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3.4 How do businesses operate1 Unit 3.4 How do Businesses Operate?

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Presentation on theme: "3.4 How do businesses operate1 Unit 3.4 How do Businesses Operate?"— Presentation transcript:

1 3.4 How do businesses operate1 Unit 3.4 How do Businesses Operate?

2 3.4 How do businesses operate2 What is Production? 3 stages: inputs  process  output The making and providing of both goods and services This is also known as the production mix or IPO

3 3.4 How do businesses operate3 Using the 4 Factors of Production Capital Enterprise Labour Land

4 3.4 How do businesses operate4 Methods of Production 7 Nature of the product 7 Number of customers wanting to buy 7 Labour 7 Technology Depends on:

5 3.4 How do businesses operate5 Methods of Production Job production Batch production Flow production

6 3.4 How do businesses operate6 Job Production A job is done from start to finish, then another job is started, eg bridge building, wedding cake manufacture AdvantagesDisadvantages Personal touch – made to customer requirements Labour-intensive skilled workers – probably expensive More motivating to workersCost not recovered until job finished

7 3.4 How do businesses operate7 Batch Production Number of similar lines of production - each line will be produced in a batch before the next batch is started eg Tesco bakery, chocolates in Oban Chocolate Co AdvantagesDisadvantages Can be suited to the needs of the customer Careful planning required Less skilled workers –cut costs Reduced worker motivation Click for video

8 3.4 How do businesses operate8 Flow Production Product is passed down a line with a series of operations eg car manufacture, soft drink production AdvantagesDisadvantages Goods produced on a large scale – economies of scale Expensive to set up Products are identical Less skilled workers –cut costs Workers lack motivation Technical problems can halt production Click for video

9 Stock Control 3.4 How do businesses operate9 Purpose – to ensure a supply of stock (raw materials) available for the production process and for distribution (finished goods). Raw materials – resources for production Types of stock: Work-in-progress – semi-finished Finished goods – waiting to be distributed

10 Keeping Stock Secure 3.4 How do businesses operate10 Stock must be kept secure against internal and external theft

11 Manual Stock Record Keeping (on paper) 3.4 How do businesses operate11 Records must be kept of stock ordered, received and used

12 Computerised Stock Control 3.4 How do businesses operate12 Most organisations now computerise their stock control system. Barcodes are scanned which automatically record stock received and used. This permits stock to be recalculated automatically and is often linked to automatic ordering of new stock.

13 Length of Storage Period 3.4 How do businesses operate13 Stock should not be kept for long periods of time – goods can deteriorate or go out of date. Stock also ties up money so business must hit the right balance of having enough stock to operate but not so much that it will spoil. Refridgeration unit Parts storage Finished goods storage

14 3.4 How do businesses operate14 Re-order level – depends on production needs, delivery time, etc. details of each item of stock – a record of each item held is necessary to ensure that there is never a shortage of necessary materials. Stock Control: Maximum stock level – depends on space, delivery time, etc Minimum stock level – depends on buffer stock needed, etc

15 Graph illustrating traditional Stock Control System 3.4 How do businesses operate15 Traditional method where stock never falls below minimum stock level

16 Just-in-Time Stock Control JIT is where the manufacturer orders goods from suppliers only when they need stock. This means that stock levels do not build up, however there is no emergency or back-up stock. Manufacturers must be able to rely on suppliers delivering the goods immediately. 3.4 How do businesses operate16 Click for video

17 Advantages/Disadvantages of Just-in-Time Stock Control AdvantagesDisadvantages Up-to-date raw materialsVery dependent on suppliers for quality and punctuality No over-stockingProduction held up if supplies are late – no stock to fall back on No storage costsDifficult to expand production at short notice No money tied up in stock 3.4 How do businesses operate17

18 Graph Illustrating Just-in-Time Stock Control 3.4 How do businesses operate18 Just-in-time method where stock levels fall to zero before new supplies are bought

19 Comparison of Traditional and Just-in-Time Stock Control 3.4 How do businesses operate19

20 3.4 How do businesses operate20 Costs of holding stocks: Benefits of holding stocks: Supplies available when needed Bulk buying Discounts Customer orders/increases can be met Money, and Warehousing, insurance, risk Labour costs of stock control

21 3.4 How do businesses operate21 How do Products Get to Consumers? € Retail outlet – shop eg JB Sports € Mail Order - Littlewoods € Wholesaler – sell to Trade and Retailers eg Bookers € Internet website – MandM Direct € Door-to-door - Avon € Catalogue € Home Delivery

22 3.4 How do businesses operate22 Manufacturer to Wholesaler to Retailer to Customer

