- Workers are divided up and given a specific job to do. In specialisation, people who have a particular strength work with that strength. (also called The devision of labour)
- Makes production more efficient.
- Skills are improved.
- Firms try to break up complex prodution techniques into simple tasks and get workers to specialise in those tasks.
- Workers may do that one task hundereds of times a day so they become very efficient at it. This provides the firm's productivity.
- Not just workers who use specialisation, whole firms can by making themselves interdependant. Firms specialise in what they're good at, makes the whole process more efficient.
- Firms are interdependant with businesses in the same production chain.
- Some production stages make the product more valuable than before. Other stages provide vital services.
Problems with Specialisation (Division of Labour)
- Workers can get bored of doing the same thing every day.
- This can lead to poor quality of products.
- A problem with one group may halt production of the whole business.
- Workers can become ever specialsed and have trouble finding another job if their skills are no longer in demands. Unemployment due to occupational immobility may result.
1) Making as many identical products as possible. To be effient, production must be continuous. Some flow production fctories operate 24 hours with workers doing shifts.
2)Aim is to gain from economies of scale and produce at a minimum unit cost to allow competitive prices. Modern flow production uses robots. Flow production is highly capital insentive (needs a lot of money upfront to pay for machinary)
3) Used for mass market products. e.g. chocolate bars/mobiles/TVs
4) Also sometimes called mass production.
Business Growth and Efficiency
- Businesses produce more efficiently when they grow.
- Businesses aim to use most efficient production methods as possible.
- Using job and batch production isn't the best for mass market products, flow is.
- Flow production uses lots of specialisation. Some companies hire robots for certain stages and because there's less workers, wage costs are lower.
- As long as all these products are sold, flow production will be more efficient than batch/job in the long run.
- Specialisation can lead to lack of flexability. Switching production from one product to another could mean stopping the production line and retooling it.
- As a business grows it can afford a bigger premesis and more production line to make products simultaneously. Or could invest in better, more adaptable machinery.
Non-Lean Stock Control Methods
STOCK CONTROL GRAPHS
- When amount of stock falls below a certain amount, the company will reorder stock up to certain point.
- e.g. when stock falls down to 1000 units a company may restock but it could be a while before the stock arrives so they have to order it a bit before and estimate how much.
- A computerised stock control system can calculate stock levels and place orders automatically.
- A method of operating a production and distribution system with extra stocks of items of every stage of the process just in case there is a supply shortage or customer demand increases unexpectedly.
- 'buffer stocks' (extra stock) are there to ensure continuous production.
- Main problem is that firms are left with big stockpiles of items.
Lean Production - JIT
- Uses as few resources as possible.
- Just-In-Time (JIT) is a method that aims to keep stock levels to a minimum.
- Aim is that stock arrives in factory immeditely before it's used.
- Main benefit is it reduces costs of having to keep to, saves space too.
- Main problem is that it requires a lot of co-ordination between firm and supplier.
- Extra training may be required for JIT to be successful. Workers may also find JIT stressful if they're constantly on the edge of running out of stock.
- Reorganising to increase efficiency within a firm/business.
- Used to increase efficiency. Used when overhead costs need to be reduced in order to reduce break even point.
- Methods include:
- closing an administrative department and delegating work elsewhere.
- closing a factory and moving production to another side.
- reducing number of manangers.
- Often results in redundancies.
INTERNAL Economies of Scale
1) PURCHASING ECONOMIES: happens when a large firm buys supplies in bulk and gets them at a cheaper unit price than a smaller firm.
2) MARKETING ECONOMIES: arise because the cost of an advertising campaign is pretty much a fixed cost. Larger firms need to spend less per unit advertising its products than smaller firms.
3) MANAGERIAL ECONOMIES: occur when a large firm can afford to employ specialist managers who have expert knowledge (accountants, lawyers).
4) FINANCIAL ECONOMIES: Banks are willing to lend monre money to larger firms at lower interest rates. This is because bigger firms are more likely to repay than smaller ones.
5) TECHNICAL ECONOMIES: Occur because larger firms can afford to operate more advanced machinery. Law of increased dimensions means a premises which is 10x bigger will be less than 10x as expensive.
6) RISK BEARING ECONOMIES: where a firm can afford to sell a range of products to different markets. A decline in sale of 1 product wont effect firm's cash flow.
EXTERNAL Economies of Scale
- Happen when a large amount of firms locate near eachother.
- 1) Suppliers choose to locate near to customers. Reduces deliery times, transport cosrs and need for producers to hold lots of stock.
- 2) Local workforce will already have needed skils - they learned them from working in other firms in the area. Reduced training costs.
- 3) Area will build good reputation which benefits firms in the area and encourages other firms to locate there.
- 4) Local councils and national government encourage large businesses to move or stay in a particular area.
DISECONOMIES of Scale
1) Bigger the firm, harder it is to manage property.
2) Decisions take time to reach whole workforce, workers at bottom of hierachy feel insignificant. Workers get demotivated. Causes reduced productivity.
3) Production process becomes more complex and difficult to coordinate. Different departments end up working on similar projects without knowing.
- Involves checking products to make sure quality standards are met. Used to be done by quality inspectors but now some firms encourage their own workers to check their own quality.
- Products are checked for things like design/appearance/defects and safety at 3 different stages of the production process.
- STAGE 1: Check raw materials from suppliers.
- STAGE 2: Random samples taken to check quality of work in progress.
- STAGE 3: Random samples taken of finished products - items removed if don't meet required quality.
- Defects are spotted as they happen rather than waiting until products are finished (saving time and materials)
- Quality control can be expensiv but cost to the business would be greater if dissatisfied cutomers stopped buying their products.
Total Quality Management
- Total Quality Management (TQM) strategy aims to make quality the responsibility of every employee in the organisation.
- Quality Circles are where groups of workers from various departments meet regularly to identify problems and offer solutions... leads to increased motivation as workers feel more involved.
- Emphasis of quality of after sales service as well as quality of production.
- Takes a long time to introduce TQM. Workers need training so they can see quality as their responsibility. Employees can get demotivated as it seems like a lot of work.
Rapid Growth and Quality
- Rapid Growth makes it hard to maintain high quality.
- A business can be overwhelmed by orders and cut corners to make products faster.
- May become expensive to carry out necessary quality inspections.
- Firms could take on more employees but they'd have to be trained and new workers could mean fall in quality.
- Company might outsource some tasks (pay another company to do them). Can be expensive but delivers high quality. Using a cheaper company may lead to fall in quality.