MYP Production

LQ: To what extent are economies of scale only available to large businesses
Learning Objectives
Define economies of scale
Explain the different types of economies of scale
Explain diseconomies of scale
MYP Production
Assessment due 8th Feb
Using the graph for help define economies and diseconomies of scale.
Definitions
Economies of scale is the decrease in unit costs as output increases

Diseconomies of scale is the increase in unit cost as output increase


Take 5mins to discuss with the student next to you the causes of economies and diseconomies of scale
Question to answer:

Define the different types of internal economies of scale

Identify EOS advanatages
Internal EOS
Technical - capital

Financial - loans, lower interest, share capital

Managerial - high quality managers

Risk bearing - range of products and industries

External Economies of Scale
Skilled labour - reduces training costs

Infrastructure - roads, rails and IT improves efficiency

Ancillary services - suppliers set up

Co - operation - frims helping each other e.g R & D
Diseconomies of Scale
Bureaucracy - too much admin and paper work wastes time. Slow communication

Labour relations - relations with workers deteriorate

Control and co-ordination - larger businesses harder to control
Production : Economies of scale
Internal economies of scales
External economies of scale
Diseconoimies of scale
Three examples of specfic/real companies benefit from economies of scale
LQ: To what extent is disconomies of scale inevitable .

IWBT:
Identify internal EOS
Explain diseconomies of scale
Apply to real businesses
Economies of Scale
Types of Production
Job Production
Job production is where a business produces one product from start to finish before moving to the next. Each item is different e.g Burj Khalifa, wedding dress, custom made watches

Advantages:
High quality
Unique products
Higher price
Higher motivation

Disadvantages
High labour cost
Production may be slow
Specialist tools needed
Expensive production



Batch Production
This is when a business makes a number of products of the same design

Advantages
Specialization
Economies of scale
Flexible production
Use of capital


Disadvantages
More capital needed
Planning
Less motivation
Small batchs high unit cost
Flow Production
Flow production is when a business sells huge quantities of output in a mass market.

Division of labour occurs with operations carried out, one after the other.

Advantage:
Low unit cost
Production very fast
Technology adds flexibility

Disadvantages:
Standardized products
High capital costs
Low motivation
Breaks in production expensive




LQ:To what extent can firms combine methods of production to improve production processes.

IWBT:
Identify methods of production
Analyse the methods of production
Produce papaer airplanes accroding to the mthods of production


Methods of Production
Job production:
Explained
Advantages/disadvantages
Examples of products
Batch production:
Explained
Advantages/disadvantages
Examples of products
Mass/ flow production:
Explained
Advantages/disadvantages
Examples of products
Produce a paper airpline according to:
1. Job
2. Batch
3. Flow / mass
Production Activity
Produce 7 paper airplanes using:

1. Job production:
2. Batch production:
3. Mass production

Steps:
1.Discuss and plan the production
2. Consider the output that is needed.
3. Consider how it is produced and the different stages.
Productivity
Productivity
Define productivity

Identify the different types of productivity
State the formula for each type of productivity identified
Explain strategies to improve each type of productivity
Reflection Activity
After the production activity outline what additional knowledge you learned about production methods
A company that processes fruits and vegetables is able to produce 400 cases of canned
peaches in one half hour with four workers. What is the labor productivity.
Find the productivity if four workers installed 720 square yards of carpeting in
eight hours.

Compute for the productivity of a machine which produced 68 usable pieces in two
hours.

A company that processes fruits and vegetables is able to produce 400 cases of canned
peaches in one half hour with four workers. What is the labor productivity?
Solution:

Labor productivity = Quality Produced / Labors Hours
= 400 cases (4 workers x 1/2 hours / workers)
= 200 cases per labor hour





Find the productivity if four workers installed 720 square yards of carpeting in
eight hours.

