GCSE Business Studies

Productivity

JITStock Control

Use of Technology in Production

Production:

The amount produced. It is sometimes referred to as:

“Output”.

Productivity:

The amount produced in a given amount of time. If you can increase the amount you

produce in a given amount of time, you have improved your

productivity.

Productivity

You have 10 workers who all produce 10 boxes of chocolates in one day. How many boxes of chocolates are produced in a 5-day week?

500 boxes of chocolate10 x 10 x 5

You train your staff so they become more skilled at producing the boxes. Their output increases to 20 boxes a day each. How many boxes are produced in a 5-day week?

1,000 boxes of chocolate20 x 10 x 5

Productivity

In our example, production (or output) has increased from 1,000 boxes a week to 2,000 boxes a week.

The firm has improved its labour productivity – the amount of products produced in a given amount of time.

In our example, the business has also improved its efficiency – producing more in the same amount of time. This reduces costs and therefore increases profit.

Productivity in ManufacturingHow could you improve the productivity of

your Top Banana boats?

• Train your staff to become more skilled in what they do

• Purchase machinery to do the work that humans would normally do

• Reduce Downtime: have systems in place to ensure that production never stops.

Downtime

1. Why would production of

your Top Banana boats

stop (Downtime)?

• Machinery breaks down

• Factory runs out of raw materials

• Workforce all become ill and can’t work

Production and ProductivityRikki Blake is the production manager for an

independent brewery in the West Midlands. It produces 6 different beers for 37 pubs in the region. Rikki wants to improve his productivity.

1. Using the case study, explain the difference between output and productivity. 3 marks

2. What is downtime and why might it occur in the brewery? 4 marks

3. Explain TWO ways in which Ricky can raise the productivity levels in the brewery. 6 Marks

Maximise Your MarksExplain TWO ways in which he can raise the

productivity levels in the brewery. 6 Marks

• 6 marks, TWO ways = 3 marks each• “Explain” means you must write a short paragraph• State the method = one mark• Explain one reason why it would improve

productivity = one mark• Explain your answer in the context of the case

study = one mark• Use terms such as “For example, …” and “This

means that …”

Example

Rikki could buy some new brewing equipment or he could change how he makes his beer.

2 Marks

Rikki could buy better equipment so that he could produce more beer. Or he could reduce downtime by making sure he does not make any errors when measuring out his ingredients.

4 Marks

Example

Rikki could purchase some new brewing equipment that produces more beer per day than the old machinery. This means he would be able to produce more barrels of beer each day and thus improve productivity.

Rikki could reduce his downtime by ensuring that all his brewers measure out the ingredients properly. This means there will be less errors and he won’t have to stop production.

6 Marks

Test Your Knowledge

Ginifer’s is a company which manufactures TVs. Last year, labour productivity rose by 10%. This means that:

a) Sales rose by 10%

b) Labour costs rose by 10%

c) Output per worker rose by 10%

d) Output rose by 10%

Test Your Knowledge

Belk’s is a company which operates a chain of sandwich shops. It wants to increase the productivity of its workers. Which ONE of the following is most likely to achieve this?

a) Opening a new sandwich shop in Londonb) Installing new coffee machines which make

coffee faster than the old machinesc) Hiring 20 new workersd) Tightening health and safety regulations in the

company’s outlets

Test Your Knowledge

In order to improve productivity in a factory, a manager could:

a) Give all staff a pay rise

b) Having too many raw materials

c) Offer overtime to staff

d) Make some staff redundant

Test Your Knowledge

“Downtime” in a factory may be caused by:

a) Replacement staff being employed when workers go on holiday

b) Train their staff

c) Staff working too hard

d) Machinery breaking down

Improving EfficiencyIn a group of four, elect a leader.

Leader must ensure the team produce as many boats as possible in the time given. Workers get paid two Smarties for their work.

In the second activity, each worker gets paid one Smartie for each boat produced – as long as it meets the specification.

Methods of Payment

Time Rate

Each worker is paid an hourly rate – regardless of how much they produce.

Piece Rate

Each worker is paid for each item they produce. The more they make, the more they earn.

Improving Productivity and Efficiency

Firms need to produce as much as possible in a given amount of time, for as little cost as possible.

What benefits are there of increasing productivity and improving efficiency?

The firm can make and sell more goods, reduce their running costs, and thus make more profit.

This makes the business more competitive because it can sell more goods and possibly reduce prices.

Lean Production

A Japanese approach to making products:

• Reduce waste as much as possible

• Use as few resources as possible

• Keep stock levels to a minimum

• Encourage workers to think of ways to improve their productivity

JIT (Just-in-Time) Production

A Japanese method that aims to keep stock levels to a bare minimum – ideally zero. The idea is that stock arrives in the factory immediately before it is used. This reduces the cost of having to store stock. The problem is that it requires co-ordination between the firm and its suppliers – otherwise the firm could run out of stock.

Improving Productivity and Efficiency

The washing machine factory needs to produce as many washing machines as possible in a given amount of time, for as little cost as possible. Using this business as your example, answer the following questions:

1. What benefits are there of increasing productivity and improving efficiency at the factory?

2. Explain the principle of lean production.3. Explain the principle of Just-in-time production.4. What is the possible disadvantages of JIT

production?

