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Management and Production: Location

Will be affected by:

  • labour
  • customers
  • suppliers
  • competition
  • legislation
  • infrastructure
  • environment
  • government
  • history/tradition
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Management and Production: Production Methods

Considerations before production begins:

  • plant layout
  • degree of automation
  • scale of production & method of production
  • types of quality control required

Choice of production method relies upon:

  • product being produced
  • size of the market
  • size of the business
  • finance available
  • technology available
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Management and Production: Production Methods 2

Job Production:

  • meet customer needs exactly
  • high quality product
  • complete flexibilty
  • added value
  • high production costs
  • slower process
  • difficult to gauge costs
  • can't benefit from economies of scale
  • hard to find, and more expensive to train and employ, labour

Batch Production:

  • some economies of scale
  • faster than job
  • flexible and can respond to the market
  • downtime between batches
  • idle stock so storage space may be needed
  • lower skill required, staff motivation decreased
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Management and Production: Production Methods 3

Flow Production:

  • economies of scale
  • standardised product
  • little downtime
  • allows complete pricing
  • lacks flexibility
  • high initial cost
  • requires lots of planning
  • whole process stops if line stops
  • fall in demand makes process uneconomical
  • lots of stock ties up in work-in-progress
  • low staff motivation due to unskilled, repetitive work
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Management and Production: Production Methods 4

Cell Production: teams responsible for the whole production process for  a given product operating together.

  • more pride and responsibilty, increased motivation
  • incentive to reduce waste, reducing costs
  • job rotation opportunities
  • expensive to implement
  • more complex plant layout
  • relies on teamwork
  • can be slower

Changing the method of production depends upon:

  • nature of the product
  • financial situation of the business
  • significance/importance of custmers and meeting their specific needs
  • degree of competition in the market
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Management and Production: Size of Production

Internal economies of scale:

  • bulk-buying
  • financial
  • technical
  • marketing
  • managerial
  • risk-bearing

Internal diseconomies of scale:

  • communication and span of control
  • alienation of staff
  • sense of belonging
  • co-ordination

External economies of scale

  • improved infrastructure
  • suppliers in close proximity
  • supply of skilled labour
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Management and Production: Planning for Production

  • To reduce waste
  • cope with demand

Resource to Order: buy resources once the order is made

Making to Order: materials are there but made to order

Making to Stock: make before orders are placed

Gannt Charts: horizontal bar charts

  • simple and easy to use
  • can be used to monitor progress
  • allows a firm to access a time fram
  • help determine resources
  • doesn't account of interdependencies between outputs

Push Scheduling: firm sets the end date from the earliest possible start date

Pull Scheduling: customer gives the end date and production is planned around that

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Constraints on Production: Waste Managementy

Lean Production:

  • time-based competition
  • total quality management
  • jidoka
  • kaizen
  • quality and quality circles
  • J.I.T
  • cell production

Elements of Waste:

  • defects
  • overproduction
  • conveyance (unnecessary movement)
  • waiting
  • inventory
  • poor factory layout
  • overprocessing
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Constraints on Production: Law and Production

Vicarious Liability:

  • control test: has the business told the employee what task to do and how to do it
  • multiple test: who pays NI and tak, and who provides personal protection equipment
  • integration test: are they eligible to be on a company sports team, attend events etc.

Implications on the Manufacturing Process:

  • Designs/Branding
  • Trade Marks
  • Copyright
  • Patents

Food Safety Act 1990

  • presemted correctly and not dangerous
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Constraints on Production: Law and Production 2

Food Labelling Regulations 1998

  • name of food
  • list and quantity of ingredients
  • shelf life/date marking
  • storing instructions
  • country of origin
  • contact details
  • batch code

Food Standards Act 1999:

  • gives the food standards agency power to inspect food

Health and Safety Act 1974:

  • Employers must provide a safe premesis and ensure that workers health is not affected.
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Constraints on Production: Ethical Considerations

  • Pollution
  • Sustainability
  • Packaging and Waste
  • Minimum/Living Waste
  • Carbon Emissions
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Cost and Costings: Types of Costs

