3.4 How do businesses operate1 How do Businesses Operate? 3 stages: inputs  process  output What is Production? the making and providing of both goods and services This is also known as the production mix or IPO

3.4 How do businesses operate2 What Resources does a Business Need Capital Factors of Production: Labour Enterprise Land

3.4 How do businesses operate3 Methods of Production 7 Nature of the product 7 Number of customers wanting to buy 7 Labour 7 Technology Depends on:

3.4 How do businesses operate4 3 Methods: JOB PRODUCTION – a job is done from start to finish, then another job is started ADVDIS Personal touch – made to customer requirements Labour-intensive + skilled workers – probably expensive More motivating to workers Cost not recovered until job finished

3.4 How do businesses operate5 BATCH PRODUCTION – number of similar lines of production and each line will be produced in a batch before the next batch is started eg bakery ADV DIS Can be suited to the needs of the customer Careful planning required Less skilled workers –cut costs Reduced worker motivation

3.4 How do businesses operate6 FLOW PRODUCTION – the product is passed down a line with a series of operations eg car manufacture ADV DIS Goods produced on a large scale – economies of scale A lot of money required to set up More capital intensiveProducts are identical Lack of motivation Breakdown – stop in production line

3.4 How do businesses operate7 Decision  people or machine production? Service industry – more labour-intensive eg Banking  uses cash dispensers, phone banking, etc Machine production – computer controlled Changed over past 30 years

3.4 How do businesses operate8 Using machines ADVANTAGESDISADVANTAGES Robots can do work which is dangerous Breakdown – does a person have the skills to take over? Lower labour costsLoss of personal contact and loss of jobs Consistency – less errorMachine can’t answer queries Constant production Increased speed and efficiency Workers expected to be multi-skilled

3.4 How do businesses operate9 7 Must find out who you are selling to 7 Can produce a range of products for different types of customers What about QUALITY? Low quality + low price product High quality + high price product Can produce:

3.4 How do businesses operate10 What is meant by Quality?  Means different things to different people  Consumers now more aware of quality Within production process:  Quality of supplies  Quality of production – testing (TQM)  Customer services

3.4 How do businesses operate11 Distribution - Product must reach consumer when they want it

3.4 How do businesses operate12 Which distribution method? Depends on: Product  perishable/fragile – least handling possible  low value – wholesaler (holds large stocks)  specialist – personal link with customer  require special installation

3.4 How do businesses operate13 Which distribution method? Market Depends on:  response time/service important – need direct link to customer  very large – need wholesaler to reach customer as early as possible

3.4 How do businesses operate14 How do businesses Control Stock? 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

3.4 How do businesses operate15 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

3.4 How do businesses operate16 Re-order level – depends on production needs, delivery time, etc. details of each item of stock Stock Control: Maximum stock level – depends on space, delivery time, etc Minimum stock level – depends on buffer stock needed, etc security of stock – cameras, etc to stop theft

3.4 How do businesses operate17 Just-in-time system of stock control: Order only when materials needed for production No emergency or back-up stock  Close link with suppliers Cost savings (stock levels almost non-existent)

3.4 How do businesses operate18 How can a firm assess itself? Questionnaires to customers, suppliers, workers, etc Why? – to find out customer attitudes, staff attitudes, levels of waste, need to change? etc

3.4 How do businesses operate19 Customer Services Politeness of staff  Quality of goods, etc  Reaction to complaints  Replacement of faulty goods

3.4 How do businesses operate20 Why are business now more consumer-led? Monitoring + Improving Customer Satisfaction  To increase their market share  Keep existing customers  Attract new customers  SURVIVE Feedback from customers – questioned by staff, undercover customers, consumer panel Customer questionnaires