These refer to the objectives that a business wants to achieve in terms of its production of its goods + services. 3 main targets:
1. Minimise their unit costs - refer to how much its costing to produce each of its products on average.
Unit costs = total costs/output.
Want these costs to be as low as possible: 1. lower the unit costs, the more competitive the business will be compared to rivals. 2. lower they are, more profit.
2. Improve their quality - quality means their product is perfect in terms of what there customers want to buy. for most products product would be closely related to price. four main factors 1. skills 2. motivation 3. quality of technology 4. systems that they use e.g. check tests
Capacity refers to the maximum output that the business is capable of producing. The bigger the business the bigger the capacity.
Capacity utilisation = refers to how close a business is to operating at its maximum.
Actual output/Maximum output x 100
Businesses will want their capacity utilisation to be as close to the maximum as possible. if they can do this they can make better use of their fixed costs, they can spread them over a higher level of output. make them more efficient and unit cost will go down.
Advantages - 1. Charge less and get more customers 2. More profit
Disadvantages - 1. costs may go up, e.g. pay staff to work overtime 2. equipment will break down more often if using to the full 3. often difficult to maintain the quality of producing a lot.
Non Standard Order
A non standard order is an order for a product which is different to the ones the business usually produces.
4 main factors influence whether to accept their order -
1. can they produce it? - if they can they will
2. will it increase profits? usually if the answer the the first 2 questions is yes they will accept the orders. even if don't make profit will accept if third factor is true
3. will it lead to more orders in the future?
4. effect of accepting that order of their reputation
Methods that businesses can use to try and make sure all of their product are perfect, i.e meet customers exceptions
Quality control refers to the methods that businesses use to check and to test their products to try to make sure that every product will sell in perfect condition
If producing a cheap mass produced product - sample basis,but if the product is fairly expensive and also health/safety issues will test everyone.
Problems- 1. can be expensive - pay people to check all of the products
2. to some extent if you have this system you're taking pressure off of staff because they know they can make mistake, because they know it will be less important for them to be perfect.
3. very expensive for business if they make mistakes even is spot them will have to start again
Where businesses try to train their workers so much they make sure all of the machines are operating properly, that everything is perfect so they never make mistakes in the firs place. the idea is aim for zero defects -
1. train staff really well so they have got the skills so never going to make mistakes. More expensive.
2. under a system of quality assurance every worker is encouraged to accept responsibility for checking for own work - trust them to do it.
1. QA is better than QC because prevents mistake in first place
2.Better the system of QA the less money on QC
3. Most businesses will tend to do both - cant make sure on every product
4. Increasingly, most businesses will give far more emphasis onto QA
Total Quality Management
Method that businesses use to continuously improve the quality of what they do. every single worker has to accept responsibility for the quality of what they do, they must always be asking the question how can i do my job better and they have to treat the people that they work with as if customers - e.g supermarket - supervisor treat cashiers like if they were customers and constantly asking themselves what can i do to make it easier for cashiers to do their job better.
For this to work well -
1. Got to train their staff so they can keep improving what they do
2. Got to empower your staff to give them the authority to make their own decisions
These refer to official measures of quality that businesses can use that act as a guarantee of quality to their consumers
ISO 9000 - refers to a system that businesses can use which should act as guarantee for the quality of the product.
three main aspects:
1. minimum targets for the quality of your products e.g. 90% pass rate
2.business has to explain how they are going to achieve their targets. what businesses would d is describe QC + QA systems that they are going to use
These systems will then be inspected from people outside the business