1. PRODUCTION/Operations
MAKING THE PRODUCT

2. THE 3 STAGES OF PRODUCTION
INPUT
Obtaining the necessary resources
(ingredients) to make goods and
services
PROCESS
Using all the resources (inputs) to
make finished goods/services
OUTPUT
The actual product/service
which is distributed to the
customer

3. For example:
Input  wool, labour, machinery
Process Garment is knitted
Output  finished product eg jumper
Suggest another example

4. OPERATIONS - what is it?
Changing raw materials into a product which can be sold to customers
The process of using resources to ADD VALUE to a product/service so that it meets the consumers’ needs.

5. WHAT IS VALUE ADDED? This is known as WEALTH CREATION
Companies are successful if they can add value to their input materials at each stage:
STAGE 1 STAGE STAGE 3
The cost of the wood to make the table is £5 and the table is sold for £80.
This is known as WEALTH CREATION

6. Quick Test
Name a sector of industry which extracts raw materials from the earth.
Name the sector of industry which takes the raw materials and makes them into finished goods.
What is the other name for the service sector?
List 3 inputs in the production of a car.
Describe how wealth creation can be measured.

7. Answers
Name a sector of industry which extracts raw materials from the earth. Primary Sector
Name the sector of industry which takes the raw materials and makes them into finished goods. Secondary Sector
What is the other name for the service sector?
Tertiary Sector

8. 4. List 3 inputs in the production of a car
4. List 3 inputs in the production of a car. Labour, steel, rubber, plastic, leather 5. Describe how wealth creation can be measured. This is the difference between the the value of the inputs and the value of the finished output

9. WHAT HAS TO BE DONE BEFORE A PRODUCT CAN BE MADE?
All new products must go through the Planning Stage to decide:
What is to be produced
How the product is to be made
Where production is to take place
How the product will be packaged

10. RESEARCH AND DEVELOPMENT
Design product
Build a prototype
Test and redesign
Trial launch
Test profit generation
Launch the product
Research
Ensure there is a market
Find best way of meeting demand
Is it efficient
Can it be mass produced
Is it of good quality

11. Methods of production
Click

12. PRODUCTION METHODS There are 3 main choices: JOB BATCH FLOW Watch me

13. JOB PRODUCTION
Item is specifically designed or built to order (customer requirements).
It is a one-off project
One job is completed from start to finish, then the business moves on to another job.
This type of production uses a lot of workers (labour intensive) who are skilled or specialists in a particular field.

14. ADVANTAGES Customer needs are met exactly – the “personal touch”
Changes can be made throughout the job through communication with the customer at all stages  
Sense of pride - staff can identify their contribution to the product/service  
Motivation – staff enjoy a change of challenge when the next job starts

15. DISADVANTAGES
Skilled workers are required – skilled workers normally get higher wage rates than unskilled  
Expensive because of uniqueness of product
Less opportunity for automation (use of machines and technology)

16. BATCH PRODUCTION
Is the process of making several identical products at once
Production stops at the end of each batch before the next batch is started
Can be highly automated but there has to be careful planning

17. ADVANTAGES
Flexible production method as each batch can be changed to suit the requirements of the customer 
A number of different products can be made using the same production line
Fewer skilled workers are likely to be required so this will cut labour costs 

18. DISADVANTAGES
Careful planning is required for the operation to run smoothly 
Motivation of workers may be reduced if they are not totally involved in the production process
Time delays – production time is lost resetting machinery for next batch
Good stock management required

19. FLOW PRODUCTION
This is used when large numbers of identical goods are produced in a continuous process.
It involves large quantities of machinery (automation) often controlled by computers.

20. ADVANTAGES Capital-intensive – the use of machines instead of people
Consistency – machines perform the same operation again and again to the same standard
24 hour production
Speed of production – machines can operate at a faster rate than people
Goods are produced on a large scale (benefits of economies of scale)

21. DISADVANTAGES Costs are high – investment in technology and equipment
Identical products – mass produced items have no uniqueness
Lack of motivation for workers – only seeing a small part of the job
If one part of the process breaks down then production must stop

22. Which method to choose? This will depend upon:
Nature of the product – standard or unique
Number of customers
Capital available
Skills and availability of the workforce
Level of technology
Premises/Location
Core Notes
Operations Unit
Page 12

23. PURCHASING mix Choosing the right supplier will depend upon: PRICE
QUALITY
Best price - depends on quality.
Not always best to buy cheapest
Depend on target market
Always important
Depends on the product and market
Consumers EXPECT quality

24. Delivered on time (undamaged) Price of transportation should be
DELIVERY
LEAD TIME
RELIABILITY
Delivered on time (undamaged)
Price of transportation should be
considered (cost of fuel)
The time between ordering the
goods and them being delivered
Constant standards from suppliers
Deliver the correct order on time

25. STOCK – Stock Control
Businesses must keep the correct amount of stock for their needs. What happens if a firm has too much or too little stock?

