Production and Manufacturing: Chapter 4

Production and Manufacturing

• Production and manufacturing involve making products and providing services.

Chapter 4 Learning Goals

• Main factors of production should be identified and described.
• Different methods applied in production and the sequences of steps in the production process should be able to be described.
• Steps owners and managers can take to improve productivity should be explained.
• The importance of information technology (IT) and the career paths available in the IT field should be explained.
• Growth of globalization, protectionism, and the importance of the global supply chain should be understood.

Factors of Production

• Production involves many different processes that intersect and are interconnected.
• Understanding the production process is key to a business's success.
• The factors of production are land, labour, capital, and entrepreneurship.

Land

• Land is a critical factor in production, including agricultural land for growing crops and the real estate needed for a factory.
• Land also includes the natural resources that come from the land.
• Canada has an abundance of land and the natural resources that grow over it and minerals that lie underneath it.

Capital

• Capital includes the things that are needed to manufacture a product, such as machinery, computers, desks, robots, and trucks.
• It is important to distinguish between "capital" and "consumer goods."
• A truck used to transport goods from the factory is “capital,” whereas a truck used by the owner to get to work is a “consumer good”.

Labour and Entrepreneurship

• Entrepreneurship is the drive and work ethic of individuals who start and run a business.
• Labour is the work done by employees.
• Physical labour is work using your body (laying bricks, landscaping, cooking).
• Mental labour is primarily thinking, reasoning, and problem-solving (lawyer, computer programmer, or architect).

Knowledge

• In business, knowledge is the ability of businesses to exploit information and scientific research.
• It includes knowledge of industry trends, market conditions, customer preferences, technical skills, and organizational culture and processes.

Knowledge as a Factor of Production

• In knowledge-based societies, a significant portion of a country's economic assets consist of less tangible products, such as scientific and technical knowledge and intellectual property.
• Many feel that knowledge should be considered a factor of production.

Types of Production

• The method used to produce a product or service depends on the kinds of products or services, and how best to produce them profitably.
• Some products are unique and created once to meet specific customer needs.
• Other products can be identical and are therefore mass-produced.

Job Production

• Job production means creating individual items using the same general process, such as a custom kitchen.
• Advantages are the high quality of work, employee enjoyment of the variety of work, and ability for customers to get exactly what they want.
• Disadvantages are labour intensive and expensive.

Job Production vs Craft Production

• Job production may use automation, and the same general process is always used to create the product.
• Craft production is unique each time and uses very little automation, such as a piece of artwork or customized jewelry.

Service Production

• Service production involves processes combined to deliver a service.
• Examples include teaching, catering a meal, or servicing a car.

Mass Production

• Mass production is the use of machines, robotics, and automated processes to create many identical items (a standardized product at the lowest possible unit cost).
• A common example is the automobile assembly line.

Advantages of Mass Production

• Lower labor costs
• Fast production rates
• High accuracy
• Low cost per unit

Disadvantages of Mass Production

• Less variety in the types of products created
• Need for expensive machinery
• Lack of flexibility in adding individualized features
• If there is a breakdown in the assembly line or a general work stoppage, all production comes to a halt.

Mass Customization

• Mass production and mass customization are similar, using automation to make products in large volumes.
• Mass production creates only identical products, while mass customization allows each product have some differences

Production Process: Planning

• Planning is important to ensure that the final product or service is high quality, delivered on time, satisfies customers, and makes the company money.

Production Process: Four Steps

• Design
• Purchasing
• Processing
• Quality Control

Production Process: Design Stage

• Design is the stage of the process during which the idea for the product or service is created.
• It combines art, science, and technology to come up with marketable ideas.
• This is the stage when the product or service is developed and the manufacturing or service processes chosen.

Production Process: Purchasing Stage

• Purchasing is the stage when all the materials needed to make the product or service are bought.
• For a large business, buying ingredients to make a product or service, on time and at a good price, is the job of the purchasing department.

