ul><ul><li>Quality of labour can be improved by training staff, introducing new work practices, providing employees with better machinery </li></ul>
  5. 5. Capital <ul><li>Buildings, machinery, equipment and tools. And money! </li></ul><ul><li>Amount of capital can be improved by getting loans, buying new equipment </li></ul>
  6. 6. Enterprise <ul><li>Person who brings together the factors of production </li></ul><ul><li>This can be improved by encouraging people to take risks, government can set policies to make it easier to receive start-up loans, grants, advice, training </li></ul>
  7. 7. I P O INPUTS PROCESS OUTPUT Operations/Purchasing is concerned with the way organisations transform inputs into finished articles (outputs)
  8. 8. Purchasing Decisions <ul><li>Price – best possible price from suppliers </li></ul><ul><li>Quality – GIGO, has to be good enough quality but not too expensive; not too cheap as to be rubbish! </li></ul><ul><li>Continuity of Supply – need a reliable supplier who delivers ON TIME </li></ul>
  9. 9. Methods of Production <ul><li>There are 3 main methods of production: </li></ul><ul><ul><li>Job </li></ul></ul><ul><ul><li>Batch </li></ul></ul><ul><ul><li>Flow </li></ul></ul><ul><li>Depending upon the nature of the product will determine what method of production is adopted. </li></ul>
  10. 10. Job Production <ul><li>Job production concentrates on producing one product from start to finish. </li></ul><ul><li>Once production is complete another product can then be produced. </li></ul><ul><li>This method of production is extremely labour intensive and is often used to produce a ‘ one off ’ product eg: </li></ul><ul><ul><li>wedding dress </li></ul></ul><ul><ul><li>painting </li></ul></ul><ul><ul><li>house extension </li></ul></ul><ul><ul><li>customised car </li></ul></ul>
  11. 11. Advantages & Disadvantages of Job Production <ul><li>Customers are able to order exactly what they want – can customise it to their personal taste and preference. </li></ul><ul><li>Quality of work is high – specialist workers with expertise. </li></ul><ul><li>Workers are well motivated – unique job requires concentration and must ensure customer’s expectations are met. </li></ul><ul><li>Very expensive as materials and equipment need to be purchased in order to complete each product requested. </li></ul><ul><li>Workers tend to be skilled workers. </li></ul><ul><li>The activities involved tends to be very labour intensive which don’t allow for opportunities for automation. </li></ul>Advantages Disadvantages
  12. 12. Batch Production <ul><li>Batch production is a process which enables items to be created in bulk – similar items are produced in a set. </li></ul><ul><li>General purpose equipment and methods are used to produce small quantities of items that will be made and sold for a limited time only. </li></ul><ul><li>Usually a similar design and process will be used to make a new product. </li></ul><ul><li>This method of production is commonly used in food and packaging eg. White rolls, brown rolls; Big Mac from McDonalds; Cadbury’s Dairy Milk bar. </li></ul>
  13. 13. Advantages & Disadvantages of Batch Production <ul><li>Allows workers to specialise and use specialist equipment. </li></ul><ul><li>Different batches of different products can be made. </li></ul><ul><li>More cost effective than job production. </li></ul><ul><li>Specialisation means workers are doing repetitive jobs – this can result in tiredness and boredom. </li></ul><ul><li>Machinery has to be reset and cleaned between batches – this can be very time consuming thus slow down production. </li></ul><ul><li>More goods have to be stored once they are made which can be very costly. </li></ul>Advantages Disadvantages
  14. 14. Flow Production <ul><li>Flow production (also known as continuous production) enables products to be created in a series of steps. </li></ul><ul><li>Large amounts of goods are produced. </li></ul><ul><li>This method of production is extremely capital intensive as opposed to being labour intensive i.e there is a high level of equipment used. </li></ul><ul><li>As a result, a great deal of investment is required to ensure that the equipment can cope with the high level output of products made. </li></ul><ul><li>Cars are a good example of flow production as there is a huge market for the product and they can be produced on a large scale. </li></ul>
