BUSINESS Theme 2:2.3-Operating decisions

Job production-SLOW and COSTLY

Job production => making individual, unique products based on customer's specific preference e.g-crafts, canvases. Highly skilled workers are needed to manufacture these products

PROS: Because unique, individual products made that are high quality, more customers will buy them rather from competitors who sell many of these but not based on preferences                     

Individual products- business can't benefit from economies of scale as specific raw materials needed-but they CAN charge PREMIUM-customers still be willing to buy as their high quality,

Workers get to utilise their skills/do what they've wanted to-motivated them

CONS:                                                                    

Specific machinery needed, specific raw materials, so VERY COSTLY                                          Highly skilled workers-may be hard to find them, training needed=costly

Flow production-very efficient

Flow production=making identical products so making as many of these as possible

PROS:

Identical products made=same raw materials required, same machinery, so business can buy in bulk and benefit from economies of scale

Because same products produced at fast rate=delivered faster to customers=revenue gained sooner

Productivity is high as production is efficient, high quality machinery being used 

CONS:

Can be costly as machinery needs to be brought, room to store products etc

Batch production => many similar products produced together, everything can't be produced continuously as everything isn't the same. Products in each batch are identical

Instead, a batch of one set of products is made, then another batch of something else

Advantage:

-can buy materials in large quantities, benefit from ecnomies of scale

-higher productivity than job production as products in each batch=identical

Cons

-switching between batches is inconvenient and time wasting

-more expensive than flow as each batch needs specific tools/machinery

Technology is heavily used now in business production.

Pros:

-makes processes much quicker, products delivered faster=revenye gained quicker

-less likely for products to have fault, if employee did it, could make a mistake

-don't need some employees=dont need to pay wages=costs saved

-products can be made 24//7 with tech

CONS:

-expensive

-may take time to install machinery, replace it if it gets old and stops working

-employees scared tech will replace them=demotivated

With just in time stock control, all raw materials come and are made into products. These products go to be delivered 'just in time' for customers

Pros of JIT:

-All raw materials turned into products=reduced cost of storing and managing them

-Prvents materials from going out of date (having to reorder)=lowers costs

Cons:

-business can't benefit from economies of scale because it only buys the raw materials it's gonna need to make into products, so can't buy in bulk=higher costs

-all raw materials come frequently to be made into business, sometimes the orders may come late, this would mean don't get to customers in time=customers buy from competitors, also frequent orders=high transport costs

-lets say demand increases, thsi is bad because for JIT all raw materials are used

Some businesses ensure it has buffer (extra/minimum) stock that they always have,JUST IN CASE there is high demand or supply shortage

PROS:

-benefit from economies of scale as can buy in bulk and store the extra

-business can instantly deal with spike demand and not have shortage of products=shortage deters customers

CONS:

-high cost for storing products and managing them, goods cna go out of date

PROCUREMENT=find and buy raw materials needed from suppliers

LOGISTICS=Getting goods/services from one part of supply chain to another

Supply chain starts with 1)Suppliers supplying raw materials 2)Manufacturer turning raw materials into products 3)Distrubutor-a firm distributes to shops 4)Retailer-sells product to customers

Procurement and logistics is important because:

-it improves efficieny, business has what it needs, each part of supply chain has what it needs

-good reputation, if business has high quality products that reach consumers at right time=improves brand image and reputation of business as well as customer satisfaction

1)QUALITY-High, as if customers aren't happy with product, they will be blaming the business, so business has to ensure suppliers supply satisfactory quality raw materials

2)PRICE-Business will want to pay a price it can afford to the supplier, but if the supplies are high qaulity, it may have to pay higher. But product=high quality, customers still pay premium so business can pay high price for supplier

3)TRUST-If supplier lets down business multiple times, this will mean business can't make the products, customers unhappy. Business might reconsider supplier, new supplier might want high pay

4)AVAILABILITY-If supplier is constantly out of stock, this isn;t good as business needs supplier

5)DELIVERY-Business will obviously want supplies to be delivered quickly, not just to make products, but to reduce transport costs, it also needs to ensure products aren't damaged along the journey as this will hinder production process (may have to order more)

Quality= VERY IMPORTANT-if products are high quality, brand image of business will improve, it can afford to charge premium etc

But business has to monitor quality of products to reduce cost of compenating customers who want a refund for poor quality, business will also waste less products that can;t sell

QUALITY CONTROL: Inspectors check for any faults whilst the products are being made:

PRO as then fault can be checked beforehand-prevents customers getting angry/wanmting refunds, waste reduced. However, it is expensive as sometimes batches need to be scrapped

QUALITY ASSURANCE:Through each process involved, high quality goods will be made. STOPS ERROS IN FIRST PLACE RATHER THAN SCRAPPING GOODS WITH ERRORS.

Advantage as  the firm can have it's quality assesed and ASSURE customers products are high quality

Aspects of sales process:

1PRODUCT KNOWLEDGE: If employee keeps referring customer to others, customers will feel like employees don't know much, and so might not purchase from the business

2)QUICK & EFFICIENCT: Customers don't want to spend ages getting questions answered/purchasing. E.g-self-check out machines mean customers doesn't have to queue

3)ENGAGEMENT If employees engage well with customers, makes customers feel valued, they want to purchase from company

4)POST-SALES SERVICE: can make sure customer has had good experience with product, if customers have issue with product, customers can contact this for help

5)CUSTOMER FEEDBACK: If a buainess responds to customer feedback, it can improve and know how customers feel. If customers feel satisfied and business thanks them, other customers may want to buy from business