Production Process: Processing Stage

• Processing is the stage of the production process where the goods are made or the services are created and delivered.
• At this stage, workers are trained in production methods, the production schedule set, the product inventoried and stored, and then transported to the customer.
• In a service business, the processing is often done with the customer present.

Production Process: Quality Control Stage

• Quality control is a step that a company takes to inspect its products or services to ensure they have few or no errors, and to maintain a high level of excellence.
• Quality control is important because it makes certain that products are dependable and safe, and adhere to specifications/industry standards.

ISO: International Organization for Standardization

• The International Organization for Standardization (ISO), based in Switzerland, is a non-governmental organization that provides standards for products, services, and systems.
• ISO standards are voluntary and are not legally binding, but are widely recognized and adopted.

Importance of ISO Certification

• Safe, reliable, high-quality products and services
• Compatibility of products from different sources
• Access to new global markets

Business Productivity: Definition

• Productivity measures how well a business uses all its inputs (the things purchasing buys) to create its outputs (the product or service it creates).
• Productivity measures production efficiency and is a calculation of the ratio of input costs to output costs.
• Productivity is related to profitability.

Ways to Improve Productivity

• Use more and better machinery
• Be careful about how much it spends
• Hire more highly skilled employees
• Train employees to be more productive
• Hire more qualified managers to organize the workplace

Capital Investment

• Capital investment is one way to improve productivity.
• Machinery replaces labour, saving on salaries and wages.
• Automation in a retail store, such as self-checkout lines, is an example.
• Increasing use of information and communications technology (ICT) is another type of capital investment.

Human Capital

• Human capital is attributes of the employee, like prior education, skills, intelligence and health as well as intangible things such as loyalty and punctuality.
• Human capital can be improved by investing in education, experience, and abilities.
• In general, the more a company invests in its employees (i.e., in their education and training), the more productive and profitable that business could be.

Employee Training

• Giving a worker the skills and knowledge to accomplish their job ensures their productivity, it also gives confidence and leads to job satisfaction.
• Well-trained employees require less supervision, saving management time and money.
• Training workers and improving job satisfaction also decreases employee turnover, saving the company money.

Outsourcing

• Outsourcing means a business strikes a deal with a third party in the same country to carry out a specific task.
• Contracting out office cleaning or accounting services is an example.

Offshoring

• Offshoring means moving manufacturing to countries where businesses believe higher profits can be made, usually because labour is cheaper.
• Apple computers are produced and assembled in Asia as an example.

Nearshoring

• Nearshoring (or friendshoring) involves developing supply arrangements in countries that are politically “friendly."
• Political uncertainties and international competition led various governments to adopt policies that restrict trade, in favour of countries that are more politically stable and aligned with their long-term interest.

Information Technology (IT)

• IT (information technology) refers to the use of computers, data storage, and networking to create, process, store, secure, and exchange all forms of electronic data.
• Businesses rely on collecting vast amounts of data and on technology that can harness and analyze this information with IT.
• Information is a major competitive advantage, and the source of future jobs.

Functions of an IT Department

• Infrastructure Set-Up: Selecting the right technology and then establishing the circuitry necessary.
• Network Oversight: Establishing the parameters for the use of the IT systems.
• Software Applications: Setting up and maintaining applications that allow the company to function.

Responsibilities of IT Specialists

• Facilitate communication
• Develop and maintain companies website
• Provide technical support

Software Engineers

• Software engineers are the creative developers and coders behind all the business programs (software).
• This includes producing the programs used in business and the home, such as Microsoft and Adobe products.
• It includes programming associated with the online gaming industry.

Concerns for Those in IT

• IT requires more and more training, so it is necessary to stay in a continuous "learning mode".
• IT work is often contract work with no sick pay, no paid regular holidays, no pensions and no other employee benefits.
• Automation, downsizing and outsourcing has occurred, and many low- and middle- level jobs have shifted to low-wage countries or been replaced with robots.

Jobs in IT

• Job titles and job descriptions in the IT field are constantly changing.
• IT consultant
• Cloud architect
• Computer forensics
• Mobile developer
• Web developer
• Software engineer
• IT vendor
• Geospatial professional
• Data modeller