4.3.2
Productivity & Efficiency
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Productivity, Efficiency and Lean Production
Increasing efficiency and labour productivity is vital for a business to be successful in the long term.
Productivity
- Productivity refers to the number of units produced by an employee in a certain period of time.
Efficiency
- Efficiency refers to the ability of employees to increase their output from a fixed amount of inputs, like raw materials.
Lean production
- Efficiency can be improved using lean production:
- Lean production minimises waste so increases efficiency.
- For example, if McDonalds redesigned their restaurant so that staff had less distance to walk between cooking appliances in the kitchen, time wastage will be reduced which improves efficiency and therefore productivity.
Just in Time
- Just in Time is a form of lean production. Just in time involves businesses only ordering supplies when they are needed, and therefore reduces waste.
- For example, a restaurant may only place its seafood order when it has confirmed orders from customers and this reduced food wastage.
- Using Just in Time does have disadvantages, meaning it can be difficult to use:
- Just in Time means that businesses will have no spare stock to respond to an unexpected customer order which may affect customer satisfaction.
Increasing Efficiency
Different types of businesses require different approaches for increasing efficiency.
Capital intensive businesses
- Capital intensive businesses are businesses that mainly rely on the use of capital, or machinery, in the production of goods and services.
Labour intensive businesses
- Labour intensive businesses are those which mainly rely on the use of human labour in the production of goods and services.
Mixture of approaches
- Businesses must ensure they use the right mix of capital intensive and labour intensive approaches, as each approach has advantages and disadvantages:
- Capital intensive production can be cheaper than labour-intensive production in the long-term.
- Capital intensive production can require businesses to commit to high start-up costs as machinery is purchased.
- Labour-intensive production increases operational flexibility as people can be reassigned to different projects or retrained to complete different tasks.
Example of labour intensive approach
- For example, Asda relies on labour intensive approaches as its supermarkets are maintained and stocked using human labour.
Example of capital intensive approach
- For example, Coca Cola factories rely on capital intensive approaches as machinery completes most of the steps involved in the production, packaging and distribution of products.
1What is Business?
1.1Understanding the Nature of Business
1.2Understanding Different Business Forms
1.3External Environments
2Managers, Leadership & Decision Making
2.1Understanding Management
2.2Understanding Management Decision Making
2.3Understanding Stakeholders
3Decision Making to Improve Marketing Performance
3.1Decision Making to Improve Marketing Performance
3.2Understanding Markets & Customers
3.3Market Segmentation, Targeting & Positioning
3.4Marketing Mix
3.4.1Marketing Mix3.4.2Product Decisions3.4.3Pricing Decisions & Price Skimming3.4.4Pricing Decisions & Price Penetration3.4.5A-A* (AO3/4) - Pricing & Competition3.4.6Promotional Decisions3.4.7Promotional Decisions 23.4.8Promotional Decisions 33.4.9Distribution Decisions3.4.10Distribution Decisions 23.4.11Digital Marketing3.4.12Evaluating Digital Marketing3.4.13A-A* (AO3/4) - The Marketing Mix & Promotion
4Decision Making to Improve Operational Performance
4.1Setting Operational Objectives
4.2Analysing Operational Performance
4.3Increasing Efficiency & Productivity
4.4Improving Quality
4.5Managing Inventory & Supply Chains
5Decision Making to Improve Financial Performance
5.1Financial Objectives
5.2Analysing Financial Performance
5.3Sources of Finance
5.4Improving Cash Flow & Profit
6Improving Human Resource Performance
6.1Human Resource Objectives
6.2Analysing Human Resource Performance
6.3Improving Organisational Design
6.4Improving Motivation & Engagement
6.5Improving Employer-Employee Relations
7Analysing the Strategic Position of a Business
7.1Mission, Corporate Objectives, Strategy
7.2Financial Ratio Analysis
7.3Overall Performance
7.4Political & Legal Change
7.5Economic Change
7.6Social & Technological Environment
7.7Competitive Environment
7.8Investment Appraisal
8Choosing Strategic Direction
8.1Choosing Areas of Competition
8.2Choosing How to Compete
9How to Pursue Strategies
9.1Change in Scale
9.2Assessing Innovation
9.3Assessing Internationalisation
9.4Digital Technology
10Managing Strategic Change
10.1Managing Change
10.2Managing Organisational Culture
10.3Managing Strategic Implementation
10.4Problems with Strategy
Jump to other topics
1What is Business?
1.1Understanding the Nature of Business
1.2Understanding Different Business Forms
1.3External Environments
2Managers, Leadership & Decision Making
2.1Understanding Management
2.2Understanding Management Decision Making
2.3Understanding Stakeholders
3Decision Making to Improve Marketing Performance
3.1Decision Making to Improve Marketing Performance
3.2Understanding Markets & Customers
3.3Market Segmentation, Targeting & Positioning
3.4Marketing Mix
3.4.1Marketing Mix3.4.2Product Decisions3.4.3Pricing Decisions & Price Skimming3.4.4Pricing Decisions & Price Penetration3.4.5A-A* (AO3/4) - Pricing & Competition3.4.6Promotional Decisions3.4.7Promotional Decisions 23.4.8Promotional Decisions 33.4.9Distribution Decisions3.4.10Distribution Decisions 23.4.11Digital Marketing3.4.12Evaluating Digital Marketing3.4.13A-A* (AO3/4) - The Marketing Mix & Promotion
4Decision Making to Improve Operational Performance
4.1Setting Operational Objectives
4.2Analysing Operational Performance
4.3Increasing Efficiency & Productivity
4.4Improving Quality
4.5Managing Inventory & Supply Chains
5Decision Making to Improve Financial Performance
5.1Financial Objectives
5.2Analysing Financial Performance
5.3Sources of Finance
5.4Improving Cash Flow & Profit
6Improving Human Resource Performance
6.1Human Resource Objectives
6.2Analysing Human Resource Performance
6.3Improving Organisational Design
6.4Improving Motivation & Engagement
6.5Improving Employer-Employee Relations
7Analysing the Strategic Position of a Business
7.1Mission, Corporate Objectives, Strategy
7.2Financial Ratio Analysis
7.3Overall Performance
7.4Political & Legal Change
7.5Economic Change
7.6Social & Technological Environment
7.7Competitive Environment
7.8Investment Appraisal
8Choosing Strategic Direction
8.1Choosing Areas of Competition
8.2Choosing How to Compete
9How to Pursue Strategies
9.1Change in Scale
9.2Assessing Innovation
9.3Assessing Internationalisation
9.4Digital Technology
10Managing Strategic Change
10.1Managing Change
10.2Managing Organisational Culture
10.3Managing Strategic Implementation
10.4Problems with Strategy
Practice questions on Productivity & Efficiency
Can you answer these? Test yourself with free interactive practice on Seneca — used by over 10 million students.
- 1
- 2
- 3Which of the following is a disadvantage with Just in Time?Multiple choice
- 4
- 5Which of the following are true?True / false
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