Compute for the productivity of a machine which produced 68 usable pieces in two
hours.
Solution:

a) Productivity = yards of carpeting install / Labors Hours worked
= 720 square yard / (4 workers x8 hours / worker)
= 720 yards / 32 Hours
= 22.5 yards/ hours


b) Productivity = Usable Pieces / Production Time
= 68 usable pieces / 2 hrs
= 34 pieces/ hours
LQ: What is the difference between production and productivity?

IWBT:
Define productivity
Explain the different categories of productivity
Calculate productivity
Refection/ Revision
In one paragraph summarize your knowledge on the different types of production

Compete without notes

10mins
Productivity
Productivity is the rate or efficiency of production with a given quantity of resources.


Formula:



Labour productivity = Total Output / No. of workers



Capital productivity = Total Output / Capital Employed


Increasing Productivity
Labour Productivity

Education & training
Improved motivation
Improved working practices

Capital Productivity
Update machines and software
Introduce new technology


Lean Production
Define Lean Production
Explain in detail the kaizen apporach
Just in time production anaysis (adv & disadv)
Outline cell production
LQ: To what extent does lean production minimizse waste in businesses.

Learning Objectives:
Define lean production
Explain the Kaizen approach
Analyse JIT stock control
Lean Production
A japanese philosophy developed by Toyota that aims to minimise waste through using fewer resources.

Raises productivity
Reduces costs and lead times
Reduces number of defect products
Improves reliability and seeds up product design
Kaizen
Kaizen is a japanese word which means continuous improvement.

New ideas to improve quality and production methods

Promotes a culture of innovation

Workers need to be trained and skilled
Just In Time Production
Business hold minimal stock with suppliers delivering supplies as the business needs them.


Advantages:
Cash flow improved
Reduces damages stock
Less space needed
Strong links with suppliers

Disadvantages:
Higher ordering and admin costs
Reliance on suppliers
No bulk buying

To what extent can technology improve business operations
IWBT:
Complete Kaizen case study
Analyse the impact of technology in manufacturing
Assessments
Explain the terms:

Computer Aided Design

Computer Aided Manufacturing

Computer Integrated Manufacturing
New Technology Activity
Identify new technologies used in:

Financial services
Marketing
Retailing
Hotels
Airline industry
Education
E - Commerce
Define e-commerce

Analyse the benefits & drawback of firms using e-commerce
Businesses can improve their efficiency and competitiveness by introducing new technology in both production and administration.
While new technology can be expensive to install, increased productivity and savings made in running costs and reduced wastage usually compensates for the cost.
While new technology improves productivity and reduces costs, it may lead to the loss of traditional skills and to unemployment. Some workers might become demotivated as they cannot cope with the necessary changes

Summary

Computer-aided design (CAD) – designing products and projects using computer-generated drawings and models
Computer-aided manufacturing (CAM) – using computers to control machinery
Computer-integrated manufacturing (CIM) – controlling a factory or production line through computers
E-commerce (electronic commerce) – the buying and selling of goods and services via the internet
Electronic funds transfer at point of sale (EFTPOS) – transferring money from customer’s bank account to the bank account of the supplier electronically, usually through the use of electronic tills
Information and communications technology (ICT) – the use of computers, other electronic means, to process and distribute information
Internet – the worldwide network of computers that can be accessed through the telephone system, using PC or modem
Intranet – a networked group of computers

Key terms

Focus on how the business will affected by technology in terms of costs and opportunities (savings and expenditure) and the implications for the staff. Remember to look at both the positive and negative issues.
You may need to consider the social costs of new technology:
Job losses
Motivation of workers – worried about machines taking over their jobs (though extra training to work with machines may provide some increased motivation)
Loss of traditional skills


Top tip

You work for a company that owns three supermarkets. The owner of the company is impressed with the internet and thinks that it should start an e-commerce department selling the products it sells in its supermarkets. Write a report for the owner explaining the advantages and disadvantages to the company of selling on the internet.

Activity 7.3

Customers need to own or have access to a computer and be on-line and know how to use the Internet.
It is not easy to assess the quality and suitability of many products on the screen.
Inconvenience of returning unwanted goods.
Customers usually have to have a credit card to make Internet purchases
Security risks of buying on-line

What do you think are the disadvantages for customers of using e-commerce?


