IGCSE Cambridge Business Studies 4th Edition, Karen Borrington & Peter Stimpson

2. Production involves
using resources to
make goods and
services to satisfy
consumer needs
and wants.

3.  The production process applies to
manufacturing as well as service
industries

4. Production is a process that starts
with using and managing resources
INPUTS
(economic
resources)

5.  Resources are the inputs to productive
activity.

6. Use many workers
and few machines
to produce goods
Where labour cost
are high, where
businesses use
machines/robots
and employ few
workers

8. OD’s role in a business is to take
inputs and change them into
outputs for customers use (physical
goods or services)

9. Operation
manager
Factory
Manager
Responsible for the
quality and
quantity of the
product
Purchasing
manger
Responsible for
providing the materials,
components and
equipment required for
the production
Research &
Development
Manager
Responsible for the
design and testing of
new production
processes and
products

10. Production adds value to the resources it
uses by turning them into products
consumers want and are willing to pay for.

12. For example, a business that produces
500,000 chocolate bars with a market
value of $1 million but which cost only
$700,000 to produce will have added
$300,000 to the resources it has used in
their production—labour, cocoa
powder, milk, machinery, vehicles, foil,
paper, electric power, etc.

13. For example, a business that produces 500,000
chocolate bars with a market value of $1 million but
which cost only $700,000 to produce, will have added
$300,000 to the resources.
It has used in their production—
labour, cocoa powder, milk,
machinery, vehicles, foil, paper,
electric power, etc.
What other resources
does the company
needed for their
production?

14.  The total output of a business
organisation is measured by the volume
or value of all the goods or services it
produces each week, month or year.

15. The level of production is the
output of the business
Productivity is how a business can
measure its efficiency
Productivity = Quantity of output
Quantity of outputs

16.  The aim of any business will be to
combine its resources in the most efficient
way.
 Productivity, measures how efficiently
resources are being used in production.

17. Productivity in a business will
have increase if more output
or revenue is produced from the
same amount of resources, or the same
output or revenue can be produced
using fewer resources.

18.  A firm that fails to increase productivity
at the pace or at a faster rate than rival
firms will have higher production costs
and therefore lower profits than its
competitors.

19.  Labour productivity is the most common
measure of productivity in a business

20. Labour productivity is calculated by
dividing total output over a given period of
time,
Average Productivity of labour =
_____total output_____
Number of employees

21. The average productivity
of labour is a useful
measure of how efficient
workers are and how
efficiently they use other
resources.

22. For example, if a company employs 10
workers who produce 200 plant pots each day.
How much is the average product per
employee?
the average product per employee per
day is 20 pots

23.  If the daily output will rise to 220 pots per day
without employing additional workers.
 How much is the average product per employee?
______________________
then productivity will have increased to 22 pots per worker
per day.

24. Productivity in business organisations
producing services can be more difficult to
measure.

25. For example, a hair salon could measure the
number of customers or hair treatments per
day per employee, but not all employees in
the salon will be hairdressers. Some may be
office staff or cleaners, so how can we
measure their productivity?

26. Productivity is also difficult to
measure in organisations that do
not produce a physical output
or earn revenue

27.  Training employees to
improve their skills and to
use new technologies
 Rewarding employees who
increase their productivity
with performance-related
pay

28.  Improving the working
environment to increase
employees’ job
satisfaction
 Introducing automation

29. In addition, productivity can be increase
by:
 Replacing old equipment and
machinery with new technologies
 Automating production by replacing
labour with modern computer-operated
machinery

30. Ways to
increase
producti
vity
Improve
employee
motivation
Introduce
new
technology
Improve
inventory
control
Train staff
to be more
efficient
Use
machines
instead of
people to
do jobs
(automation
)
Improved
quality
control/
assurance
reduces
waste

31. Increase output relative to
the inputs required
Lower costs per unit
(average cost)

32. Fewer works may be needed,
possibly leading to lower
wage cost
Higher wages for workers
increases motivation

33. Inventory
levels
Amount of
inventory
reordered to
return
inventory
levels back to
the maximum
Maximum
inventory level
Reorder
level
Minimum
or buffer
inventory
level
Time

