1. PRODUCTION AS AN ECONOMIC ACTIVITY
Objective 2.03

2. Importance of Production
The economy begins with production.
Consumers need Products/Services to satisfy their needs and wants.
Businesses also need Products/Services
To use in/with their own Products/Services.
To resell to consumers.

3. The three categories of products used by business and consumers are:
Natural Resources – raw materials supplied by nature
Agricultural Products – crops and animals grown my farmers
Processed Goods – products that have been changed in form to increase their value and usefulness

4. The following types of businesses make products:
Producers – develop products to sell to other businesses or consumers
Extractors – obtain natural resources, such as water, oil, coal, and timber, from the earth for processing and use
Farmers – tend land and other natural resources to grow crops and livestock that are later sold and processed
Manufacturers – obtain materials from other producers and convert them into products for sale to consumers and other businesses

5. Extraction and Cultivation
Types of Production
Extraction and Cultivation
Processing
Manufacturing
Obtaining products from nature or using natural resources to grow
Examples:
Chicken
Tomatoes
Broccoli
Changing and improving the form of another product
Examples:
Honey
Mango
Soil
Combining raw materials and processed goods into finished products
Examples:
Cosmetics
China
Shoes

6. Types of Manufacturing Procedures
Mass Production
Custom Manufacturing
Material Processing
The process of using assembly activities to produce large quantities of identical products
Examples:
Krispy Kreme Donuts
Maybelline Lipstick
Nike sneakers
The process of producing a specific and exclusive product for a customer
Examples:
Ceramics
Prosthetic Limb
Signs
The process of changing raw materials to another form in order to be consumed or used to make other products
Examples:
Paper
Soap
Glass
Plastic
Steel
Cement

7. Production and Manufacturing Planning
Production and manufacturing involve the following activities in order to produce products:
Product Development
Production Planning
Inventory Management

8. Production Development
Improving an existing product or developing new kinds of products

9. Why Do Business Create New Products?
New product development is an important way for businesses to stay ahead of the competition and continue to appeal to the changing needs of existing customers. In addition, new product development can open up new marketing channels and help to increase market share.

10. Product Research
Performed by engineers and other scientists to develop new products or to discover improvements for existing products.

11. Applied Research
Marketing research that studies existing products to develop design improvements or new products.
Example: Engineers working for an automobile manufacturer will study the current designs to improve the efficiency of engines or increase passenger safety.

12. Pure Research
Discovers new solutions to problems – done without a specific product in mind.
Example: Scientists working for drug manufacturers study diseases and immune systems of the body. Their goal is to uncover treatments and cures.

13. Product Design
Turning the idea into a product that can be made and sold with a profit.
Creating models and testing them to come up with the best possible design.
Determining all the materials and parts needed for the final product.
Determining the cost of making the product.
Determining the selling price.

14. Production Planning
Production Process consists of activities, equipment, and resources needed to manufacture products.
Production Resources consists of machines, tools, and other equipment needed for production.
Personnel consists of employees and skills needed for production

15. Inventory Management
A detailed account of a company’s materials, supplies, and finished products.

16. Inventory Management
Maintains the supply of all resources needed for production and the products produced.
A vital manufacturing activity.
Keeping records of the supply and the cost of all resources used in production.
Ensure that suppliers deliver orders on time and in the correct quantities and price.
Maintaining adequate storage space to make sure the parts and materials can be easily located and moved to productions lines as needed.
Ensuring that materials are safe and secure and can be moved quickly and easily.
Moves finished products for storage or for immediate distribution to customers.
Keeping accurate product inventory in order to make sure orders can be filled.

17. Marketing Procedures

18. Continuous Process Improvement (CPI)
The purpose of CPI is to make sure manufacturing processes are completed as effectively and efficiently as possible.

19. Continuous Process Improvement (CPI) Six Steps:
Involve everyone.
Identify process activities.
Establish quality performance standards.
Select measurement tools.
Monitory performance continuously
Improve process quality.

20. Common Business Operations:
Facilities Management
Logistics
Scheduling
Safety and Security

21. Facilities Management
Buildings are one of the largest investments of a business.
House the work and workers
Provide space for all of the business operations
Provide space for storage of materials, supplies, and products
Facilities management protects the company’s investment.

22. Making Economic Decisions About the Buildings
Buy existing buildings
Building new buildings
Rent buildings
Studying long-term plans of the company
Are current building adequate, is more space needed, are some facilities no longer needed or out-of-date?
Purchase land

23. Building Maintenance and Repair
Scheduled cleanings
Painting
Carpets
Update Equipment
Exterior Maintenance
Landscaping
Repairs to facilities and equipment

24. Energy and Environmental Management
Energy costs - rapidly growing expense
Need a ready supply of electricity, gasoline, heating oil, and water
Keep utility costs under control
Ways to conserve energy resources
Monitor quality of air, building temperature, and other environmental factors to maintain a healthy and productive workforce

25. Logistics
Managing the acquisition, movement, and storage of supplies, materials, and finished products in a business.
Supply Chain Management – newer term for logistics
All of the businesses involved from the time raw materials are obtained until finished products are sold.
Major Activities
Locating sources of supplies
Purchasing
Transportation
Sales

26. Logistics (Continued)
Responsible for effective communication and information among everyone in the supply chain
Just-in-Time
Goods arrive when needed for production, use, or sale rather than sitting in storage
Requires careful planning and coordination among supply chain members.
Requires effective information system

27. Scheduling
Determining the activities that need to be completed, the people who will complete the work, and the resources needed for the task.
Scheduling Employees
Right number of Full-Time, Part-Time, Temporary Employees
The right number of employees to complete the scheduled work
Right number of employees with the right skills
Hire more/Reduce number of employees
Training
Determining daily/weekly work schedule
Schedule carefully so as not to exceed the budget but still get the work finished

28. Safety and Security Protecting people and property Security Safety
Study the resources and activities of a business to identify potential security problems
Prepare security plans and procedures to prevent problems whenever possible
Safety
Prevent accidents and injuries
Maintain safe work areas and work procedures
Provide safety training and enforce rules and regulations designed to reduce accidents
Place safety posters around the workplace
Recognize work units that have a record of no accidents or injiries for a period of time

29. Business Operation Tools
Management Tools
Technology Tools

30. Management Tools
Operational Plan – identifies how work will be done, who will do it, and what resources will be needed.
Operating Budget – is a detailed financial plan for a specific area of the business.
Schedule – is a time plan for completing activities.
Procedures – are lists of steps to be followed for performing a particular work activity.
Standards – are specific measurements against which an activity or result is judged.

31. Technology Tools
Supply Chain Management Software – allows cooperating companies to share order, production, and shipping information, track products, and exchange customer data.
Collaboration Software – also called groupware, provides real-time communications capabilities by voice, text, and video; allows team members working at their own computers from anywhere in the world to view the same documents on their computer screens and work on them as a team.
Computer Security – provides access and restrictions, usage data, privacy, and virus protection for computers and networks.
Inventory – helps the managements of sales, purchases, and payments; tracks production, usage, and sales levels; and even prints bar codes.

32. Technology Tools (Continued)
Project Management – Keeps track of project calendars, tasks, to-do lists, work assignments, and project resources.
Budgeting – Automates budget planning, compares budgets from one time period to another, and coordinates budgets among departments.
Document Management – controls the production, storage, and managements, and distribution of electronic documents
Manufacturing Automation – monitors and often controls manufacturing machines, checks for errors and defects, and reports on production levels.
Scheduling – manages employee, facility, resource, and production scheduling. Allows easy review of schedules by all participants as well as quick updating.