Aim: to consolidate understanding of methods of production

Learning Objectives-To understand the need for flexibility

- to know the different methods of production used by businesses.

LEARNING OUTCOME-Define operational flexibility.- Differentiate between job, batch and flow production

Starter question.What is meant by flexibility in general?1 word for it.

What would flexibility in business mean?Write it in 1 statement.

Now compare your statement with person next to you.

Meaning of Operational FlexibilityIt is the ability of a business to vary both level of production and range of products following changes in customer demands.In groups of 3 prepare a list of businesses who need to have flexibility in operations.You get 1 min and lets see which group has longest list!!!Give it a thoughtIf business wants to increase its level of production what things would it need???Video on production methodsVIDEO

Which method of production?Mr Kipling cakes

A railway bridge

A tailored suit

TV sets

High St clothing

Batch

Job

Job

Flow

Batch

Job ProductionMade to customers particular orderUniqueMade one at a timeHighly skilled workFactory layout flexibleLabour intensive

Batch productionMade in batches or groupsDifferent varieties of the same product are madeMachinery can be usedMachinery is multi-purposeFactory set out with machines grouped by process

Flow ProductionHighly specialised machinery usedContinuous production Mass produced goodsFactory set out in permanent assembly linesCapital intensive

Methods of Production

Job one at a time

Batch a small or large quantity made all at once, followed by a different product

Flow or continuous a production line with highly specialised machinery

Which method of production?Seats for a car

A custom paint finish

Tyres

Spanners

A machine used for making gearbox parts

Batch/flow

Job

Batch/flow

BatchJob

Job ProductionAdvantagesCan match customers precise needsMotivated workforcePremium pricesDisadvantagesUnpredictable demandHigh wage costsComplicated production scheduling

Mass custamisation Combines latest technology with multi skilled labour forces to use production lines to make a range of varied products.

Mass marketing not neededexamplesFeatures of each production methodOpen the Production Methods table Pg 397 For each method draw a mind map based on these factors

Number of products made at onceMachinerySkillsMotivationExamplesWhat method to use?The choice of production method depends on:

How many of the product are being madeWhether the product is uniqueHow complex the product isThe size of the business making itCapital availability Problems with changing the production methodsJob to batch and Job or batch to flowJob to batch--cost of equip needed--additional working capital--staff demotivation Job or batch to flow-- cost of capital equip needed--staff training to be flexible and multi skilled--accurate estimates of future demandFinal evaluation :pg398Silent reading Location Decisions:3 characteristics Strategic in nature Difficult to revertTaken at highest management levelOptimal location A business location that gives the best combination of quantitative and qualitative factors.

Example of 2 businessesQuantitative factorsSite and capital costsLabour costsTransport costs Sales and revenue potential Government grants Techniques to assist in location decision :quantitative factors Profit estimatesInvestment appraisalBreak even analysis

Qualitative factorsRoom for further expansion Manager`s preferencesEthical consideration Environmental concernsInfrastructure

Other locational issues The pull of the market Planning restrictionsExternal economies of scale

Advantages and disadvantages of multi site locations Pg 404 group activity International location decision Reasons--to reduce costs --to access global markets --to avoid protectionist trade barriers(NAFTA ,ASEAN)--other reasonsIssues and problems with international location Language and other communication barriersCultural differenceslevel of service concern Supply chain concernsEthical considerations

Scale of operation

The maximum out put that can be achieved using the available inputs (resources)--this scale can only be increased in the long term by employing more of all inputs .

Economies and Diseconomies of scale:Economies of scale are factors that lead to a reduction in average costs that are obtained by growth of a business. There are five economies of scale:Purchasing economies: Larger capital means you get discounts when buying bulk. Marketing: More money for advertising and own transportation, cutting costs. Financial: Easier to borrow money from banks with lower interest rates. Managerial: Larger businesses can now afford specialist managers in all departments, increasing efficiency.Technical: They can now buy specialised and latest equipment to cut overall production costs.

Diseconomies Of ScaleThere are diseconomies of scale which increases average costs when a business grows: communication problems: It is more difficult to communicate in larger firms since there are so many people a message has to pass through. The managers might loose contact to customers and make wrong decisions. Alienation of the work force: People work in large businesses with thousands of workers do not get much attention. It decreases morale and in turn efficiency. Poor coordination : More people have to agree with a decision and communication difficulties also make decision making slower as well.

The Impact of Economies & Diseconomies of Scale on Average Costs

Large scale production unit costs of production

Are Diseconomies Avoidable ?Approaches used to overcome potential diseconomies:

MBOAvoids coordination problems giving divisions and depts. objectives.long term goals to be met.Decentralisation giving divisions degree of autonomy Reduced Diversification concentrate on core to help reduce coordination problems.