CHAPTER 13PRODUCTION & BUSINESS

OPERATIONS

13.1 OBJECTIVES Describe the role of producers in the

economy and the forms of production

Differentiate among the various types of manufacturing

PRODUCTION IN THE ECONOMY Economy begins with production Consumers need products/services to

satisfy their needs and wants

ROLE OF PRODUCERS 3 categories of products used by

people Natural resources

Raw materials supplied by nature Agricultural products

Crops and animals raised by farmers Processed goods

Products whose forms have been changed to increase their value and usefulness to people

ROLE OF PRODUCERS (CONT.) 4 types of businesses that are responsible for

production of goods/services Producers

Develop products to sell to other businesses or consumers Extractors

Find natural resources like water, oil, coal, timber from the earth to be processed and used

Farmers Tend land to grow crops and livestock that are later sold

and processed Manufacturers

Get materials from other producers and convert them into products for sale to consumers

FORMS OF PRODUCTION Forms of production are

Extraction & cultivation Processing Manufacturing

All needed to makeproducts for customers

EXTRACTION & CULTIVATION Products are obtained from nature Makes sure that there is always an

available supply of natural resources Also makes sure that crops, livestock,

fish are available at all times Most basic form of production

PROCESSING Changing & improving the form of a

product Not many products are used exactly

how they are found in nature Most are processed before being used Water, Cotton, Timber, Oil, Cows

MANUFACTURING Combines raw materials and processed

goods into finished products Businesses and consumers use these Can be simple (cabinetmaking) or

complex (designing a computer microchip)

MANUFACTURING EXAMPLES One manufacturer might use steel and

plastic to make many parts for a snowmobile

Another may purchase meat, vegetables and fruit from farms to create frozen TV dinners

Another might take timber from a forest and process it into lumber and plywood for a construction company to buy to build houses with

MANUFACTURING PROCESSES Usually, several manufacturers are a part of the

total activity needed to produce goods that we buy

EX: a textile mill in North Carolina buys cotton from an Alabama farm. It spins the cotton into yarn and makes the yarn into fabric. A plant in Boston then colors and prints the cloth. A clothing manufacturer in New York then buys the cloth and makes it into jeans

Working together is what fulfills consumer needs

TYPES OF MANUFACTURING PROCEDURES 3 main types of Manufacturing

procedures Mass production Custom manufacturing Materials processing

MASS PRODUCTION An assembly process that makes a large

number of identical products using a continuous, efficient procedure

Sometimes called repetitive production EX: automobile or bottling plants Every employee has a specific task Training costs are lower and quality is higher Can also be boring and decrease motivation Machines now assist with many assembly lines

CUSTOM MANUFACTURING Manufacturers make products to meet specific

needs and standards of customers/businesses Products range from dentures to concert halls Building a product for a specific use Work closely with the customer to plan and

design product to fit their requests May call for unique materials/special process EX: bridges, buildings, piece of airplane,

special running shoe for particular athlete

MATERIALS PROCESSING Changing the form of raw materials so they can be

consumed or used to make other products EX: oil companies refine oil to form gasoline; mills

process grain into flour and cereal; digital editors convert audio/video files into films/CDs

2 types Continuous processing

Raw materials always move through equipment to change them into a specific product to buy

EX: milk Intermittent processing

Uses short production times to produce a certain amount of change to a product. Machines are reset after each set.

EX: printer for special stationary

13-1 ASSESSMENT

ANSWER #1-4 ON PAGE 322 BEFORE CONTINUING NOTES

13.2 OBJECTIVES Identify the activities involved in

production planning

Describe how manufacturing is organized

PRODUCTION ACTIVITIES Production processes are very complex Involves careful planning and

coordination Before a company can manufacture a

product, it must have the facilities and equipment to carry out the production

It must hire enough people to complete jobs

It also must check all finished products for quality and store them until they are sold

PRODUCT DEVELOPMENT Before production planning can

happen, the company decides what products it will produce

You can’t expect to sell the same thing every year; New products will have to be developed

Product planning has 2 steps: New product research New product design

NEW PRODUCT RESEARCH Goal is to develop new products that customers

will like, meet their customer needs, and improve current products offered

Companies perform 2 types of research: Applied research

Studies existing products to develop improvements or new uses of the product

EX: auto manufacturers improve fuel efficiency Pure research

Research done with no product in mind; instead, wanting to discover new solutions to problems

EX: scientists researching for cures to diseases

NEW PRODUCT DESIGN Turning an idea into a product a company

can sell and make a profit from Designs are tested and best ones are chosen After engineers build and test a model, the

business determines all parts/materials needed for final product

Financial experts decide on what price to set Make sure company makes money AND

customers can afford it

PRODUCTION PLANNING If a company develops and tests a new

product idea, and they decide they want to proceed, they will then develop plans to produce it

Production planning includes 3 activities: Develop a production process Collect production resources Select and prepare production personnel

DEVELOP THE PRODUCTION PROCESS Consists of the activities, equipment

and resources needed to manufacture a product

If you are going to use mass production, this is where you organize the assembly line

Figure out which method you are going to use is a key part of this step

COLLECT PRODUCTION RESOURCES Order machines, tools required for

production Business must locate and organize a

space to perform production activities Can either buy a new building or

remodel their current space to make bigger and better

Determine where materials will be coming from

Identify suppliers and make sure materials are delivered on time and at the right price

