chapter4

5. Activity 17.1
a) See table below: output per worker increased to start with but then remained steady.
b) Increase the productivity of Better Bakers by introducing new technology; improve worker motivation; train
staff.
c) Benson cannot measure the output of his office workers if it is not a physical output or measurable in some
way.

7.  .
Benefits of
increasing
efficiency
/productivity.
Increased output relative to the inputs
required.
Lower average cost.
Fewer workers may be needed,
possibly leading to lower labour costs.
Higher wages for workers
increases motivation

8. Inventory control
Inventory refers to the
amount of stock/goods or
materials that are kept by a
business for future
production, sale or use in
the business.
Types of
inventory
Finished goods
Raw materials
Supplies/spare
parts/consumables
Work in progress

9. Lead time- is the time
between placing an order with
the supplier, and the inventory
becoming available for use.
Re-order level. This is the inventory
level at which an order should be
placed to replenish inventories. The re-
order level is determined by considering
the maximum rate of consumption
and the maximum lead time.
Maximum level of stock-the
highest inventory level available for
use. This level is also a warning to
you that inventories are reaching a
potentially wasteful level.

10. Why
should
you hold
inventory?
To ensure sufficient goods are
available to meet expected
demand
As a deliberate investment
policy, especially in times of
inflation or possible shortages
As a necessary part of the process
for example when maturing cheese
To allow production processes to
flow smoothly and efficiently.
To absorb seasonal fluctuations and
any variations in usage and demand
To take advantage of bulk
purchasing discount
To meet any future
shortages

11. Holding costs- these are the
expenses your business incurs as it
holds inventory in a certain period of
time. If your business holds too
much inventories, holding costs will
unnecessary be incurred and such
costs include;
-Costs of storage and stores
operation
-Interest charges
-Insurance costs
-Risk of obsolescence
-Deterioration
Ordering or procurement costs-
these are expenses incurred to
obtain inventory. If your business
keeps low inventories, small
quantities of inventory will have to
be ordered more frequently, thereby
increasing the ordering costs such
as;
-Clerical and administrative.
-Transport costs.
-Production run costs, for inventory
which is manufactured internally
rather than purchased from external
sources.
Stock out costs- these are
expenses which may arise if your
business keeps too little inventory
and your business runs out of stock.
They arise from;
-Loss of contribution from lost sales.
-Loss of future sales due to
disgruntled customers.
-Loss of customer good will.
-Cost of production stoppages.
-Labor frustration over stoppages.
-Extra costs of urgent, small
quantity, replenishment orders

12. Methods
of lean
production
Kaizen: it’s a Japanese term meaning ‘continuous
improvement’. It aims to increase efficiency and reduce
wastage by getting workers to get together in small
groups and discuss problems and suggest solutions.
Just-in-Time inventory
control: This technique
eliminates the need to hold
any kind of inventory by
ensuring that supplies arrive
just in time they are needed
for production.
Cell production
Production line is divided
into cells. Each cell makes
an identifiable part of the
finished product.

13. The seven types of wastage that can occur in a firm:
 Overproduction– producing goods before they have been ordered by customers. This results in
too much output and so high inventory costs
 Waiting– when goods are not moving or being processed in any way, then waste is occurring,
 Transportation-moving goods around unnecessarily causes waste. They also risk damage during
movement
 Unnecessary inventory -too much inventory takes up valuable space and incurs cost
 Motion-unnecessary movement about by employees and operation of machinery is a waste of time
and cost respectively.
 Over-processing-using complex machinery and equipment to perform simple tasks may be
unnecessary and is a waste of time, effort and money
 Defects– any fault in equipment can halt production and waste valuable time. Goods can also turn
out to be faulty and need to be fixed- taking up more money and time.

14. The seven
types of
wastage that
can occur in a
firm:
Overproductio
n–
Waiting
Defects
Over-processing
Transportation
Unnecessary
inventory
Motion
Benefits of
lean
production.
Less storage of
raw materials,
components and
finished goods.
Less money and
time tied up in
inventory
Quicker
production of
goods and
services
No need to repair
faulty goods- leads
to good customer
satisfaction
Ultimately, costs will
lower, which helps
reduce prices, making
the business more
competitive and earn
higher profits as well

15. Benefits of
lean
production.
Less storage of
raw materials,
components and
finished goods.
Less money and
time tied up in
inventory
Quicker
production of
goods and
services
No need to repair
faulty goods- leads
to good customer
satisfaction
Ultimately, costs will
lower, which helps
reduce prices, making
the business more
competitive and earn
higher profits as well

16. Activity 17.2
Student’s own answer but answers should give examples for each of the following: overproduction, waiting,
transportation, unnecessary inventory, motion, over-processing, defects.
Activity 17.3
Changes identified should include: reduced space needed for production; work-in-progress is reduced; less
inventory of raw materials; finished product not stored; more of a flow through the factory; some machines are
grouped together.