23 3.4 How do businesses operate23 Manufacturer Retailer to Customer

24 3.4 How do businesses operate24 Manufacturer to Customer

25 3.4 How do businesses operate25 Distribution - Product must reach consumer when they want it

26 3.4 How do businesses operate26 Which distribution method?  perishable/fragile – least handling possible  low value – wholesaler (holds large stocks)  specialist – personal link with customer  require special installation

27 3.4 How do businesses operate27 People v Machines Mechanisation This refers to a process where workers are replaced by machines – but human input is still required eg workers operating machinery Fully Automated This refers to a process where machines completely replace workers – machines are programmed to operated with minimum supervision. Click on pizza for video Click on robot for video

28 Advantages/Disadvantages of Mechanisation/Automation AdvantagesDisadvantages Increased outputHigh cost of buying and installing equipment Workers can produce moreHigh cost of training staff Better quality – less chance of human error Breakdowns and technical difficulties can stop workflow Greater variety of machinery available which can be adapted to carry out different processes Can result in workers losing their jobs and higher unemployment Robots can do work which is dangerous Machine can’t answer queries 3.4 How do businesses operate28

29 3.4 How do businesses operate29 Effect on Workforce of Automation/Computerisation Many jobs have been lost especially in manufacturing where machines can do repetitive, unskilled tasks Demand for skilled workers has increased Skills required to manage and control production Workers expected to be multi-skilled Governments and industries must put money into training staff appropriately

30 The Importance of Quality How might products or services be improved: –Better raw materials –Improved packaging –More eco friendly –More care with production process 3.4 How do businesses operate30

31 3.4 How do businesses operate31 7 Must find out who you are selling to 7 Can produce a range of products for different types of customers QUALITY Low quality + low price product High quality + high price product

32 Why is Quality Important? 3.4 How do businesses operate32 Quality raw materials After-sales service Quality of production (click for video) Quality targets should be set and monitored, and procedures should be set up to deal with areas in which quality is not meeting the targets. If quality is poor, demand will fall as customers will not return so profits will fall as the company reputation suffers.

33 Methods of Improving Quality Quality Control This is where one department is responsible for checking and monitoring quality. Inspectors check final product and scrap them if they are substandard. This means, however, that substandard items are not found till the end of the process and results in high waste levels. 3.4 How do businesses operate33

34 Methods of Improving Quality Quality Assurance/Quality Circles Workers are organised in teams to ensure quality during and after production. These teams may be known as Quality Circles. 3.4 How do businesses operate34

35 Methods of Improving Quality Total Quality Management This is the newest form of quality control where views are sought by –Involving customers in quality monitoring by asking how satisfied they are with quality of product or service –Also involving workers in quality control –People will also work in teams to help each other 3.4 How do businesses operate35

36 Advantages/Problems of Quality Checks AdvantagesProblems Less likelihood of customer dissatisfaction Time involved in consistently checking production Attempts to improve and stabilise production Need more manpower to carry out quality checking process Good reputation for company Higher revenue through Less waste of materials and substandard products 3.4 How do businesses operate36

37 3.4 How do businesses operate37 Questionnaires to customers, suppliers, workers, etc Why? – to find out customer attitudes, staff attitudes, levels of waste, how to develop products, need to change? etc Click for video How Can an Organisation Assess Itself?

38 Customer Services Treatment of customers by staff on the phone, in the shop, at the checkout Replacement of faulty goods Reaction to complaints Quality of goods, etc After-sales service, eg installation, guarantees 3.4 How do businesses operate38

39 Methods of Monitoring Customer Service MethodDescription Questioned by staff (interviews) Customers may be asked questions, eg on the telephone, about the standard of service they have received. They can take a short time but provide valuable feedback. Undercover customers (mystery shoppers) A shopper is employed to report on service received. The shopper does not identify themselves so the business will not know they have been assessed until they receive a report. Consumer panel (focus group) A group of customers is asked to attend a meeting to feed back on products and service received. Expensive to organise but customers can be questioned in depth. Customer questionnaires Often a written or on-line survey to guage customer opinion. Response rate can be low (few people complete the forms) so sometimes a competition is organised to encourage people respond. 3.4 How do businesses operate 39

40 How to Improve Customer Service Get things right, first time, every time Improve customer experience eg by modernising business, setting up website Ensure orders are processed accurately Respond quickly and politely to queries Provide products on time and to agreed price and quality Respond fairly to customer complaints 3.4 How do businesses operate40

41 Why are Businesses More Consumer-Led? 3.4 How do businesses operate41  To increase their market share  Keep existing customers  Attract new customers  SURVIVE

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