• Production is the provision of a product or a service to satisfy consumer wants and needs
• This process often involves firms adding value to a product

Productivity

• Productivity is the measure of production
• Productivity is the output measured against the inputs used to create it
• It is also termed as efficiency or quality
• The formula to define productivity is: output/input (e.g. number of employees)
• As employees become more efficient, the output will rise and therefore cost of production falls
• Reasons to increase productivity include:
  Generate profit
  Become more competitive
  Remain trading

Methods of Production

• Job Production
• Batch Production
• Flow Production

Job Production

• A single product is created at a time
• Products are made specifically to order
• Each order is different and may, or may not, be repeated
• Example: bullet-proof cars, specialist machinery

Advantages:

• Product meets the exact requirement of the customer
• Therefore increasing customer satisfaction
• The workers get more varied jobs
• This increases their motivation and gives them job satisfaction

Disadvantages:

• Skilled labor is costly
• Total cost is high

Batch Production

• A quantity of one product is made then a quantity of another item will be produced
• Similar products re-made in small batches
• These are often produced to order
• The products are grouped by specification
• Example: clothing sizes, furniture production

Advantages:

• Flexible
• Variety added to the workers’ jobs
• Production may not be affected to any great extent if machinery breaks down

Disadvantages:

• Transportation cost high
• The equipment used in batch production must be reset between batches to ensure correct production, which may prove to be time consuming
• Warehouse space required

Flow Production (Mass Production)

• Large quantities of a product are produced in a continuous process
• The products are standardized
• Products “flow” down the production line
• Use of robotisation and automation
• No individuality in products
• Example: packaged foods

Advantages:

• Low cost
• Low price
• Individuals become better at the job because they are doing the same thing all the time
• People only have to be trained in one task
• Capital-intensive techniques can be used
• Therefore reducing labor costs and increasing efficiency
• There is no little need for skilled workers therefore little training is required
• Often high sales due to low price
• Goods produced cheaply and quickly
• Less time taken in transportation
• Low total average cost
• Economies of scale
• Standardized products

Disadvantages:

• Employee absenteeism
• High labor turnover
• Very monotonous
• Little job satisfaction for workers
• Capital cost may be high
• If one machine breaks down, the whole production line will have to be halted- no flexibility whatsoever

Factors Determining What Method of Production to Use

• Economic, Political, Social situation
• Environment of the city/market
• Uniqueness/novelty of good
• Quality required
• Quantity required/ Demand

Stock Control

• Stock levels must be monitored to ensure that there is always enough stock to satisfy demand
• Stock of raw material and components must be available for a manufacturing company with sufficient lead time- especially in batch and flow production- as there will be delays in production otherwise
• Lead time is the margin of time between the date when stock is obtained and the date when it is sold on
• Reasons for stock fluctuation:
  Higher sales than usual
  Delivery of stock may be late

• Stock may be in the form of raw material, components, unfinished goods, work-in-progress or finished goods

Advantages of high stock level:

• Reduces average costs (economies of scale)
• Lean production
• Time saved
• Satisfies increased demand

Disadvantages of high stock level:

• Theft
• Depreciation
• Damage
• Financial loss due to idle stocks
• Waste of warehouse space

• Maximum stock level is also known as economic order quantity
• Minimum stock level is also known as buffer stock
• In between these two is the reorder level known as optimum stock
• When stock levels reach the reorder point, they will be reordered to bring stock back up to the max level again
• Reasons to hold sufficient stock:

Lean Production

• Techniques used by businesses to cut down on waste and therefore increase efficiency
• It aims to reduce the time taken for a product to be produced

Kaizen

• Means continuous improvement through the elimination of waste
• The improvement comes through the ideas of the workers themselves
• Small groups meet regularly to come up with solutions since they are the ones who closely know about the problems
• The idea is to eliminate wastes such as time, piles of stock, unnecessary movement etc.
• The factory floor is reorganized by repositioning machines tightly together in cells in order to improve the flow of production through the factory

Advantages:

• Increased productivity
• Reduced amount of spaces needed
• Work-in-progress reduced
• Improved layout of the factory floor may allow some jobs to be combined thus freeing the employees to carry out other jobs
• Time taken to produce is reduced

Just-In-Time

• Production method that involves reducing or eliminating the need to hold stocks of raw materials or unsold stocks of the finished product
• Supplies arrive just as the time they are needed
• Reliable suppliers are required
• Efficient system of ordering raw material/components is required
• Just-In-Time is usually implemented along with the introduction of cell production

Advantages:

• Work-in-progress is reduced
• It reduces the cost of holding stocks by the elimination of warehouse space
• The finished product is quickly sold so the money will come back immediately
• Thus helping the cash flow
• No extra stock is kept

Cell Production

• The production line is divided into separate, self-contained cells
• Each cell makes an identifiable part of the finished product

Advantages:

• Improves the morale of the employees and makes them work higher
• Efficiency of the workers increases, thus total efficiency increases
• The employees feel more valued and are less likely to strike or cause disruption

Kanban

• System of ordering used alongside Just-In-Time production
• It operates by having two component bins, one on the production line and one being made ready
• When the first is empty, it is wheeled with its Kanban order card to the section of the factory that produces those components
• This triggers the production of the components which should then be ready before the second component bin is empty

Advantages:

• This reduces the amount of part-finished stock
• Everyone must work together and efficiently so that production does not stop

Improvements in Technology (External Influence)

• Technology reduces costs in the long run
• It advances techniques and makes firms more competitive
• It also makes it easier for a company to satisfy the demand

Quality

Reasons for Quality Control and Quality Assurance:

• Better reputation
• Higher sales
• A business needs to try to ensure that all the products it sells are free of faults or defects
• Satisfy the customer
• Good design

Quality Control

• Inspectors check finished goods
• Detection of components or products that are faulty
• Considerable waste involved
• Take samples at regular intervals to check for errors
• Stringent checking
• Policy of continuous checking
• Quality to be maintained at every step of the production line
• Eliminate errors before they occur
• Find defective products before they leave the factory
• This method is very expensive

1. Checking
2. Proof-checking
3. Detecting errors
4. ISO 2000 stamp once quality is confirmed

Quality Assurance

• Inspection during and after production
• Aim is to stop faults from happening
• Pre-standard of products is set
• Teamwork and responsibility
• Quality standards are set and apply throughout the business
• To ensure that the customer is satisfied with the aim of achieving greater sales, increased added value and increased profits.
• Design, components, materials, delivery schedule, after-sales service, QC procedures all fall under these standards
• Workforce must support the use of this system
• QC is used to verify the quality of the output whereas QA is the process of managing for quality

Total Quality Management

• Total Quality Management is the continuous improvement of products and processes by focusing on quality at every stage of production
• Encourages everyone to think about quality
• Quality is the main aim for all staff
• Customers’ needs are paramount
• It tries to get it right the first time and not have any defects
• This way, the customer is always satisfied- as are the workers
• Quality is maintained throughout the business
• All employees are concerned with ensuring that a quality good is delivered
• The total average cost will fall
• It is closely linked with Kaizen and Quality Circles
• Creates a Quality Culture

Ways to Increase Productivity

• Improved quality control/assurance reduces waste
• Improve employee motivation
• Use of modern equipment
• Machines instead of people
• Train staff to be more efficient
• Improve stock control