18. Method of lean production Advantages
Kaizen production: it’s a Japanese term meaning
‘continuous improvement’. It aims to increase
efficiency and reduce wastage by getting workers to
get together in small groups and discuss problems
and suggest solutions.
 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 inventory control: This technique
eliminates the need to hold any kind of inventory by
ensuring that supplies arrive just in time they are
needed for production.
• Eliminating the need to hold stocks.
• Goods are delivered to the selling point just when
they are needed
Cell production: Production line is divided into cells.
Each cell makes an identifiable part of the finished
product.
• Improves worker morale

19. Method of production Advantages Disadvantages
Job Production: products
are made specifically to
order, customized for each
customer. Eg: wedding
cakes, made-to-measure
suits, films etc.
 Most suitable for one-off products
and personal services
 The product meets the exact
requirement of the customer
 Workers will have more varied jobs
as each order is different,
improving morale
 Very flexible method of
production
• Skilled labour will often be
required which is expensive.
• Costs are higher for job
production firms because they
are usually labour-intensive.
• Production often takes a long
time.
• Since they are made to order,
any errors may be expensive to
fix.
• Materials may have to be
specially purchased for different
orders, which is expensive

20. Method of production Advantages Disadvantages
Batch Production: similar
products are made in batches or
blocks. A small quantity of one
product is made, then a small
quantity of another. Eg:
cookies, building houses of the
same design etc.
• Flexible way of working-
production can be easily
switched between products
• Gives some variety to
workers
• More variety means more
consumer choice
• Even if one product’s
machinary breaks down,
other products can still be
made
• Can be expensive since
finished and semi-finished
goods will need moving
about.
• Machines have to be reset
between production batches
which delays production
• Lots of raw materials will be
needed for different product
batches, which can be
expensive.

21. Method of production Advantages Disadvantages
Flow Production: large
quantities of products are
produced in a continuous
process on the production
line. Eg: a soft drinks
factory.
• There is a high output of standardized
(identical) products
• Costs are low in the long run and so prices
can be kept low
• Can benefit form economies of scale in
purchasing
• Automated production lines can run 24×7
• Goods are produced quickly and cheaply
• Capital-intensive production, so reduced
labour costs and increases efficiency
A very boring system for the workers,
leads to low job satisfaction and
motivation
Lots of raw materials and finished
goods need to be held in inventory-
this is expensive
Capital cost of setting up the flow line
is very high
If one machinery breaks down, entire
production will be affected

23. Activity 17.4
a) Job production then batch production when she first rents a factory. Finally she uses flow production when
moving to the larger factory.
b) Increased demand means more output needs to be produced. Also Tara wanted increased efficiency and lower
costs per unit.
Activity 17.5
a) Walls: flow production, as the ice-cream is mass produced and each type of ice-cream is the same.
Alexander: job production, as each customer wants individual attention. Each hairstyle is different to meet each
customer’s needs.
b) Batch production is the most suitable method, given that the components are standardised for use in several
engines. The production of engines will not be large enough to make flow production viable.

24. Factors that
affect which
production
method to
use:
The size of the business:
Small firms with little
capital access will not
produce using large
automated production
lines, but will use batch
and job production.
The nature of demand: If there is a
fair and steady demand for the
product, it would be more suitable to
run a production line for the product.
For less frequent demand, batch and
job will be appropriate.
The nature of the product: Whether it is
a personal, customized-to-order product,
in which case job production will be used.
If it is a standard product, then flow
production will be used
The size of the market:
For a large market, flow
production will be required.
Small local and niche
markets may make use of
batch and flow production.
Goods that are highly
demanded but not in very
large quantities, batch
production is most suitable.

25. Factors that
affect which
production
method to
use:
The size of
the
business:
The nature of
demand
The nature of the
product
The size of
the market:.

27. Automation: equipment used
in the factory is controlled by
computers to carry out
mechanical processes, such as
spray painting a car body.
Mechanization: production is
done by machines but is
operated by people
CAD (computer aided designing): a
computer software that draws items
being designed more quickly and
allows them to be rotated, zoomed in
and viewed from all angles.
CAM (computer aided
manufacturing): computers
monitor the production process
and controls machines and
robots-similar to automation
CIM (computer integrated
manufacturing): the integration of CAD
and CAM. The computers that design
the product using CAD is connected to
the CAM software to directly produce
the physical design.
EPOS (electronic point-of-sale): used
at checkouts/tills where operator scans
the bar-code of each item bought by
the customer individually.
EFTPOS (electronic funds
transfer at point-of-sale): the
electronic cash register at the till
will be connected to the retailer’s
main computer and different
banks.

28. How Technology has changed Production methods
CAM (computer aided
manufacturing): computers
monitor the production process
and controls machines and
robots-similar to automation

29. Advantages of technology in
production
Disadvantages of technology in
production
 Greater productivity
 Greater job satisfaction among workers
as boring, routine jobs are done by
machines
 Better quality products
 Quicker communication and less
paperwork
 More accurate demand levels are
forecast since computer monitor
inventory levels
 New products can be introduced as
new production methods are
introduced
 Unemployment rises as machines and
computers replace human labour
 Expensive to set up
 New technology quickly becomes
outdated and frequent updating of
systems will be needed- this is expensive
and time-consuming.
 Employees may take time to adjust to new
technology or even resist it as their work
practices change.