report will discuss the pros and cons of: capacity utilisation, productions
methods and managing change (stock control and quality).
aim of this report is to explain and provide recommendations for methods, that
would most benefit the company.
report includes a graph and a table from the previous year, which shows how the
company is currently producing products. Therefore, enabling clarity to
evaluate where improvements need to be made.
report includes descriptions of the most beneficial methods for businesses, to
clarify judgement, followed by comparisons to other useful methods. Finally,
the most efficient methods are recommended.
Stocks at start (thousands)
Monthly sales (thousands)
Production level (thousands)
Stocks at end (thousands)
Identifying under-utilisation and where stocks are building up
the graph attached
Capacity utilisation is a measure of
the degree to which an organisation is using its maximum possible capacity is
usually shown as percentages.
supermarket checkouts, queues build creating the shop to have them be over 100%
capacity utilisation, which can add stress and an unneeded extra workload for
the employee. It will create the employee to rush, giving a bad impression to
the customers. Whereas at some supermarket checkouts, you can have employees
sitting idly with no work to do. Creating them to be working under 100%
capacity utilisation. Companies try to combat having a low capacity utilisation,
for example B&Q operate a ‘over 60s’ discounts’ on Wednesdays, as it is
classed as a quieter period and to hopefully increase their capacity utilisation.
Another example, cinemas offer discounts Mondays as they are their quietest
period, which they’d hope to increase their capacity utilisation. It isn’t possible,
or wanted, to keep all resources fully employed. Majority of companies aim to function
at just under full capacity, such as 90%. It is important to run a business at around
90%, as it is a measurement of efficiency and all organisation will want to be
as efficient as possible. The more output a company makes, the average
production cost fall, therefore a higher utilisation makes the business more
is a capacity utilisation issue with MowRite, as they can’t always keep their
production level at 90,000 because they do not have the storage (80,000)/demand
to hold the stock. As the demand increased for MowRite they clearly couldn’t
produce enough stock to keep to their minimum (buffer) stock level at 40,000
units. This is shown in the table from the stock at the end of the April-July,
as the stock was below their 40,000 thresholds. Capacity utilisation is substantial,
as it is used as a measure of productive efficiency, also the average
production costs tend to fall as the output rises, thus higher capacity
utilisation can reduce the unit costs, making a company more competitive and
more efficient. Therefore, organisations usually aim to produce as close the
full capacity (100% utilisation) as possible.
production is normally completed by a single worker or a group of workers, the
job can vary from complex and high technology to small scale and low
technology. An example of low technology jobs are hairdressing and tailoring,
where the production is very simple, requiring low skill and easy obtainable
equipment. This method allows customers specific requirements to be included,
normally as the job progresses. Whereas high technology jobs include a lot more
complexity, which means there is a greater management challenge. The business
should always keep a clear definition of objectives.
process is essential, like how are decisions taking about the needs of each
process in the job, labour and other resources. Examples of high technology /
complex jobs: film production; large construction projects. m
As a business grows and production volumes
increase, it is not unusual to see the production process organised so that
batch production can be used. Using batch production obliges the work for any
task to be divided into sections or operations. Each section is finished
through the whole batch before the next section can be performed. It is
possible to achieve specialisation of labour, by using batch method. Careful planning
is needed to ensure that production equipment is not left idle, but the capital
expenditure can also be kept lower. The main aims for batch production are to
concentrate skills (specialisation), plus to achieve high equipment
utilisation. The batch method is probably the most commonly used method of for
organising manufacture. An example for batch method is the production of
electronic instruments. Batch production does have faults though, having to
finish an operation on all the products, before you can move onto the next
section, means that there can be a high build-up of significant stock. There is
a high chance of unpleasant work flow, especially if the batches are not
optimal in the process.
Flow methods are very analogous to
batch methods, apart from the issue of in batch production where the batch is
resting awaiting to be used for the following stage. The objectives of flow production
• Improved work and material flow
• Reduced need for labour skills
• Added value / completed work faster
Flow methods are efficient as when work
on a task at a specific stage is completed, it is required to be moved onto the
next stage in the process without waiting for the remaining batch of products
as you do in batch method.
For flow production to work, there
need to be a consistent demand for the product as if the demand is random, it
can lead to an excess amount of stock, therefore having to buy storage is an
unwanted business expense. Flow is very uncompromising, it cannot deal very
well with differences to the product
If the raw materials for the product isn’t
delivered on time, it may cause the whole production to an end, with a likelihood
of a serious cost consequence.
MowRite uses flow production, as it makes such
a vast amount of lawn mowers. The use any
other production method wouldn’t make sense
for MowRite as it wouldn’t be able to keep up with the demand that MowRite has.
Which would foresee a bad reputation.
5. Managing change – Stock control and quality
Stock control ensures that all forms of stock are accurately
accounted for within the organisation. Different stocks will require different
forms of storage. Stock control systems should ensure that materials/resources
are always available to meet demand.
Organisations aim to build effective links with suppliers so that
short-lead times can minimise quantities of stock being held. Some organisations
will require a buffer level so that production/sales continue whilst awaiting
delivery of new stocks.
