2.3.1_Business_operations___production_processes_student.pptx

Business PowerPoint on 2.3.1

1. PowerPoint Guide The news icon is hyperlinked to a related article or website. Simply click to access The film icon is hyperlinked to a related clip. Simply click to access The discuss icon indicates suggested points to discuss The writing icon indicates a written activity or question time

2. 2.3 Making operational decisions 2.3.1 The purpose of business operations/Production processes

3. Key elements to this topic The purpose of business operations Production processes

4. What is the purpose of business operations? The purpose of business operations is to turn raw materials into goods and services that can be sold. There are different types of processes that can be used to produce goods and services.

5. Different types of production processes All involve transforming inputs such as labour, raw materials and energy into outputs.

6. The production process

7. Watch the clip and identify the inputs and outputs

8. Types of production processes Job production Batch production Flow production

9. Job production A method of production whereby a product is produced that meets specific customer requirements.

10. Context corner… Mollie’s Creative cakes is owned by Lancashire based Mollie Robbins. Mollie designs and makes high quality cakes to meet individual customer requirements. Mollie’s greatest creation was her life size Shetland pony cake that was made for an animal charity.

11. Explain two reasons why Mollie’s Creative Cakes uses job production as its method of production Job production in action…

12. Benefits of job production Products are usually high quality Products are made to the specific requirements of the customer Higher prices can be charged Greater job satisfaction for workers, as they are usually involved in all stages of the production process A business may find it easier to differentiate itself from rivals

13. Drawbacks of job production Unit costs are higher than using other methods of production Labour-intensive processes, therefore this method is less suited to the use of machinery Requires skilled employees, who may demand higher wages and/or on going training

14. Batch production This involves making a group of identical items together. Each batch goes through one stage of the production process together as a group, before moving onto the next stage. The products produced by batch production will be similar but have some variation, for example different style, different size or different colour.

15. Bakeries are one type of business that use batch production. Bakers will prepare one type of roll, for example white rolls, before baking and moving onto the next type of roll. Batch production in action… In pairs, think of at least two benefits and two drawbacks to a business of using batch production.

16. Advantages and disadvantages of batch production Advantages A variety of products can be manufactured to satisfy customer needs Lower unit costs compared to job production, as more than one product is produced at once Use of specialist machinery and skills can increase output and productivity, making the process more efficient than job production Disadvantages Potentially de-motivating for staff as tasks are more repetitive compared to job production Need to keep stocks of raw materials, which will impact on cash flow Time lost switching between batches, as machinery may need to be reset, resulting in a reduction in efficiency and productivity

17. Flow production The continuous movement of items through the production process. Flow production uses production lines to manufacture products.

18. Seabrook Crisps Watch the clip and draw a flow diagram to outline the production process used at Seabrooks

19. Seabrook – flow diagram

20. Benefits of using flow production

21. Drawbacks of using flow production

22. Give me 5! You have 5 minutes to list as many different products as you can that you believe would be produced by job, batch and flow production Explain why this production method is appropriate to each of the products identified

23. Assessing your understanding Job Batch Flow Unit costs are at their lowest Staff motivation levels are usually at the highest Breakdowns of machinery will cause major disruption to production One group of identical products is made, followed by a different group Machinery may need to be changed every time a new product is made Low unit costs means that lower prices can be charged to customers Large groups of standard products can be produced quickly High prices can be charged to reflect the uniqueness of the product Businesses will need to spend large amounts to initially purchase expensive machinery Identify the type of production process each of the following statements relate to:

24. Productivity: All businesses want their production operation to be as efficient as possible. In order to do this, they will aim to maximise their productivity. Productivity can be defined as the amount produced (output) for a given number of employees (input) i.e. i t compares the number of workers with the output that they are producing. Clearly businesses want this to be as high as possible!

25. Let’s look at an example: Two window cleaner businesses have recorded the number of houses that they have cleaned the windows for in one day. Which business has the highest labour productivity during that day, assuming the house sizes are the same? Window Cleaning Business B has cleaned the most houses in the day – 60 in total However, Window Cleaning Business A has the highest labour productivity, as each member of staff on average has cleaned 8 houses’ windows, compared to 6 houses per worker for Business B Window Cleaning Business A Window Cleaning Business B Number of house s cleaned 40 60 Number of staff 5 10

26. Why does this matter? Let’s take a look… Window Cleaning Business A Window Cleaning Business B Number of house s cleaned 40 60 Number of staff 5 10 Average number of houses cleaned by each member of staff 8 6 As can be seen, Business A is more efficient, as even though the workers did not clean as many houses in total, each member of staff cleaned on average, 8 compared to 6 in Business B This means that the fixed costs of the wages of each staff member would be spread across more units or houses, lowering unit costs… which means that the business could enjoy a larger profit margin on each house that the workers clean, if it decided to charge the same price as Business B. However, if the market is very competitive, it is likely that these cost savings will be passed onto customers in the form of lower prices. If Business A is able to charge lower prices compared to Business B, then it is likely to attract more customers, as long as the quality of the service was the same!

27. How could a business improve its productivity levels? Remember, productivity relates to how much output each employee produces and is linked to efficiency and lowering unit costs. Production relates to the total quantity produced . So, how could a business increase its level of productivity? In pairs, you have 60 seconds to come up with as many ideas as you can.

28. Ideas…

29. Be the Business Advisor Peter Hall & Son manufacture high quality furniture by hand. The use of machinery would enable the business to increase its output. Should the owners of the business consider moving from job production to flow production? Justify your decision Remember to contextualise your answer!

30. About Peter Hall and Son

31. Feedback: some ideas… Reasons to keep the current job production methods Traditionally used this method since the business started in 1972 Customer expectations; the business has loyal customers and has built a reputation based upon producing hand made products Unique products differentiate the business from rivals in the very competitive furniture market Staff are highly skilled; they are likely to enjoy the job and therefore staff retention will be high Higher prices can be charged for high quality, unique furniture which will help to pay for the high quality raw materials e.g. wood that is used in the production process and for higher labour costs Reasons to change to flow production methods The business would become more efficient, as it could produce more furniture in the same amount of time Average unit costs of production would fall, meaning that the business could lower its prices to customers or it could keep a larger profit margin on each item sold Peter Hall and Son operate in a highly competitive market and therefore being able to reduce prices may increase demand for its products The use of machinery would mean a consistent quality could be maintained on each piece of furniture produced

32. For each of the products shown explain: The production process being used Two advantages of this production process Two disadvantages of this production process Recap of Production Processes