PRODUCTION PERSONNEL Estimates the number of employees

needed to complete production activities

Determines skills required of each employee

Company will check their own employees first, then hire and train new ones if needed

INVENTORY MANAGEMENT Inventory is a detailed list of a company’s

materials, supplies and finished products. Inventory management keeps track of the

inventory & resources needed for production Very important to manufacturing because you

can’t produce products without your inventory Managers keep a record of the supply and

costs of resources used in production After product is assembled, extra resources

are moved into storage or sold to customers

MANUFACTURING PROCEDURES Today’s assembly line is quite different than it

used to be Employees work in teams Parts move along conveyor belts Products move quickly through process Employees check products for quality at several

points When completed, products are packaged,

labeled and moved to a loading area for shipment

ORGANIZING THE WORK AREA The type of product will determine how

the work area is organized Mass production requires a large

building There must be space for assembly line,

equipment, tools, employee work stations and storage areas for parts used

The smaller the product, the larger amount of workspace each employee will have

IMPROVING MANUFACTURING Today there are higher costs, more competition,

and more customer demands Challenges today are: faster production,

increased quality of products, reduced costs Companies are coming out with improved

procedures, better training for employees and a higher level of quality for products

Continuous Process Improvement (CPI)has been added—increases the quality of work by reducing errors and waste. Processes are reviewed instead of waiting until a problem comes up.

CPI-CONTINUOUS PROCESS IMPROVEMENT

STEP 1: Involve Everyone

STEP 2: Identify process activities

STEP 3: Establish quality performance standards

STEP 4: Select measurement tools

STEP 5: Monitor performance continuously

STEP 6: Improve process quality

CPI (CONT.) Designed to help an organization

achieve its goals by improving the quality of work

Standards are developed for quality performance

Standards are based on benchmarks (best practices among all competitors)

Based on these results, employees look for ways to improve work procedures so all products can improve as well

13-2 ASSESSMENT

ANSWER #1-4 ON PAGE 328 BEFORE CONTINUING NOTES

13.3 OBJECTIVES Discuss the importance of effective

business operations

Describe tools used to manage business operations

THE IMPORTANCE OF BUSINESS OPERATIONS

How a business operates day-to-day can determine if it succeeds or fails Work procedures may not be efficient Security issues may result in thefts Lack of maintenance could lead to

expensive repairs Bad work environment can lead to

unhappy employees

TYPES OF BUSINESS OPERATIONS Some operations are specific to the

type of business Most common types of business

operations: Facilities management Logistics Scheduling Safety and security

FACILITIES MANAGEMENT Buildings are one of the largest investments

of a business They provide space for all of the business

operations and all storage Management begins with deciding on the

building that will be needed (new or existing) Management also deals with maintenance

and repairs needed to make building better Management also keeps energy/utility costs

under control—be as “green” as possible

LOGISTICS Managing the movement and storage of

supplies, materials and finished products in a business

A newer term for logistics is: supply chain management

Major logistic duties: Locating/purchasing where to get supplies from Transportation of supplies, materials and products Communicating with everyone in supply chain JUST-IN-TIME: when goods arrive just in time for

production or to sell—instead of just sitting in storage

SCHEDULING Determining the activities that need to be

completed, who will complete the work, and the resources needed to complete the task in time

Factories must maintain the right inventory to fill each order or customers will wait too long to receive merchandise

Employee scheduling is important—full-time, part-time and temporary employees

Company must have the right number of people scheduled to complete the work needed

SAFETY AND SECURITY Protecting people and property Damage/injury can happen due to

Crime Accidents Natural disasters (tornados, earthquakes)

Security employees study activities of business to identify possible security problems then come up with a way to prevent them

They also try to minimize the amount of accidents and injuries—give safety training classes and hang safety posters in employee areas

INFORMATION MANAGEMENT Uses technology to access & exchange information

to complete the work of an organization 4 goals:

1. Collect, organize & maintain needed information2. Provide instant access to information required to

perform work and make decisions3. Prevent access to unauthorized users4. Use technology to improve communication

Types of information used in business: text, data, graphics, pictures, and videos

Oral (telephone, voicemail, meetings) Written (letters, memos, reports, emails)

INFORMATION MANAGEMENT (CONT.) Information managers are responsible for

designing, purchasing, installing and maintaining the many types of technology used in business

They must develop procedures for collecting, storing and using the information

They make sure the information collected is easy to get to, yet still safe and secure

The internet makes it more difficult to safeguard against hackers worldwide

TOOLS FOR BUSINESS OPERATIONS Management Tools

Operational plan: identifies how work will be done, who will do it and what resources will be needed

Operating budget: detailed financial plan for a specific area of the business

Schedule: time plan for completing activities Procedure: list of steps to be followed for

performing a work activity Standard: specific measurement against which an

activity or result is judged. Must be clear and realistic (EX: the number of customers that should be served in a fast food restaurant at one time)

TOOLS FOR BUSINESS OPERATIONS Technology Tools

So many common business operations can be completed using computer software like:

Project management Budgeting Scheduling Inventory Computer security Document management

New types of software are available to help with logistics: supply chain management software and collaboration software (pg 336)

13-3 ASSESSMENT

ANSWER #1-3 ON PAGE 336 BEFORE COMPLETING OTHER CHAPTER

ACTIVITIES

CHAPTER 13: EXTRA CHAPTER ASSIGNMENTS

Chapter 13 Assessment #11-26 (write definition and word)

Page 341: Decision Making Strategies #32-33

Chapter 13: Study Guide Handout