34. Covers a variety of
techniques used by business
to cut down on waste and
therefore increase
efficiency.
introducing
new
processes
and
technologi
es to
reduce
waste and
inefficiency
in
production

35. Overproduction
Waiting
PRODUCING GOODS BEFORE THEY
HAVE BEEN ORDERED BY
CUSTOMERS.
WHEN GOODS ARE NOT MOVING OR
BEING PROCESSED IN ANY WAY THEN
WASTE IS OCCURING

36. Transportation
Unnecessary
inventory
MOVING GOODS AROUND UNNECCESARILY
CAUSES WASTE AND IS NOT ADDING VALUE
TO THE PRODUCT
IF THERE IS TOO MUCH INVENTORY THEN
THIS TAKES UP SPACE

37. Motion
Over
processing
Defects
ANY ACTIONS, INCLUDING BENDING OR
STRETCHING MOVEMENT OF THE BODY OF THE
EMPLOYEE WASTES TIME.
IF COMPLEX MACHINERY IS BEING USED TO
PERFORM SIMPLE TASKS THEN THIS IS
WASTEFUL.
ANY FAULTS REQUIRE THE GOODS BEING
FIXED AND TIME CAN BE WASTED
INSPECTING THE PRODUCTS

38. Quicker production of goods and services
Less storage of raw materials or components
Better use of equipment
No need to repair defects or provide a
replacement service for dissatisfied customer
Less money tied up in inventories
Cutting out some processes which speeds up
production

39. Kaizen
Just-in-time inventory
control
Cell production

40. All workers
can
participate
in kaizen in
a business
by
identifying
problems
and making
suggestions
to improve
production
and remove
waste.

41. The Kaizen effect: before
The Kaizen effect: after

42.  This involves suppliers
delivering components or
materials to production
lines ‘just-in-time’ for them
to be processed.
 It also known as ‘stockless
production’.

45. Cell production has
the flow production
line split into a
number of self-
contained units.
Each team or ‘cell’ is
responsible for a
significant part of the
finished article
rather than each
person only carrying
out only one very
specific task
team members are
skilled at a number of
roles, so it provides a
means for job
rotation.
Cell
Production

46. Choosing a
method of
production is
very
important in
keeping the
costs low.
Production methods
can vary from the
production of individual
custom-made products
to the continuous
production of identical
on a mass scale.

47. i) Job
production ii) Flow
production iii)Batch
Production

49.  This method is used to provide
goods & services that are
made or delivered to order.

50. Advantages Disadvantages
Products meet the precise
requirements of their customers.
It is labour intensive.
Businesses can often include a
premium in the price they
charge their customers to
reflect increased quality.
Wage costs can be high
and it is time
consuming.
Workers have varied jobs and
many can make a finished
product from start to finish. This
can motivate the workers and
create a sense of pride.
Any mistakes can be
expensive as the
products are produced
to order.

51. Involve mass
production of identical
or standardized
products in a
continuous moving
process.
products are
assembled, finished
and packed as they
move or ‘’flow’ along
a production line.
FLOW PRODUCTION

53. Advantages Disadvantages
Goods can be produced quickly
and cheaply.
The costs of equipment and
machinery required can be high.
Lower costs of production can
result in lower price.
Storage requirements and the
costs of stocks of materials,
components and finished
product can be substantial.Can reduce the number of
workers needed and cut labour
costs.
Automated production can be
continuous for 24 hours each
day.
Machinery break downs, power
cuts or supply problems with
components will hold up
production.
It allows workers to specialize in
specific, repeated tasks.
Workers undertaking repetitive
tasks may become bored.

54. involve producing a
limited number of
identical products
to meet a specific
requirement or
customer order
capsul

57. Advantages Disadvantages
A good way of adding
variety to otherwise
identical products to
give consumers a
wider choice.
It needs careful
planning to minimize
the amount of
unproductive time
between different
batches.
Workers’ tasks are
more varied than in
flow production,
reducing the risk of
boredom.
Costs will be higher
than for production on
a mass scale.

58. The nature of the product
The size of the market
The nature of the demand
The size of the business