Resource Management Resource management is all about the making of the product or service and delivering it to the client Marketing creates demand for the product or service, resource management supplies it It involves the following 5 steps Designing the product or service to meet customer needs Producing the product Working with suppliers Managing quality Achieving high levels of efficiency

Specification We will follow in specification order 4 lessons production 2 capacity utilisation 3 stock control 2 quality management

Production; different approaches: Job production. Producing a one-off item for a customer. Finish one before starting the next. Example? Hand made shoes, suits (can be £000s) Batch production. Set number of identical items are produced. Often uses machinery (eg not hand stitching, but using a machine), and labour specialises. Produce batch of one product before moving on. Examples? Boots for the army, bread Flow production. A production line. Often very automated with little labour, and the most efficient way to produce a good with predictable high-volume sales. Examples? Cars Cell production. Small production line or group which can produce flexibly and to order, but also with greater efficiency than job production. Examples? Custom bicycles

Productivity – what is it? Output Inputs per time period Formula: The inputs can be land or capital (machinery), but it is generally applied to labour Labour productivity is therefore a measure of how much each worker can produce. It may typically be measured per hour or per day Be careful: productivity is not the same as total production Firm 3 produces the most but is least productive (efficient). Firm 2 has the highest productivity Bicycles Firm 1 Firm 2 Firm 3 Workers 12 9 15 Output per day 42 36 45 Productivity (bicycles per day) 3.5 4.0 ?

Importance of productivity Output per employee is a key measure for a firm (or any organisation) The more productive a firm’s employees are, the cheaper its costs to produce each unit. Calculate wage cost per bicycle below In this case, the labour cost of producing a bicycle is only £22.50 in Firm 2, but £30 in Firm 3 This means Firm 2 can either earn higher profits, or it can lower its price and so be more competitive and thus sell more bicycles Bicycles, £ Firm 1 Firm 2 Firm 3 Workers 12 9 15 Output per day 42 36 45 Productivity (bicycles per day) 3.5 4.0 3.0 Daily wage rate (£) 90 Wage cost per bicycle (£) 25.71 22.50 30

Influences on productivity Quality of machinery/equipment The more a firm invests in modern equipment, the better it will be and the higher productivity will be Investment is generally lower in the UK than in other countries eg China (but this is also because our economy is more based on services than manufacturing, and services use less equipment)

Influences on productivity Quality of labour Do workers have the right skills and training to complete the job? Better educated and better trained workers can produce more and with fewer errors More jobs in the UK require IT literacy as well as other transferable skills (eg literacy and numeracy) UK firms do not always invest in training, worrying that workers leave for other firms once they have been trained But UK government is focused on training – look up Autumn Statement (Investing in Britain’s Future); 1 paragraph to be written Are they motivated? Can be a big factor in productivity. Will cover with Miss Cheetham (Were Chelsea players motivated this year? Man U?)

Measuring productivity Are there any problems with measuring productivity , ie can we measure it for everyone in a firm? Try for each of these (4 groups, 2 mins each) CEOs and other managers? Doctors? Lawyers? Receptionists?

UK productivity Before the financial crisis, UK productivity was above the EU average, and not far below Germany Following the financial crisis and recession in 2008, however, UK productivity fell, and has still not risen above 2008 levels In 2013, output per worker was 27% higher in France, 28% higher in Germany and a surprising 31% higher in the US This is called the UK productivity puzzle and has had an impact on the competitiveness of UK firms Fortunately, the UK specialises in high-end manufactures (eg Jaguar Land Rover) or services for which price is not the only factor determining competitiveness What are the other factors?

Efficiency and productivity Productivity is very closely linked with efficiency Though productivity may not include wastage or pollution Production is at its most efficient when costs per unit are at their lowest Larger factories tend to be more efficient than smaller ones Larger firms can buy in bulk, so costs per unit fall as output increases So as a firm produces more, costs per unit tend to fall However, if firms become too big, they become cumbersome and costs may increase There is an optimum output at which average costs are at their lowest AverageCost Cost (£) Output Minimum level of unit costs

Factors influencing efficiency As well as the scale of the business, other factors affecting efficiency include: How much wastage there is – are many products thrown away because their quality is inadequate? Are the machines being used the most up-to-date and so efficient (think of a 10 year old PC…)? Does the firm have the right number and type of workers as well as the right machinery?

Capital and labour intensity Labour-intensive means labour costs are a high percentage of total costs A firm uses labour rather than machinery Capital-intensive means the fixed costs of purchasing and running machinery are high A firm uses a lot of machinery Which industries or types of firms tend to be labour-intensive? Savile Row tailors (hand made) or makes of custom wedding dresses), hairdressers Smaller firms – in general cannot afford expensive machinery Service industry – what about schools? Job rather than flow production Which types of firms tend to be capital-intensive? High output of similar products eg cars – flow production Linked to industries with economies of scale

Labour-intensive production

Characteristics and +/- Labour-intensive Capital intensive