PRODUCTION AS AN ECONOMIC ACTIVITY

PRODUCTION AS AN ECONOMIC ACTIVITYImportance of ProductionThe economy begins with production.Consumers need Products/Services to satisfy their needs and wants.Businesses also need Products/ServicesTo use in/with their own Products/Services.To resell to consumers.The three categories of products used by business and consumers are:Natural Resources raw materials supplied by natureAgricultural Products crops and animals grown my farmersProcessed Goods products that have been changed in form to increase their value and usefulnessThe following types of businesses make products:Producers develop products to sell to other businesses or consumersExtractors obtain natural resources, such as water, oil, coal, and timber, from the earth for processing and useFarmers tend land and other natural resources to grow crops and livestock that are later sold and processedManufacturers obtain materials from other producers and convert them into products for sale to consumers and other businessesTypes of Production and Manufacturing ProceduresTypes of ProductionExtraction and CultivationObtaining products from nature or using natural resources to grow

Examples:ChickenTomatoesBroccoliProcessingChanging and improving the form of another product

Examples: HoneyMangoSoilManufacturingCombining raw materials and processed goods into finished products

Examples:CosmeticsChinaShoesTypes of Manufacturing ProceduresMass ProductionThe process of using assembly activities to produce large quantities of identical products

Examples:Krispy Kreme DonutsMaybelline LipstickNike sneakersCustom ManufacturingThe process of producing a specific and exclusive product for a customer

Examples: CeramicsProsthetic LimbSignsMaterial ProcessingThe process of changing raw materials to another form in order to be consumed or used to make other productsExamples:PaperSoapGlassPlasticSteelCementProduction and Manufacturing PlanningProduction and manufacturing involve the following activities in order to produce products:Product DevelopmentProduction PlanningInventory ManagementProduction DevelopmentImproving an existing product or developing new kinds of productsWhy Do Business Create New Products?New product development is an important way for businesses to stay ahead of the competition and continue to appeal to the changing needs of existing customers. In addition, new product development can open up new marketing channels and help to increase market share. Product ResearchPerformed by engineers and other scientists to develop new products or to discover improvements for existing products.Applied ResearchMarketing research that studies existing products to develop design improvements or new products.Example: Engineers working for an automobile manufacturer will study the current designs to improve the efficiency of engines or increase passenger safety.Pure ResearchDiscovers new solutions to problems done without a specific product in mind.Example: Scientists working for drug manufacturers study diseases and immune systems of the body. Their goal is to uncover treatments and cures.Product DesignTurning the idea into a product that can be made and sold with a profit.Creating models and testing them to come up with the best possible design.Determining all the materials and parts needed for the final product.Determining the cost of making the product.Determining the selling price.

Production PlanningProduction Process consists of activities, equipment, and resources needed to manufacture products.Production Resources consists of machines, tools, and other equipment needed for production.Personnel consists of employees and skills needed for productionInventory ManagementA detailed account of a companys materials, supplies, and finished products.Inventory ManagementMaintains the supply of all resources needed for production and the products produced.A vital manufacturing activity.Keeping records of the supply and the cost of all resources used in production.Ensure that suppliers deliver orders on time and in the correct quantities and price.Maintaining adequate storage space to make sure the parts and materials can be easily located and moved to productions lines as needed.Ensuring that materials are safe and secure and can be moved quickly and easily.Moves finished products for storage or for immediate distribution to customers.Keeping accurate product inventory in order to make sure orders can be filled.Marketing ProceduresContinuous Process Improvement (CPI)The purpose of CPI is to make sure manufacturing processes are completed as effectively and efficiently as possible.Continuous Process Improvement (CPI)Six Steps:Involve everyone.Identify process activities.Establish quality performance standards.Select measurement tools.Monitory performance continuouslyImprove process quality.Business OperationsCommon Business Operations:Facilities ManagementLogisticsSchedulingSafety and SecurityFacilities ManagementBuildings are one of the largest investments of a business.House the work and workersProvide space for all of the business operationsProvide space for storage of materials, supplies, and productsFacilities management protects the companys investment.Making Economic Decisions About the BuildingsBuy existing buildingsBuilding new buildingsRent buildingsStudying long-term plans of the companyAre current building adequate, is more space needed, are some facilities no longer needed or out-of-date?Purchase landBuilding Maintenance and RepairScheduled cleaningsPaintingCarpetsUpdate EquipmentExterior MaintenanceLandscapingRepairs to facilities and equipmentEnergy and Environmental ManagementEnergy costs - rapidly growing expenseNeed a ready supply of electricity, gasoline, heating oil, and waterKeep utility costs under controlWays to conserve energy resourcesMonitor quality of air, building temperature, and other environmental factors to maintain a healthy and productive workforceLogisticsManaging the acquisition, movement, and storage of supplies, materials, and finished products in a business.Supply Chain Management newer term for logisticsAll of the businesses involved from the time raw materials are obtained until finished products are sold.Major ActivitiesLocating sources of suppliesPurchasingTransportationSalesLogistics (Continued)Responsible for effective communication and information among everyone in the supply chainJust-in-TimeGoods arrive when needed for production, use, or sale rather than sitting in storageRequires careful planning and coordination among supply chain members.Requires effective information systemSchedulingDetermining the activities that need to be completed, the people who will complete the work, and the resources needed for the task.Scheduling EmployeesRight number of Full-Time, Part-Time, Temporary EmployeesThe right number of employees to complete the scheduled workRight number of employees with the right skillsHire more/Reduce number of employeesTrainingDetermining daily/weekly work scheduleSchedule carefully so as not to exceed the budget but still get the work finishedSafety and SecurityProtecting people and propertySecurityStudy the resources and activities of a business to identify potential security problemsPrepare security plans and procedures to prevent problems whenever possibleSafetyPrevent accidents and injuriesMaintain safe work areas and work proceduresProvide safety training and enforce rules and regulations designed to reduce accidentsPlace safety posters around the workplaceRecognize work units that have a record of no accidents or injiries for a period of timeBusiness Operation ToolsManagement ToolsTechnology ToolsManagement ToolsOperational Plan identifies how work will be done, who will do it, and what resources will be needed.Operating Budget is a detailed financial plan for a specific area of the business.Schedule is a time plan for completing activities.Procedures are lists of steps to be followed for performing a particular work activity.Standards are specific measurements against which an activity or result is judged.

Technology ToolsSupply Chain Management Software allows cooperating companies to share order, production, and shipping information, track products, and exchange customer data.Collaboration Software also called groupware, provides real-time communications capabilities by voice, text, and video; allows team members working at their own computers from anywhere in the world to view the same documents on their computer screens and work on them as a team.Computer Security provides access and restrictions, usage data, privacy, and virus protection for computers and networks.Inventory helps the managements of sales, purchases, and payments; tracks production, usage, and sales levels; and even prints bar codes.Technology Tools (Continued)Project Management Keeps track of project calendars, tasks, to-do lists, work assignments, and project resources.Budgeting Automates budget planning, compares budgets from one time period to another, and coordinates budgets among departments.Document Management controls the production, storage, and managements, and distribution of electronic documentsManufacturing Automation monitors and often controls manufacturing machines, checks for errors and defects, and reports on production levels.Scheduling manages employee, facility, resource, and production scheduling. Allows easy review of schedules by all participants as well as quick updating.