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2.4.1 Production, productivity and efficiency

A) Methods of production:

Job – This involves making individual goods either by a single worker or a group of workers e.g. ship builders.

Batch – This is when a group of similar products are made together e.g. different colours of paint

Flow – This involves the use of production lines where products flow around the factory in a continuous process until they’re finished e.g. car manufacturing

Cell – This is when the production of items are organised into teams/cells. Each cell is responsible for making different parts of the product. This allows for job rotation due to the number of skills that workers have as well as allowing for teamwork.


B) Productivity

Productivity – Output (how much is produced) per unit of input (one worker) per hour.

Factors influencing productivity:

  • Quality of inputs – If a business has high quality/skilled labour or high quality machinery then productivity is likely to be very high. This is due to the fact that high skilled staff are much more trained and therefore can do their work much faster than untrained workers. However, this may result in an increase in costs due to the fact that skilled labour is likely to be much more expensive than low skilled labour.
  • Motivation – If motivation of the labour workforce is high, then they’re much more likely to be productive. This is due to the fact that they will be driven to producing much more quality products and in a faster amount of time. However, highly motivated staff may be more expensive. Furthermore, their motivation may be financially driven and therefore motivation will drop again once workers get used to their increased pay level.
  • Technology – Changes in technology may result in the productivity of the production increasing. This may be as a result of the production process being mechanised due to the fact that robots are able to work 24/7 which is in contrast to workers. However, this is likely to result in high levels of unemployment which may damage the reputation of the business.
  • By increasing the productivity of the inputs of a business’s then it is likely to reduce average costs. This is due to the fact that costs will be spread over a larger output as productivity increases. This is likely to result in businesses becoming more competitive due to the fact that their profit margins are likely to increase. This will allow the businesses to gain an increased amount of profit or they could use the cost saving to lower their price which is likely to result in increased demand for their product and therefore an increase in their market share.


C) Efficiency

The production at minimum average cost occurs when economies of scale are fully exploited. This is called the minimum efficient scale.

Factors influencing efficiency:

  • Quality of inputs – If a business has high quality inputs such as skilled staff then they’re likely to be better at their job. This will reduce the amount of waste produced as fewer mistakes are made. Furthermore, the quantity of goods produced is also likely to increase due to the fact that skilled labour can make goods faster as they know what they’re doing. This will result in an increase in efficiency.
  • Production – If the business has a lean production approach to management then it will help to reduce unnecessary wastage. This will help to reduce the business’s cost caused by wastage and therefore increase the efficiency of the business.
  • Management of staff – If staff are better organised then it is likely to result in an improvement in the co-ordination of the business. As a result of this, less time is likely to be wasted resulting in a reduction in costs and therefore increased efficiency.

Labour intensive production is where the production process involves a lot of labour. In businesses where production is labour intensive, labour are likely to take up a high percentage of total costs e.g. agriculture. This is in contrast to capital intensive production where the majority of production is mechanised e.g. car manufacturing. In capital intensive production few workers are involved in the production process and those who are likely to be maintaining the machinery.

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