  15. 15. Advantages & Disadvantages of Flow Production <ul><li>Large numbers of the product can be produced at a low cost. </li></ul><ul><li>The product being produced can be complex as so many machines and workers can be involved. </li></ul><ul><li>The tasks given to workers can be quickly mastered as they are concentrating on one specific area of the production process. </li></ul><ul><li>Very costly as large amounts of equipment are required. </li></ul><ul><li>Tasks on the assembly lines are very monotonous thus resulting in tiredness and boredom. </li></ul><ul><li>A breakdown of any part of the assembly line can lead to a complete shutdown thus stopping production completely. </li></ul>Advantages Disadvantages
  16. 16. People vs Machines
  17. 17. <ul><li>Machines have changed our lives in terms of communication and production. </li></ul><ul><li>Capital Intensive – work done mainly by machines (eg car assembly) </li></ul><ul><li>Labour intensive – work done mainly by humans (eg teaching, hairdressing) </li></ul><ul><li>Automation – where machines produce products rather than people </li></ul>
  18. 18. Linwood The Hillman Imp was made at Linwood Automation was brought in to cut spiralling costs. In 1981 the plant closed. Peugeot- Citroen could make cars cheaper elsewhere using more advanced production facilities. 13,000 people lost their job. Linwood had one of the highest unemployment rates in the UK. For a time Linwood was a wilderness.
  19. 19. +/- of using Machines in Production <ul><li>ADVANTAGES </li></ul><ul><li>Robots can do dangerous, boring work </li></ul><ul><li>Low labour costs </li></ul><ul><li>Greater accuracy and consistency </li></ul><ul><li>24/7 </li></ul><ul><li>Increased production </li></ul><ul><li>DISADVANTAGES </li></ul><ul><li>Loss of personal contact </li></ul><ul><li>A machine cannot answer queries </li></ul><ul><li>Breakdowns </li></ul><ul><li>Machines can’t think for themselves…yet! </li></ul>
  20. 20. Use of Technology in Production <ul><li>There have been significant changes in production techniques due to the advancement of technology. New technologies used in production include: </li></ul><ul><ul><li>CAD : Computer Aided Design ; computers used to help design a product. </li></ul></ul><ul><ul><li>CAM : Computer Aided Manufacture ; computers used to control machines. </li></ul></ul><ul><ul><li>CIM : Computer Integrated Manufacturing ; computers used to control extensive parts of the production process. </li></ul></ul><ul><ul><li>Robots: Machines which can be programmed and re-programmed to perform physical tasks. </li></ul></ul><ul><li>Automation has resulted in a large proportion of the production process being controlled by machines. The demand for multi-skilled and skilled workers is now greater resulting in the decrease in the need for unskilled workers. </li></ul>
  21. 21. Computer Aided Design (C.A.D) <ul><li>C.A.D is the use of computers in creating and editing design drawings. </li></ul><ul><li>The products are designed on a computer allowing the designer to change the design; make improvements; change details; or, change the specification completely. </li></ul><ul><li>C.A.D is used in many different areas: </li></ul><ul><ul><li>Architecture : Computer graphics can be used to create ‘visionary architecture’ to assess plans and designs. Enables the client to view their ‘virtual’ property. </li></ul></ul><ul><ul><li>Animation: Recent films produced using computer animation include: Toy Story; Ants and A Bug’s Life. </li></ul></ul><ul><ul><li>Artificial Intelligence : The computer simulation gives the impression of being in a real 3D environment. This is used regularly by defense organisations to train soldiers. </li></ul></ul>
  22. 22. Computer Aided Manufacturing (C.A.M) <ul><li>C.A.M means that robots now perform the tasks once conducted by humans. </li></ul><ul><li>Computers now control large parts of the production process to replace human doing mundane repetitive tasks. </li></ul><ul><li>Humans are now responsible for supervising the running of the machines – it is their responsibility to program and maintain the computers. </li></ul><ul><li>A result of C.A.M has been an increase in the levels of accuracy and quality in production. </li></ul><ul><li>In order to keep up with the pace of technological change, there is an increase in demand for highly-skilled employees. </li></ul>