Stock management may include FIFO or LIFO systems which will depend
upon the type of stock/materials. Just-in-time is a method of stock management
that aims to keep minimum stocks, and hence cash tied up in stock, but does
rely upon suppliers. The Kanban system can be used to employ just-in-time
production, preventing a build-up of stocks.
are two types of stock rotation: FIFO (First in first out) and LIFO (Last in
means that the stock that has been delivered first are first to be sold, which
is highly recommended to perishable items and products that are likely to
become out of date. For example, such
as meat, vegetables, dairy products and even prescription drugs. LIFO means
that the latest stock is used rather than earlier stocks, these technique is
used if stocks are bulky and/or difficult to handle. It’s not suitable to use
this for perishables as it would cause a lot of stock to go off or/and out of
date. A problem for this is that old stock will be stored for extended periods
of time, maybe even get forgotten about, therefore wasting money on stock not being
Just in time was developed in the 1950s in
Japan. A form of ‘pull’ system. An organisation only produces, and therefore
orders, what is required at the required time. So, all stocks kept to a minimum,
it requires efficient and effective scheduling, plus it is usually managed by a
computerised system, also ensures supplies are delivered only when required.
of just in time is that your cash is not tied up in stock, so you can spend
your money on other business expenses. It reduces storage costs as you won’t
have the stock to store, because you’ll order stock when you need it, and using
it straight away when It is delivered, also making it very unlikely for your
stock to become obsolete. Also, it reduces waste because you will order the
amount of stock you need.
of using just in time is that it’s extremely dependant on having reliable
suppliers, because if you get an order due in for a certain date and your
supplier is late with the delivery, then you will have to deliver you order
late, which may dampen your reputation. If there is a sudden change in your
demand it will be difficult respond. One huge disadvantage of using just in
time is that you lose the opportunity of getting bulk buying discounts.
Kanban system is used as part of the just-in-time process. It ensures only
materials/resources needed for a particular stage are authorised for movement.
Therefore, avoiding a build-up of unnecessary stocks. A Japanese method meaning
‘signboards’ or ‘cards’. It is used to move materials through the different
stages of production. The ‘kanban’ can be in various forms e.g. a physical
card; a plastic marker.
advantages of using IT are, the range of new products, for example you can get
anything from touchscreen computers to routine updates on your computer
software. It can massively increase productivity, as any mistakes that are made
are easily corrected when on a computer, but if you have all paper work then it
can make your work look scruffy and once you’ve sent it off it can be a hassle
to make any adjustments, whereas if it’s on a computer you can quickly go onto
the website and change what you’ve done. Also, using IT can create a lot more
waste as there would be no paper waste as every would be done electronically.
It can massively improve communication as you can email and fax things with
computers. Having your work on computer can make your working conditions a lot
more flexible, as you would only need a small laptop to complete your work and
not a bunch load of paperwork.
disadvantages of using IT are, the stress it can be on employees if they are
not computer friendly, which could create a bit of a hostile environment. It
may reduce jobs, as you wouldn’t need people for all the small jobs. If there are
any issues with your IT equipment its reliant on specialists, which could cost
a lot and may even interrupt your normal routine as you wouldn’t have the
equipment you are used to and need. The software on computers are updated very
regularly, which could put the person using the computer under pressure making
them feel like they must do things which they don’t know enough about. The
costs of IT equipment aren’t cheap by any means, for you would need an initial
amount of money to invest in or have someone that’s happy to make the
investment. Lastly, employees may feel like the traditional crafts/skills are
lost as it is all controlled by computers.
benefits of innovative technology cannot be denied, and businesses cannot
ignore the change, otherwise they will be slacking behind every other business
that are embracing technology and making their company more streamlined. Introducing
new systems may be problematic but can be successful provided those applying
them are enthusiastic and confident. Technology is only another ‘set of tools’
relying on good understanding of customer and staff needs and wants; internal
auditing and knowledge of the external environment. So good management of it is
no different to good management generally.
Quality control involves testing of
units and determining if they are within the specifications for the final
product. The purpose of the testing is to determine any needs for corrective
actions in the manufacturing process. Excellent quality control helps companies
meet consumer demands for better products.
involves each step of the manufacturing process. Employees often begin with the
testing of raw materials, pull samples from
along the manufacturing line and test the finished product. Testing at the
various stages of manufacturing helps identify where a production problem is
occurring and the remedial steps it requires to prevent it in the future. A
quality product or service is one which is fit for its intended purpose, and is
produced at an acceptable cost. An organisation will need to consider the cost
of failing to meet quality requirements.
Quality management initiatives enable
an organisation to focus on both customer and employee satisfaction. However,
this may be at a cost in financial terms and in meeting requirements of
the table and graph provided, lawn mowers sell a considerable amount more
between March and June. To counter the issues of not being able to keep the
buffer stock based on the operations managers suggestions. This report would
advise to make more lawn mowers a few months before and keep them in storage
and it can then be more consistent with production, making it more consistent,
which may make the employees more comfortable than having to rush at certain
times throughout the year. Flow production is the most suitable way of
production for MowRite as make a lot of lawn mowers and on such a consistent
basis, therefore keeping things the same is most beneficial.
This report would advise FIFO to be adapted at
MowRite, as it would reduce the waste made, making sure that all the stock
being bought is being used and not going to waste, making the money go further.
MowRite using just in time is very constructive, as stock ordering can be
predicted can tell how much stock you would need. This will release cash would
be able to invest in other ventures. So, making investments in other areas like
marketing or advertising could be easily made.