Being part of the global market means the business is in competition with lots of others
Designing and keeping the website up-to-date is expensive and requires specialists
Market research needs to be very detailed to meet the needs of customers in such a wide market
Packing and distribution of products can be very costly and involve long distances
Not all the businesses target customers have access to the internet.


Disadvantages of e-commerce for a business


Customers have a huge range of goods to choose from
They can ‘shop around’ the ‘web’ for the best bargain
Internet prices are often lower than in shops
Customers can shop from the comfort of their own home ‘24/7’


What do you think are the advantages for customers of using e-commerce?


Access to the global market means the business will be better known
A business using e-commerce can get ahead of its rivals
Increased sales, leading to increased profit
Savings on expensive showrooms
Reduced advertising costs
Increased sales leads to ‘economies of scale’
Business is open 24/7

Advantages of e-commerce for a business


What do you think are the advantages for businesses of using e-commerce?


Using E-commerce gives businesses access to customers all over the word.
This is known as ‘The global market’ which is reached by means of a website.
Think of examples of websites you or your family frequently use to make purchases.


E-commerce

E-commerce is short for ‘electronic commerce’

It means buying and selling goods using the Internet.


E-commerce
What is it?

Explain how introducing new technology can cut costs and bring other benefits to a business.
What drawbacks might there be?
On balance, do you think introducing new technology is always good for a business?

Activity 7.2

The introduction of new technology may affect:
Costs
Labour
Production methods
Marketing
Although it may be expensive to to buy, install and maintain, the cost is usually offset by savings in labour costs and increased productivity.
Machines are generally faster, more accurate and more productive than people without the boredom and complaints of staff.

The effects of new technology

Using computer-aided design (CAD), a product can be designed and displayed in three dimensions on a computer screen. It is even possible to test the design, using computer programs that will calculate the strength of the materials from which the finished product will be made, showing how it will react in different circumstances.
This is important when designing things like motorway bridges and aircraft.
Therefore new production technology can increase the speed of production, improve the quality of the product and reduce costs per unit of production.


New technology in production

Introducing new technology in the production of goods normally involves the use of computers.
In computer-aided manufacturing (CAM), computers control the machinery and equipment. This reduces the need for labour. Computer-aided manufacturing can be extremely accurate in producing a high-quality product.


New technology in production

Select a business to investigate. The business you choose should be one that you know well and that you can investigate easily. You may use your school or college if you wish. Find out what ICT is used at your selected business.
What is it used for?
Has the business benefited from the use of ICT? How?
Have there been any drawbacks?
How have the drawbacks been resolved?

Activity 7.1

Today, customers expect even the smallest of businesses to have a professional, informative website. Businesses that have failed to embrace the advancement of communications and ICT have put themselves at a disadvantage.
It is now common for adverts to include a web address in addition to, or even instead of a phone number.



Recent developments


Until the mid-90s it was not possible to shop online. The closest alternative was shopping by phone.
The same was true for banking and all the host of Government and other services which now exist online.
Email was not widely used and instant messenger didn't exist.
Instead of mobile phones there was a trend for CB (Citizen's Band) radio.
Documents could not be sent as email attachments and were faxed instead (a paper document is digitised, sent down a phone line, and then printed at the other end).
The need to travel for essential services, eg banking, was far greater for those who lived outside town.

History and recent developments


What are the benefits of mobile phones for businesses?

The three main types of ICT system to be considered for GCSE are:
Information systems
This type of ICT system is focused on managing data and information. Examples of these are a sports club membership system or a supermarket stock system.
Control systems
These ICT systems mainly control machines. They use input, process and output, but the output may be moving a robot arm to weld a car chassis rather than information.
Communications systems
The output of these ICT systems is the successful transport of data from one place to another.