  23. 23. Benefits of New Technology <ul><li>Companies are now able to increase their rate of productivity as computers and machines conduct the repetitive tasks required to produce the product. As a result, manufacturing costs are significantly reduced. </li></ul><ul><li>The use of computers and machines ensures a high quality standard as they are able to produce at the same rate continuously. The only way in which Quality may be affected if there has been a fault in the technology or wrong instructions have been inputted by the operator. </li></ul><ul><li>Using new technology enables the company to offer a wider range of products to its customers. </li></ul>
  24. 24. Costs of New Technology <ul><li>Training : staff will need to be trained so that they know how to effectively and productively manage the machines/computers. </li></ul><ul><li>Motivation : it may be difficult to motivate employees to be productive if they feel that they are no longer actively involved in the production process. </li></ul><ul><li>Maintenance : it is important that the equipment is maintained to ensure that no faults occur in the production process. </li></ul><ul><li>Capital : a large amount of capital is required in the set-up of the production process as the machinery/computers are extremely expensive. </li></ul><ul><li>Control : it may be difficult to constantly monitor whether or not the quality standards are being met. </li></ul>
  25. 25. Importance of Quality <ul><li>Quality is ensuring that the end-to-end customer requirements are met to the highest possible standard. </li></ul><ul><li>It is imperative to businesses that their production process meets quality standards throughout so that the end result delivers customer satisfaction. </li></ul><ul><li>Quality focuses on reducing errors, faults and cutting out flaws. </li></ul><ul><li>It is important that all employees are informed of the quality levels and standards expected of the company. Eg. IBM produces weekly quality reports indicating current performance levels. </li></ul>
  26. 26. Quality Control <ul><li>There are 3 stages in attempting to improve on quality: </li></ul><ul><ul><li>Quality Control </li></ul></ul><ul><ul><li>Quality Assurance </li></ul></ul><ul><ul><li>Total Quality Management </li></ul></ul>
  27. 27. Quality Control <ul><li>This process was a traditional method of quality control, whereby inspectors were required to spot check the final products. </li></ul><ul><li>Whenever sub-standard products were found it was the duty of the inspector to remove the items and discard them. This proved to be an extremely costly exercise as it resulted in a high level of wastage. </li></ul><ul><li>At no point in the process were the production workers involved in determining what was the expected level of quality. </li></ul>
  28. 28. Quality Assurance <ul><li>This process of quality control made the production workers aware of the standard which was required by the business. </li></ul><ul><li>Quality checks would be conducted at each stage of production. </li></ul><ul><li>The workers would operate as a team to check and monitor the progress and accuracy of the production process. </li></ul>
  29. 29. Total Quality Management <ul><li>The main principle of TQM is that every employee is motivated to think about their personal contribution to providing quality to customers. </li></ul><ul><li>Every employee has a responsibility to ensure that a quality product leaves the workplace. </li></ul><ul><li>To encourage this level of participation in the quality process, management give more independence to the workforce and constantly seek their opinions and comments on ways in which quality can be improved in the business. </li></ul>
  30. 30. Total Quality Management <ul><li>As no errors are tolerated, tasks must be completed correctly first time! </li></ul><ul><li>In order for TQM to be effective the following factors must be implemented : </li></ul><ul><ul><li>Clearly defined policy on the required levels of quality. </li></ul></ul><ul><ul><li>Every employee must be focused on customer satisfaction. </li></ul></ul><ul><ul><li>Staff must be provided with appropriate training to ensure they know how to meet the set standard. </li></ul></ul><ul><ul><li>People should be appointed to constantly check and monitor that the process is working. </li></ul></ul><ul><ul><li>Teamwork, at all levels, should be encouraged. </li></ul></ul>
  31. 31. TQM - Kaizen <ul><li>The Japanese have perfected the concept of total involvement in the life of the organisation. </li></ul><ul><li>Workers are part of a team; there are team songs and team competitions. </li></ul><ul><li>Everyone is expected to strive towards continual improvement. </li></ul>
