2 4 resource management

Production is the transformation of resources (e.g. raw materials, components and processes) into finished goods or services.

Job production is when manufacturers produce one product at a time as ordered by the customer.

Flow production is the continuous manufacturing of standardised products, usually on a production line.

Batch production is when groups of the same product are produced. This method is commonly used in food production.

False. Productivity is the output per input (person or machine) per hour, while production is the total amount of output produced in a time period.

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True. Increased automation can improve levels of output and quality because well-maintained machinery is less likely to make mistakes than humans and can operate for long periods without a break.

Efficiency is the ability of a business to use its production resources as cost-effectively as possible.

Labour-intensive production predominantly uses physical labour in the production of goods and services.

Capital-intensive production predominately uses machinery and technology in the production of goods and services.

False. Workers with autonomy are less likely to need close supervision.

Downsizing means moving production to a smaller location to reduce fixed costs.

Lean production is an approach to manufacturing that involves the reduction of all types of wastage.

Competitiveness is the ability of a business to maintain or grow its sales and market share given the presence and actions of rivals.

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Capacity utilisation measures the extent to which business assets are being used to produce output.

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True. Under-utilisation of capacity leads to increased unit costs as fixed costs are spread over fewer units of output, resulting in higher average total costs.

False. There is little opportunity to engage workers in maintenance tasks if a business is operating at full capacity..

Over-utilisation of capacity refers to a situation where a business is using all or more than its maximum production capacity.

True. Operating under capacity provides a business with flexibility and the opportunity to engage workers in maintenance tasks.

True. Over-utilisation of capacity can lead to machinery being pushed to its limits and prone to breakdowns, which disrupts production and increases costs.

Under-utilisation of capacity means that a business is not making the most of its available production resources and is likely to have increased unit costs.

Redeployment means moving underused resources to other parts of the business that need them.

True. Selling fixed assets or reducing staff levels can increase capacity utilisation but reduce flexibility to respond to sudden increases in demand.

Buffer stock is a quantity of components, raw materials or finished goods kept in case of stock shortages.

Just in Time (JIT) stock management is a process in which neither raw materials nor components are stored onsite but ordered as required and delivered by suppliers 'just in time' for production.

True. Poor stock control can lead to holding too much stock, resulting in higher storage costs.

A stock control diagram illustrates the flow of stock (inventory) into and out of a business over time.

Stock shrinkage refers to the loss of inventory due to factors such as theft, damage or accounting errors.

False. Just in Time (JIT) stock management does not generally allow for bulk buying economies of scale.

The lead time is the length of time between the point at which stock is ordered from the supplier to the point at which it is delivered.

The reorder level is the level at which a business places a new order with its supplier.

True. Holding too little stock is risky, as a business may run out of stock, resulting in a loss of potential sales revenue.

The maximum stock level is the maximum amount of stock a business is able to hold in normal circumstances.

The minimum stock level, also known as the buffer stock level, is the lowest level to which a business is willing to allow stock levels to fall.

Just in case stock control involves the holding of buffer stocks in case of stock shortages, so as to provide a competitive edge over rivals that are unable to meet demand.

The opportunity cost of holding buffer stocks is that it ties up capital that could be invested in other areas of the business.

False. In lean production, less labour is used as it is typically a capital-intensive process.

Obsolescence occurs when an asset (e.g. stock) becomes out of date, is no longer useful, or is no longer capable of being sold.

True. Businesses that use just in time stock control develop close working relationships with a small number of trusted suppliers.

Quality control is inspecting the quality of output at the end of the production process.

Quality assurance is the ongoing checking of quality throughout the production process.

A quality circle is a group of workers that meets regularly to solve quality problems identified in the production process.

Total quality management (TQM) is the organisation of the business with quality at its core and with every worker responsible for quality.

False. Quality control involves inspecting the quality of output at the end of the production process, with little focus on the cause of defects.

Reworking involves fixing or reassembling items that would otherwise fail quality control inspections.

False. Unit costs are likely to be low if a business takes a preventative approach through the use of quality assurance, or TQM.

Continuous improvement (Kaizen) involves a business taking continuous, small steps to improve productivity through the elimination of all types of waste in the production process.

True. For quality circles to be effective, management needs to have trust in workers' views and solutions.

False. Kaizen involves small and ongoing changes rather than significant one-off improvements.