Resource Management
• Resource management is all about the making of
the product or service and delivering it to the client
• Marketing creates demand for the product or service,
resource management supplies it
• It involves the following 5 steps
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Designing the product or service to meet customer needs
Producing the product
Working with suppliers
Managing quality
Achieving high levels of efficiency
Specification
• We will follow in
specification order
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4 lessons production
2 capacity utilisation
3 stock control
2 quality management
Production; different approaches:
1.
Job production. Producing a one-off item for a customer. Finish one
before starting the next. Example?
Hand made shoes, suits (can be £000s)
2.
Batch production. Set number of identical items are produced. Often
uses machinery (eg not hand stitching, but using a machine), and
labour specialises. Produce batch of one product before moving on.
Examples?
Boots for the army, bread
3.
Flow production. A production line. Often very automated with little
labour, and the most efficient way to produce a good with predictable
high-volume sales. Examples?
Cars
4.
Cell production. Small production line or group which can produce
flexibly and to order, but also with greater efficiency than job
production. Examples?
Custom bicycles
Productivity – what is it?
• Formula:
Output
Inputs per time period
• The inputs can be land or capital (machinery), but it is generally
applied to labour
• Labour productivity is therefore a measure of how much each
worker can produce. It may typically be measured per hour or
per day
Bicycles
Firm 1
Firm 2
Firm 3
Workers
12
9
15
Output per day
42
36
45
Productivity (bicycles per day)
3.5
4.0
?
• Be careful: productivity is not the same as total production
• Firm 3 produces the most but is least productive (efficient). Firm
2 has the highest productivity
Importance of productivity
• Output per employee is a key measure for a firm (or any
organisation)
• The more productive a firm’s employees are, the cheaper its costs
to produce each unit. Calculate wage cost per bicycle below
Bicycles, £
Firm 1
Firm 2
Firm 3
Workers
12
9
15
Output per day
42
36
45
Productivity (bicycles per day)
3.5
4.0
3.0
Daily wage rate (£)
90
90
90
25.71
22.50
30
Wage cost per bicycle (£)
• In this case, the labour cost of producing a bicycle is only £22.50
in Firm 2, but £30 in Firm 3
• This means Firm 2 can either earn higher profits, or it can lower
its price and so be more competitive and thus sell more bicycles
Influences on productivity
1. Quality of machinery/equipment
• The more a firm invests in modern equipment, the
better it will be and the higher productivity will be
• Investment is generally lower in the UK than in other
countries eg China (but this is also because our economy
is more based on services than manufacturing, and
services use less equipment)
Influences on productivity
2. Quality of labour
• Do workers have the right skills and training to complete the
job?
• Better educated and better trained workers can produce more and
with fewer errors
• More jobs in the UK require IT literacy as well as other transferable
skills (eg literacy and numeracy)
• UK firms do not always invest in training, worrying that workers leave
for other firms once they have been trained
• But UK government is focused on training – look up Autumn
Statement (Investing in Britain’s Future); 1 paragraph to be written
• Are they motivated?
• Can be a big factor in productivity. Will cover with Miss Cheetham
• (Were Chelsea players motivated this year? Man U?)
Measuring productivity
• Are there any problems with measuring
productivity , ie can we measure it for everyone in a
firm? Try for each of these (4 groups, 2 mins each)
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CEOs and other managers?
Doctors?
Lawyers?
Receptionists?
UK productivity
• Before the financial crisis, UK
productivity was above the EU
average, and not far below Germany
• Following the financial crisis and
recession in 2008, however, UK
productivity fell, and has still not
risen above 2008 levels
• In 2013, output per worker was 27%
higher in France, 28% higher in
Germany and a surprising 31%
higher in the US
• This is called the UK productivity
puzzle and has had an impact on the
competitiveness of UK firms
• Fortunately, the UK specialises in
high-end manufactures (eg Jaguar
Land Rover) or services for which
price is not the only factor
determining competitiveness
• What are the other factors?
Efficiency and productivity
• Productivity is very closely linked
with efficiency
Cost (£)
• Though productivity may not
include wastage or pollution
Average
Cost
• Production is at its most efficient
when costs per unit are at their
lowest
• Larger factories tend to be more
efficient than smaller ones
• Larger firms can buy in bulk, so
costs per unit fall as output
increases
• So as a firm produces more, costs
per unit tend to fall
• However, if firms become too big,
they become cumbersome and
costs may increase
• There is an optimum output at
which average costs are at their
lowest
Minimum level
of unit costs
Output
Factors influencing efficiency
• As well as the scale of the business, other factors
affecting efficiency include:
• How much wastage there is – are many products thrown
away because their quality is inadequate?
• Are the machines being used the most up-to-date and
so efficient (think of a 10 year old PC…)?
• Does the firm have the right number and type of
workers as well as the right machinery?
Capital and labour intensity
• Labour-intensive means labour costs are a high percentage of total costs
• A firm uses labour rather than machinery
• Capital-intensive means the fixed costs of purchasing and running machinery are
high
• A firm uses a lot of machinery
• Which industries or types of firms tend to be labour-intensive?
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Savile Row tailors (hand made) or makes of custom wedding dresses), hairdressers
Smaller firms – in general cannot afford expensive machinery
Service industry – what about schools?
Job rather than flow production
• Which types of firms tend to be capital-intensive?
• High output of similar products eg cars – flow production
• Linked to industries with economies of scale
Labour-intensive production
Characteristics and +/• Labour-intensive
• Capital intensive