  32. 32. Stock <ul><li>Stock is a resource which is held in a specific location awaiting use. </li></ul><ul><li>Holding stock can be expensive to a business as there are a variety of costs associated to it eg. maintaining warehouse; employee wages etc. </li></ul><ul><li>There are 3 basic categories which describe stock: </li></ul><ul><ul><li>Raw Materials : resources required to produce a product. </li></ul></ul><ul><ul><li>Work-In-Progress : goods which are still to be completed (currently in the process of being produced). </li></ul></ul><ul><ul><li>Finished Goods : final product which is waiting to be distributed to the end-user (customer). </li></ul></ul>
  33. 33. Why Is It Important To Control Stock? <ul><li>It is important for businesses to have an effective stock control system to ensure that there is minimal wastage and expense. </li></ul><ul><li>Furthermore, businesses must ensure that the stock held matches the resources required. </li></ul><ul><li>An effective control system would have the following factors: </li></ul><ul><ul><li>Regular stock checks to ensure that records are accurate and up-to-date. If an order were to be placed it is imperative that the business is aware if they can fulfil the demand. </li></ul></ul><ul><ul><li>Security of storage must be of a high standard to prevent stock being damaged or stolen. </li></ul></ul><ul><ul><li>Ensure that costs are minimised whilst also ensuring that the correct level of stock is held. </li></ul></ul>
  34. 34. Levels of Stock <ul><li>A business which holds stock will implement the following stock levels in order to meet customer demand at all times. </li></ul><ul><ul><li>Minimum Level : this is the minimum amount of stock needed in case the required supply were to be delivered late. The business will never allow the stock level to drop below a certain point in order to prevent a resource shortage. </li></ul></ul><ul><ul><li>Maximum Level : this is the maximum amount of stock which can be held in the warehouse at any given time. This level is restricted by factors such as space; cost; and, delivery time. </li></ul></ul><ul><ul><li>Re-Order Level : this is when the stock level drops to a certain point and the process will automatically re-order the required stock. In order to decide at what point to re- order, businesses must consider the following: how long is the delivery time? how reliable is the supplier? </li></ul></ul>
  35. 35. Cost/Benefit Analysis of Holding Stock <ul><li>Supplies are available when you need them. </li></ul><ul><li>Any increase in demand can be met. </li></ul><ul><li>Discounts available for bulk buying. </li></ul><ul><li>Customers’ orders can be met immediately. </li></ul><ul><li>Money could be used more efficiently. </li></ul><ul><li>Financial costs associated with warehousing and insurance. </li></ul><ul><li>Labour costs involved in stock control. </li></ul><ul><li>Value of stock may decrease if fashions change or passes sell by date. </li></ul>Benefits Of Holding Stock Costs Of Holding Stock
  36. 36. Just In Time Production (JIT) <ul><li>JIT production is a Japanese approach to production that involves keeping the stock levels to a minimum. </li></ul><ul><li>Stocks arrive just in time to be used in production. </li></ul><ul><li>As a result, costs are cut by reducing the amount of stocks held by the business. </li></ul><ul><li>Goods are not produced unless the business has an order from the customer. </li></ul><ul><li>JIT strives to eliminate waste by producing the right part in the right place at the right time! </li></ul>
  37. 37. Effective JIT <ul><li>In order to be effective and efficient JIT requires the following factors to be in place: </li></ul><ul><ul><li>Highly skilled and flexible workforce which are able to respond to the challenges of JIT. </li></ul></ul><ul><ul><li>Absolute certainty regarding delivery times to ensure that production runs to schedule (if the delivery was late this would halt production). </li></ul></ul><ul><ul><li>If suppliers provide sub-standard items the whole system fails as there isn’t an alternative resource waiting in stock. </li></ul></ul>
  38. 38. Advantages & Disadvantages of JIT <ul><li>Less space required for stock. </li></ul><ul><li>Able to respond quickly to changes in demand. </li></ul><ul><li>Closer relationship with suppliers. </li></ul><ul><li>Capital can be used for other priorities as opposed to being tied up in stocks. </li></ul><ul><li>Production may be stopped if supplies are delayed. </li></ul><ul><li>Sales may be lost if not meeting customer demands. </li></ul><ul><li>Increased ordering and admin costs. </li></ul><ul><li>Depending on the efficiency of the supplier. </li></ul>Advantages Disadvantages