  • Direct costs
  • Indirect costs
  • Average costs
  • Marginal cost
  • Opportunity cost
  • Cost centres
  • Social cost = private cost+public costs
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Cost and Costings:Full Costing

Covering indirect costs in an arbitary way

  • easy to use
  • quick
  • covers all indirect costs
  • nature of costs are not considered
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Cost and Costings:Absorption Costing

Covers costs depending on the nature of the cost

  • breakeven point will be met
  • all costs are covered
  • ensures accurate pricing
  • time consuming
  • difficult to carry out
  • application must be consistent
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Cost and Costings: Contribution Costing

Price-Direct Costs=Contribution to indirect costs and profit

  • identify positive and negative relationships
  • used for special orders
  • indirect costs not necessarily covered
  • unfair to individual cost centres
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Cost and Costings: Standard Costings and Breakeven

Standard Costings:

  • Costs that a business expects to incur
  • used to compare expected costs to actual costs and identify variances

Breakeven: indirect costs/contribution=B.E.P, current output-breakeven=margin of safety

  • helps set targets
  • set a realistic selling price
  • easy to calculate
  • doesn't allow changes in costs
  • forecasted-may not be accurate
  • only shows one product rather than a portfolio
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Productive Efficiency: Calculations

  • Productivity = output/input
  • capacity utilisation = actual output/maximum outut x 100%
  • labour productivity = number of goods/number of workers 
  • capital productivity = number of goods/capital input
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Productive Efficiency: Capacity Utilisation

How can Productivity Improve:

  • lower input- decrease size- cutting staff
  • increase output- motivate staff to produce more
  • arranging work place ergonomically
  • investment in automation
  • running machines for longer
  • high capacity: low average costs
  • portrays a popular business
  • staff do not become bored and demotivated
  • little opportunity for maintenance and repair
  • hard to accept additional orders
  • puts pressure on employees-stress
  • no time for in-house training
  • quality may be affected
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Productive Efficiency: Work Study

Method Study:

  • Considers how a job should be done
  • ensures tasks are performed in the most efficient way, least cost and time used

Work Measurement:

  • determines the effort required to carry out the process to the required standards
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Productive Efficiency: Stock Control

Types of Stock:

  • raw materials
  • work in progress
  • finished goods
  • holding stock: satisfy demand
  • cope with fluctuations in demand
  • buffer stock to meet late deliveries
  • cost savings - economies of sale (purchasing)
  • storage costs
  • opportunity costs
  • depreciation costs
  • security costs
  • insurance costs
  • out of stock costs

Reorder Level depends upon:

  • lead time and proximity to suppliers
  • sales record to date
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Productive Efficiency: Stock Control 2

Maximum/Minimum Stock Levels depend upon:

  • level of sales
  • product
  • storage capacity
  • cost of storage
  • degree of competition
  • timing of marketing campaign
  • time of year (seasonal sales)
  • amount of time to deliver new stock
  • history of unforseen circumstances

Buffer Stock depends upon:

  • liklihood of delays with delivery
  • speed of production process
  • reliability and location of suppliers
  • level and pattern of demand
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Productive Efficiency: Quality Methods and Value A

Quality Methods:

  • quality control
  • quality assurance
  • Total Quality Management
  • Benchmarking
  • Quality Circles
  • Quality Standards

Value Analysis:

  • analyse and improve value, looking at:
  • function
  • cost
  • aesthetics
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  • speed, accuracy and efficiency
  • good quality - standardised
  • less waste and reduces unit costs
  • does boring, repetitve work
  • large set up costs
  • demotivation for employees as less job security


  • facilitates flexible working
  • better customer service
  • helps different sectors of a business communicate


  • speeds up research and design process
  • virtual testing
  • reduces costs
  • needs specialist skills
  • high initial cost
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Research and Development


  • market research 
  • brainstorming
  • value analysis
  • idea generation
  • idea screening
  • concept development and testing
  • beta and market testing
  • technical implementation
  • commercial launch

Factors that affect research and development:

  • level of competition
  • product
  • external environment
  • state of the economy
  • responding to a particular problem
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Research and Development 2

  • enhanced reputation
  • first mover advantage
  • PR
  • better product range
  • added value
  • increaseed quality
  • uncertain return
  • requires large amounts of finance
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