Summary of 2.4 - Resource Management

Methods of Production
Production occurs when raw materials or components are changed into  Inve
products. Production occurs when the factors of production (land, labour, Topic 2.4 Resource Management Inve
capital, and enterprise) are bought together.
JOB PRODUCTION BATCH PRODUCTION Efficiency goo
 Production of single unique units.  As production increases, a firm  Making the best use of all the resources of a firm. When a firm is running can
This could be personalised for the may use a batch approach. efficiently, there is minimal wate (waste can be considered anything that
customer and will require a highly Standardised components can be does not add value to a product). Average costs (unit costs) will also be at
skilled workforce, e.g. a custom- made in relatively large quantities, their lowest when a firm is operating efficiently.
built house extension. but the system can be modified  The unit cost (average costs) takes into account the total costs of a firm
 Highly flexible and bespoke to adjust the specification e.g. and divides this by the level of output
 High profit margins changing the size, colour, and UNIT COST = TOTAL COSTS/TOTAL OUTPUT
 High unit costs (premium price) features.  The benefits of improved efficiency:
 Labour intensive – high labour  The benefits of batch production  Labour productivity increases
costs lie in its flexibility while still being  Unit costs fall
able to deliver some economies  Resources such as labour, expertise and time can be reallocated.
of scale through automation and  Profit margins increase.  The
standardisation.  Improved flexibility across the firm. 
FLOW PRODUCTION CELL PRODUCTION  Opportunity to explore new ventures e.g. a new product line.
 Involves a dedicated and highly  Teams of workers work together  Ability to charge lower prices and therefore improve competitiveness.
 Efficiency can be influenced by the level of employee skills, management

automated production process. to produce an entire product or
Production is standardisation and part of a product. decision-making and effective systems for production and communication. 
continuous to achieve economies  Workers are motivated operating  Greater productivity means the workforce is more efficient and efficiency
of scale. as a team. across the firm allows more resources to be devoted to production. Where 
 Very low unit costs.  Production is more flexible. efficiency falls, wastage and unit costs tend to rise.
 High levels of productivity  Movement of resources (waste)
 Low motivation of workers is minimised. Waste  Wa
 Breaks in production can be Waste can be considered anything that does not add value to the product. Waste 
expensive is a key factor that influences the efficiency of a firm. The are seven types of
waste a business can reduce:

Productivity  Inventory – too much stock.

 The amount of output that can be produced with a given input of resources  Defects – faulty products.
in a specified time period. Maximising productivity means getting the most  Waiting – for processes to finish before others can begin.
out of the resources available to the firm.  Overprocessing – adding features that do not add value. 
 One way of measuring productivity is through calculating labour productivity.  Overproduction – making products that cannot be sold easily.
This measures the output per employee in a certain time period, e.g. an  Motion – unnecessary movement of people.
hour or a week, and is a measure of how productive the workforce is.  Transport – unnecessary movement of the product or materials.
LABOUR PRODUCTIVITY = TOTAL OUTPUT (IN A TIME PERIOD)/
NUMBER OF EMPLOYEES  Invo
 By effectively managing the following factors a firm can improve its
Capacity Utilisation The