Test Your KnowledgeThe number of products produced in one day is called …• Production/output/productivityTWO ways of improving productivity could be …• Purchasing better equipment/training staffThe term that means the stopping of production due to a

fault is called …• DowntimeThe production method that aims to use as few resources as

possible is called …• Lean ProductionThe production method that aims to keep stock levels to a

bare minimum is called …• JIT (Just-in-time) Production

Stock Control

What are theconsequencesto the owner,Fred, of poor stockcontrol?(4 marks)

Fred’s BaitShop

Possible Consequences of Poor Stock Control in a Shop

• Dissatisfied customer

• Customer does not return for repeat sale

• Loss of sales revenue

• Loss of profit

• Customer goes to a competitor

• Customer tells their friends and family

• Bad image for the business

JIT (Just-in-time) Production requires accurate and efficient stock control systems. Firms must know exactly when they

need new stock from a supplier. Firms therefore use stock

control graphs.

““Just in Case” Stock Just in Case” Stock ControlControl

Requirements:1. We need a minimum amount of stock so

that we have enough ready if needed.(Buffer Stock)

2. We must never run out of stock.3. We must order supplies at the right time so

that supplies are replenished when stock is getting low. (Re-order Level)

4. We need to know how much stock to re-order. (Re-order Quantity)

5. We need to know how long our suppliers will take to supply our stock when we put in an order. (Lead Time)

Managing Stock Control: Fred’s Worms

Maximum Stock Level

Minimum Stock Level

Re-order Level

Time in weeks

Sto

ck

Level

2 4 6 8

Buffer stockLead Time

5

10

15

20

Managing Stock Control: Maximum Stock Level

Minimum Stock Level

Time in days

Sto

ck

Level

3 6 9

Buffer stockLead Time

20

30

40

50

60

Re-order Level

Task 1

Managing Stock Control:

Maximum Stock Level

Minimum Stock Level

Time in weeks

Sto

ck

Level

2 6 8

Buffer stockLead Time

10

20

30

Re-order Level

4 10

Task 2

Stock Control: Revision

• What are the advantages of having a “just in case” stock control system and holding buffer stock?

• What are the disadvantages of holding buffer stock?

Test: Jollife Metals Page 45, Q 1-6

Job Production

Increase Productivity

Stock Control

Batch Production

Flow Production

Output

Piece Rate

Downtime

Buffer Stock

JIT(Just in Time)

Quality• Quality Control• Quality Circles and the Kaizen

technique• Quality Assurance

Complete the Quality Control Activities

Quality Control

• Quality inspectors check that standards have been met at the end of the production process: standards are consistent

• Ensures that quality standards are met and the customer does not receive a sub-standard product

• Could be a lot of waste – fault is only identified at the end of the production process

Quality Assurance• Builds quality into every stage of the production

process – not left until the end. When the product is sold, the business can assure the customer it is a quality product.

• Every worker is responsible for making sure that the work they do meets quality standards.

• More time consuming for the workers.

• Each worker may have different standards; therefore no consistency.

Quality Circles and Kaizen

• Constant improvement – quality and standards are always getting better. Find a problem, solve it, then identify next improvement and solve it, etc

• Japanese principle – “Kaizen” meaning “constant improvement”

• Time consuming meetings – reduces production time

Page 46+48

Page 461. What is quality control?2. What is quality assurance?3. What is the principle of the Kaizen technique?

Page 484. What do the BSI (British Standards Institute)

do?5. What does a Kitemark show?6. What are ISOs?

Test Your Knowledge …

Which method of production is being used if you produce personalised t shirts?

a) Batch Production

b) Job Production

c) Flow Production

Test Your Knowledge …

Which method of production is being used if you produce white sliced loaves in the morning and brown sliced loaves in the afternoon?

a) Batch Production

b) Job Production

c) Flow Production

Types of Production: Job, Batch, Flow

Which method of production did Henry Ford use to manufacture his black Model T cars?

a) Batch Production

b) Flow Production

c) Job Production

Methods of Payment

The method of payment where a worker is paid for the number of items produced, is called:

a) Time rate

b) Piece rate

c) Item rate

d) Production rate

Quality

A car manufacturer checks the quality of their cars at the end of the production process. If there is a fault, it is corrected at the end of the production process. This is called:

a) Quality inspectionb) Quality assurancec) Quality controld) Quality checking

Quality

The car manufacturer changes their production process so that every worker is responsible for ensuring quality standards are met. This is called:

a) Quality inspection

b) Quality assurance

c) Quality control

d) Quality checking

Stock Control

A business aims to keep at least 2,000 metal sheets in stock at any one time. This stock is called:

a) Back-up stockb) A stock checkc) The maximum stock leveld) Buffer stocke) The re-order level

Stock Control

The managing director of a company has a policy of JIT stock control – ordering stock only when absolutely necessary. However, all too often production has to stop because they have run out of materials. This would suggest that:

a) The maximum stock level is too high

b) The re-order level is too high

c) The minimum stock level should be lowered

d) The buffer stock level should be raised