5.4.2

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

  • Productivity refers to the number of units produced by an employee in a certain period of time.
Efficiency

Efficiency

  • Efficiency refers to the ability of employees to increase their output from a fixed amount of inputs, like raw materials.
Lean production

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

  • 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

  • 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

  • Labour intensive businesses are those which mainly rely on the use of human labour in the production of goods and services.
Mixture of approaches

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

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

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.
Jump to other topics
1

Business Organisation & Environment

1.1

Introduction to Business Management

1.1.1Why Businesses Exist & Sectors
1.2

Types of Organisation

1.2.1Sole Traders1.2.2Limited Liability1.2.3Non-Profit1.2.4Franchising1.2.5End of Topic Test - Franchising
1.3

Organisational Objectives

1.3.1External Environments1.3.2Business Mission & Corporate Objective1.3.3Mission, Corporate Objectives & Strategy1.3.4SWOT Analysis1.3.5End of Topic Test - SWOT Analysis
1.4

Stakeholders

1.4.1Stakeholders
1.5

External Environment

1.5.1Social & Technological Environment1.5.2Lifestyle & Technological Environment1.5.3Corporate Social Responsibility1.5.4Economic Environment1.5.5Political & Legal Change
1.6

Growth & Evolution

1.6.1Growth & Retrenchment1.6.2Challenges of Growth1.6.3Growth Models1.6.4End of Topic Test - Diseconomies of Scale1.6.5Internationalisation1.6.6Sourcing Resources & Entering Markets1.6.7End of Topic Test - Internationalisation1.6.8Managing Internationalisation1.6.9Impact of Internationalisation
1.7

HL Only: Organisational Planning Tools

1.7.1Organisational Planning Tools
2

Human Resource Management

2.1

Functions & Evolution of Human Resource Management

2.1.1Setting Human Resource Objectives2.1.2Human Resource Management2.1.3Labour Turnover & Retention2.1.4Labour Productivity
2.2

Organisational Structure

2.2.1Organisational Structures
2.3

Leadership & Management

2.3.1Managers2.3.2Management Theories2.3.3End of Topic Test - Management
2.4

Motivation

2.4.1Motivating & Engaging Employees2.4.2Taylor's Theory2.4.3Maslow's Theory2.4.4Herzberg's Theory2.4.5Different Incentives2.4.6Evaluating Incentives
2.5

Organisational (Corporate) Culture

2.5.1Managing Organisational Culture2.5.2Organisational Structures
2.6

HL Only: Industrial/Employee Relations

2.6.1Improving Employer-Employee Relations2.6.2Case Study - The Winter of Discontent
3

Finance & Accounts

3.1

Sources of Finance

3.1.1Internal Sources of Finance3.1.2External Sources of Finance3.1.3Factors for Financing3.1.4End of Topic Test - Debt
3.2

Costs & Revenues

3.2.1Costs & Revenues
3.3

Break-Even Analysis

3.3.1Profit3.3.2Break-Even Analysis
3.4

Profitability & Liquidity Ratio Analysis

3.4.1Profitability Analysis
3.5

Cash Flow

3.5.1Cash Flow3.5.2Solutions to Cash Flow Problems3.5.3Improving Cash Flow & Profits
3.6

HL Only: Investment Appraisal

3.6.1Investment Appraisal
3.7

HL Only: Budgets

3.7.1Cash-Flow & Budgets
4

Marketing

4.1

The Role of Marketing

4.1.1Setting Marketing Objectives4.1.2Market Calculations
4.2

Marketing Planning

4.2.1Marketing Mix4.2.2Segmentation4.2.3Niche & Mass Markets
4.3

Market Research

4.3.1Market Research4.3.2Market Mapping4.3.3Methods of Market Research
4.4

The 4 Ps

4.4.1Product Decisions4.4.2Pricing Decisions & Price Skimming4.4.3Pricing Decisions & Price Penetration4.4.4End of Topic Test - Pricing & Competition4.4.5Promotional Decisions4.4.6Promotional Decisions 24.4.7Promotional Decisions 34.4.8Digital Marketing4.4.9Evaluating Digital Marketing4.4.10Case Study - The Marketing Mix & Promotion4.4.11Place & Distribution
4.5

HL Only: The Extended Marketing Mix

4.5.1The Extended Marketing Mix
4.6

HL Only: International Marketing

4.6.1International Marketing
4.7

E-Commerce

4.7.1E-Commerce
5

Operations Management

5.1

The Role of Operations Management

5.1.1Setting Operational Objectives
5.2

Production Methods

5.2.1Production Processes Overview5.2.2Production Processes5.2.3Production Efficiency5.2.4Technology & Production
5.3

HL Only: Lean Prodution & Quality Management

5.3.1Importance of Quality5.3.2Measuring & Identifying Quality5.3.3Total Quality Management5.3.4Evaluating Total Quality Management5.3.5Case Study - Toyota Production System
5.4

HL Only: Production Planning

5.4.1Capacity5.4.2Productivity & Efficiency5.4.3Technology & Efficiency5.4.4Improving the Supply Chain5.4.5Inventory5.4.6Outsourcing
5.5

HL Only: Research & Development

5.5.1Organisational Planning Tools

Practice questions on Productivity & Efficiency

Can you answer these? Test yourself with free interactive practice on Seneca — used by over 10 million students.

  1. 1
    _"The number of units produced by an employee in a certain period"_ <br><br>Which of the following terms does this describe?Multiple choice
  2. 2
    What is the most likely impact of minimising waste through lean production?Multiple choice
  3. 3
    Which of the following is a disadvantage with Just in Time?Multiple choice
  4. 4
    Which type of production is cheaper in the long term if there are lots of units produced?Multiple choice
  5. 5
    Which of the following are true?True / false
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Capacity

Technology & Efficiency