- Managing resources effectively to produce goods and services
- Difference between production and productivity
- Benefits of increasing efficiency and how to increase it
- The concept of lean production
- Why businesses hold inventories
4.1.1 The Meaning of Production
Managing resources effectively to produce goods and services
Operations Management is defined as the process of production of goods and services.
Successful operations management produces goods efficiently , in sufficient quantities to meet demand, at the right time, with the right quality.
In 4.1 we need to know how to raise productivity, different production methods and how technology has affected production.
But let’s start with the basics and learn the key words that we will use throughout this unit.
Difference between production and productivity
Production is the processes used to transform inputs into goods or services.
This could be transforming wood into furniture or the programming and technology to set up a music streaming service.
Productivity measures the efficiency of production. How many inputs are required to make the output? It’s calculated by dividing total inputs by total outputs.
So if production will measure how much is produced, productivity measures how efficiently the output is produced.
In IGCSE business we focus on labour productivity, how efficiently employees produce outputs for the business. It is calculated by dividing total output by the number of employees.
Labour Productivity = Total Output ÷ No of workers
10,000 chairs ÷ 200 workers
= 50 chairs per worker
900 chairs ÷ 30 workers
= 30 chairs per worker