AS Economics: Productivity & Lean management

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  • Created on: 20-03-13 23:03
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Productivity refers to efficiency in the use of resources. This is measured by the size of its output per unit of input.
It is not measured by profit. Although companies with higher productivity tend to be more profitable this is not always the case.
Most common measure of productivity is labour productivity (i.e. output per employee); this can be measured in physical terms e.g. so many customers
served per hour or in financial terms e.g. so much turnover per employee per year.
CAPITAL INTENSIVE production uses large amounts of capital equipment and relatively little labour. Productivity will usually be high.
LABOUR INTENSIVE production uses large amounts of labour and relatively little capital e.g. hairdressing.
This measures how much of the maximum possible output is actually produced:
(Current output ÷ full potential output) X 100
OUTSOURCING buying components, services or finished products from independent suppliers rather than producing them in-house.
A major component of lean management is the minimisation of waste and costs in the production process. It entails fundamental changes in
attitudes, business culture and the production process.
Four main aspects are characteristic:

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JUST IN TIME: carefully scheduling the arrival of materials and components to the production process in small quantities as they are required. This
reduces the cost of stockholding and the space required.
KAIZEN: continuous improvement, typically drawing ideas from everyone for small improvements and constantly looking for better ways to do
CELL PRODUCTION: involves splitting a production process into sizeable steps, each of which becomes the responsibility of a team of employees.…read more


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