Learning Objectives -To understand the need for flexibility - to know the different methods of production used by businesses. LEARNING OUTCOME -Define operational flexibility. - Differentiate between job, batch and flow production

Starter question. What is meant by “flexibility” in general?1 word for it. What would “flexibility in business” mean? Write it in 1 statement. Now compare your statement with person next to you.

It is the ability of a business to vary both level of production and range of products following changes in customer demands.

In groups of 3 prepare a list of businesses who need to have flexibility in operations. You get 1 min and lets see which group has longest list!!!

Give it a thought If business wants to increase its level of production what things would it need???

Video on production methods VIDEO

Which method of production? Mr Kipling cakes A railway bridge A railway bridge A tailored suit A tailored suit TV sets TV sets High St clothing High St clothing Batch Batch Job Job Flow Flow Batch Batch

Job Production Made to customer’s particular order Unique Made one at a time Highly skilled work Factory layout flexible Labour intensive

Batch production Made in batches or groups Different varieties of the same product are made Machinery can be used Machinery is multi-purpose Factory set out with machines grouped by process

Flow Production Highly specialised machinery used Continuous production Mass produced goods Factory set out in permanent assembly lines Capital intensive

Methods of Production Job – one at a time  Batch – a small or large quantity made all at once, followed by a different product  Flowor continuous – a production line with highly specialised machinery  Flow or continuous – a production line with highly specialised machinery

Which method of production? Seats for a car A custom paint finish Tyres Spanners A machine used for making gearbox parts Batch/flow Batch/flow Job Job Batch/flow Batch/flow Batch Batch Job Job

Job Production Advantages Can match customers’ precise needs Motivated workforce Premium prices Disadvantages Unpredictable demand High wage costs Complicated production scheduling

Mass custamisation Combines latest technology with multi skilled labour forces to use production lines to make a range of varied products. Mass marketing not needed examples

Features of each production method Open the Production Methods table Pg 397 For each method draw a mind map based on these factors Number of products made at once Machinery Skills Motivation Examples

What method to use? The choice of production method depends on: How many of the product are being made Whether the product is unique How complex the product is The size of the business making it Capital availability

Problems with changing the production methods—Job to batch and Job or batch to flow Job to batch --cost of equip needed --additional working capital --staff demotivation Job or batch to flow -- cost of capital equip needed --staff training to be flexible and multi skilled --accurate estimates of future demand

Final evaluation :pg398 Silent reading

1. Strategic in nature 2. Difficult to revert 3. Taken at highest management level

Optimal location A business location that gives the best combination of quantitative and qualitative factors. Example of 2 businesses

Quantitative factors Site and capital costs Labour costs Transport costs Sales and revenue potential Government grants

Techniques to assist in location decision :quantitative factors Profit estimates Investment appraisal Break even analysis

Qualitative factors Room for further expansion Manager`s preferences Ethical consideration Environmental concerns Infrastructure

Other locational issues The pull of the market Planning restrictions External economies of scale

Advantages and disadvantages of multi site locations Pg 404 group activity

International location decision Reasons -- to reduce costs --to access global markets --to avoid protectionist trade barriers(NAFTA,ASEAN) --other reasons

Issues and problems with international location Language and other communication barriers Cultural differences level of service concern Supply chain concerns Ethical considerations

Scale of operation The maximum out put that can be achieved using the available inputs (resources)--this scale can only be increased in the long term by employing more of all inputs.

Economies and Diseconomies of scale: Economies of scale are factors that lead to a reduction in average costs that are obtained by growth of a business. There are five economies of scale: Purchasing economies: Larger capital means you get discounts when buying bulk. Marketing: More money for advertising and own transportation, cutting costs. Financial: Easier to borrow money from banks with lower interest rates. Managerial: Larger businesses can now afford specialist managers in all departments, increasing efficiency. Technical: They can now buy specialised and latest equipment to cut overall production costs.

Diseconomies Of Scale There are diseconomies of scale which increases average costs when a business grows: communication problems: It is more difficult to communicate in larger firms since there are so many people a message has to pass through. The managers might loose contact to customers and make wrong decisions. Alienation of the work force: People work in large businesses with thousands of workers do not get much attention. It decreases morale and in turn efficiency. Poor coordination : More people have to agree with a decision and communication difficulties also make decision making slower as well.

The Impact of Economies & Diseconomies of Scale on Average Costs

Large scale production –unit costs of production

Are Diseconomies Avoidable ? Approaches used to overcome potential diseconomies: 1. MBO—Avoids coordination problems giving divisions and depts. objectives.—long term goals to be met. 2. Decentralisation –giving divisions degree of autonomy 3. Reduced Diversification –concentrate on core to help reduce coordination problems.