Types of ICT system


See worksheet

Business in context

Unit 7: The impact of technology on business

Business Activity

See worksheet

Exemplar exam question

In summary technological change can bring the following benefits to a business:
Reduced running costs
Improved productivity
Improved competitiveness
Lower costs per unit of product
Improved quality of service (e.g. speed of service)
Reduced wastage
If the benefits of the above outweigh the costs, then a business should be investing in new technology.


Technological change

What do you think are the disadvantages for businesses of using e-commerce?


Computer-integrated manufacturing (CIM) is where computers control an entire production line or even factory. Sometimes this can involve the use of robots, as on many car production lines. Robots can perform simple, repetitive or highly complex tasks accurately. Subsequently, this reduces the need for people to undertake boring routine jobs.

New technology in production

Example of a website for a small business

Networks range from two or more computers in an organisation being connected by cables so that they can share resources, connect to printers, scanners and to the internet.
The benefits of using a network:
Greater speed and efficiency in accessing documents and information
Increased efficiency through sharing up-to-date information
Better communications using email, information and contact management
The ability to back up files to a central computer automatically
The ability to share software and hardware


Networks

The benefits of mobile phones for businesses are:
The business can keep in touch with employees and customers wherever they are
Employees are able to send, receive and access information while on the move
Employees are able to operate in the field as they do in the office
The opportunity to send customer-specific marketing: within a small area such as a shopping centre or train station
Mobiles have become smart and can connect to the internet

Mobile telephones

Broadband is a fast method of connecting to the internet. A modem has to be installed in the computer. The computer can remain permanently connected to the internet.
Advantage
Speed and convenience
Disadvantages
Security problems with connecting permanently

Broadband

Email is a simple, quick and cheap way of sending messages electronically, both within a business and externally to customers, suppliers and others.
Email can be used for:
To send text messages
To send pictures, videos and audio which can be used as a marketing tool
To send attachments such as invoices and marketing material

Email

New technology can enable a business to:
Improve productivity and the quality of its products
Provide faster and more accurate information to help in decision-making and running the business
Reduce costs

While new technology can be expensive to install, its benefits usually outweigh its costs.

Introduction

To develop an understanding of the impact that technological change, including the internet and e-commerce, has had on business.

Learning outcomes

Self-check out at the supermarket
Self-service ticket machines at train and bus stations
Self-service ticket machines at the cinema
Electronic kiosks to pay cash in the bank
Electronic check in at airports
Internet banking
Electronic check in at the Doctors surgery
Checking your own blood pressure
Can you think of any others?

Technological developments
What are the impacts on businesses?

Technological change can be seen in the shops and the provision of other services such as banking or repairs.
Electronic point of sale (EPOS) and Electronic Funds Transfer at Point of Sale (EFTPOS) speed up transactions in shops and give vital information for businesses so can sort out their stock levels. EFTPOS means that shoppers can pay for goods and services using credit and debit cards.



Using new technology to provide services

Laptops, notebooks and tablets are lightweight for on the go and many have the same capabilities as a computer.

Other mobile communications

By using ICT systems we are:
more productive - we can complete a greater number of tasks in the same time at reduced cost by using computers than we could prior to their invention
able to deal with vast amounts of information and process it quickly
able to transmit and receive information rapidly


The importance of ICT systems


Medicine

Farming

Communications

They're also used in fields such as:





ICT Systems are everyday and ordinary, yet extraordinary in how they can add extra power to what we do and want to do.


What is ICT?

Shopping for business supplies

Internet banking

Marketing

Email

Research

The internet is a global network to which computer users can connect via telephone/cable to share information. The internet is widely used in business as a resource and has brought great efficiencies. It is mainly used for:

The internet

Ships

Aircraft

Factories

Shops

offices

ICT and computers are not the same thing. ICT stands for information and communications technology. Computers are the hardware that is often part of an ICT system. ICT Systems are used in a number of environments, such as:


What is ICT?

What do you think are the disadvantages for
customers of using e-commerce?

What do you think are the disadvantages for
businesses of using e-commerce?

What do you think are the advantages for
customers of using e-commerce?

What do you think are the advantages for
businesses of using e-commerce?

Divide into four groups and each group take one of the following to discuss