26. OVERSTOCKING Stock can be wasted or go out of date
Too much space is taken up – storage space costs money
Security is required to ensure the stock is not stolen
Money is tied up that could be used in other parts of the business

27. UNDERSTOCKING Production will have to stop
Customer will be let down – order not met
Customers may go to another business
Business will be lost
Reputation will suffer
Workers still have to be paid

28. STOCK MANAGEMENT The following needs to be considered:
The cost of storing stock (warehousing, security and insurance)
Risk of storing stock (theft, out-of-date)
Cash flow problems from overstocking
Loss of profit and reputation from understocking
How to manage stock levels

29. STOCK RECORD CARD
Each stock item should have its own Stock Record Card.
STOCK RECORD CARD
Units
Item
Maximum Stock Level
Minimum Stock Level
Reorder Level
Receipts
Issues
Balance In Stock
Date
Quantity
Invoice
Supplier
Requisition
Department
(units)
Received No
Issued

30. MINIMUM LEVEL – the least amount to be held in the stockroom
For diagram see page 7 (operations unit) in the Core Text
MAXIMUM LEVEL - the largest amount that should be held in the stockroom
MINIMUM LEVEL – the least amount to be held in the stockroom
REORDER LEVEL - when a new order is to be sent to replenish the stockroom
LEAD TIME – the time taken between order being placed and delivery

31. Just-in-time Stock Control
To keep stocks to a minimum, many organisations use just-in-time stock control.
Stock is not stored on the premises
Stocks is delivered straight to the production line when it is needed

32. ADVANTAGES Money is not tied up in stocks
Less costs in holding stocks/warehousing
Less movement/handling of stocks
Workers must be more accurate as there is not a supply of extra materials – wasted materials may stop production

33. DISADVANTAGES Complete reliance/dependance on the supplier
Always the chance of running out of stock
Increased costs for ordering and administration
Unable to fulfil last minute orders

34. Examples of companies who use JIT

35. PEOPLE VERSUS MACHINES
MECHANISATION - workers are mostly replaced by machines that they operate
AUTOMATION - is one step further and involves replacing workers fully by machines. The machines need minimum supervision.
What are the benefits of automation

36. QUALITY

37. Quality provides a competitive advantage
keeps customers happy and encourages return purchases
provides customer with information and builds confidence in the brand
reduces costs incurred in solving post sales problems

38. Ways to Ensure Quality of Product
Use some or all of the following:
Quality Management procedures
High quality raw materials
Highly trained staff
Up-to-date technology
Well maintained machinery

39. Quality
Techniques used by businesses to check the quality of their products:
QUALITY CONTROL
(TOTAL) QUALITY MANAGEMENT
QUALITY CIRCLES
QUALITY ASSURANCE
These details are not needed at National 4.

40. QUALITY CONTROL
At the end of the production process, products are checked to ensure that they meet agreed quality standards.
Any unacceptable products are then discarded as waste or sent back for reworking.

41. (TOTAL) QUALITY MANAGEMENT
QM requires everyone in the business to think about quality – not only production teams.
It is a system of doing things right first time and no errors are tolerated.
QM also relies upon good relationships with suppliers – all materials received should be subject to the same high quality standards.

42. QUALITY CIRCLES
Groups of employees meet regularly to discuss areas where improvements can be made.
By involving the employees in the process they can take ownership of the improvements – increasing motivation and productivity.

43. QUALITY ASSURANCE
Products are checked at regular intervals during the production process.
Quality Assurance is provided when a business guarantees the quality of their products.
If a firm reaches certain standards it will be awarded a quality mark.
Customers can buy with confidence

44. Quality Day in the Life of a Toyota production line worker.
What do these business experts say about the importance of quality?
How does quality impact on workers?
First clip from BBC. Second clip is from Blue Arrow , the recruitment agency used by Toyota. There are a number of clips on web produced by them.
Day in the Life of a Toyota production line worker.

45. Technology
We have already seen how important an internal and external influence Technology is on business.
All aspects of Operations are affected by technology – from ordering stock, maintaining stock records, producing the good or service, selling and delivering the finished product.

46. Technology See how a small bakery used technology to grow…
For any firm technology allows:
standardised product(s) to be produced – allows economies of scale
continuous production

47. Technology – allows the following
processing products in batches — allows many similar standardised products to be made using pre-programmed machinery
online ordering - with quicker timescales between ordering and delivery, meaning higher levels of customer satisfaction.