Commonly used in small businesses producing specialist, customised products to meet customer needs.

Industries that mass supply are mostly capital intensive. Some industries may use capital intensive even if labour intensive is possible

Land: A place to operate from.

Labour: Can be manual labour or metal skills.

Capital: The tools, machinary and equipment the business uses for production.

Enterprise: The decision making skills and risk taking qualities of entrepreneurs.

Added Value can be increased by: 1. Efficiency of Production. 2. Better quality of goods and services 3. Flexibility and innovation

Factors the amount of added value depends on: 1. The design of the product 2. The efficiency of opertions 3. Branding to encourage customers to pay more than cost of inputs

Job Production: The production of a one- off item specially designed for the customer.

Batch Production: The production of a limited number of identical products passing through each stage together.

Flow Production: The production of items in a continually moving process.

Mass customisation: The use of flexible computer-aided technology on production lines to make products that meet specificl customers requirements of custom items.

Efficiency: Producing output at the highest ratio of input to output. Effectiveness: Meeting the objectives by using inputs productivetly

Productivity: Ratio of outputs to inputs during production. Level of Production: The no. of units produced during a time period. Production: The process that transforms inputs into outputs.

Sustainability of operations: Business operations that can be maintained in the long term, for ex, it does not harm the environment for future generations

Just in case: Advantages: 1. Little chance of ever running out of inventory so production levels maintained. 2. Less need for accurate sales forecasing. 3. Economies of scale from very large orders are possible. Dis - Advantages: 1. High capital cost of finance invested. 2. High storage, insurance costs etc. 3. Inventories could lose value due to changes in trend.

Just in time: Advantages: 1. Capital invested in/oppurtunity cost of inventory reduced. 2. Costs of storage is reduced, space can be used elsewhere. 3. Less chance of inventories becoming outdated. 4. Quicker response time to change in consumer demand. 5. Staff may gain improved motivation. Dis - Advantages: 1. Expensive production delays with failure to receive supplies. 2. Delivery costs are increased. 3. Order admistration costs will rise. 4. Reduction in the bulk discounts offered by suppliers. 5. Reputation of business.

Reasons for holding Inventory: 1. Storage for raw materials and componenets. 2. During the work in progress stage for certain businesses 3. Finished goods may have to be held in storage.

Why do inventories need to be managed effectively? 1. May be insuffitiennt inventories to meet unforseen changes. 2. Out of date inventories held due to lack of effective rotation system. 3. Inventory wastage may occur due to mishandling. 4. High inventory levels high storage and oppurtunity cost. 5. Poor managment of supply purchasing function.

Costs of holding inventory: 1. Oppurtunity cost of working capital tied up in goods 2. Storage costs of secure warehouses, often with special conditions. 3. Risk of wastage if inventories are not used or sold.

Benefits of holding inventory: 1. Reduces risk of lost sales as products always available. 2. Allows for continous production as supplies always there. 3. Avoids need for special orders from suppliers. 4. Large orders of new supplies and reduce costs..

Buffer Inventory: Minimum inventory level that should be helf to ensure continous production through an unforseen circumstance. The higher the buffer level, the higer the degree of uncertanity about delivery times or production levels.

Re - Order quanitity: The number of units ordered every time. Influenced by the economic order quanitity. It happens when the re - order level is reached triggering a new order to be sent.

Lead Time: The time between ordering new supplies and their delivery. The longer the period of time, higher will be the re - order inventory level.

Aims To reduce Time period by: 1. Establishing good relations with suppliers 2. Improving transport system to cut time 3. Speeding up new product development to give business an edge. 4. Using technology and flexible workfroces 5. Minimising waste to cut costs

Benefits of supply chain management: 1. Improves customer service when products are on time. 2. Reduces operation costs. 3. Improves profitability.

When a business is operating at less than full capacity, there is excess capacity/Spare capacity. Improving Capacity Levels???

Capacity Shortage When demand for a businesses products exceeds production quality. How to handle capacity shortage?

The imapct on fixed average costs: With capacity utilisation at a high rate, fixed costs are spread over large number of units so will be low. Vice Versa, when capacity utilisation is low, avearge costs rise. Drawbacks to full capacity: 1. Employees may feel overwheled. 2. Regular customers may have to be turned away if they want to increase orders. 3. Machinery will be contionous so no time for maintenance.

Rate of Capacity utilisation = Current output level/Maximum output level * 100

Reasons for outsourcing: 1. Reduction and control of operating costs 2. Increased flexibility. 3. Improved company focus. 4. Access to quality services or resources. 5. Freeing up internal resources.

Potential Drawbacks: 1. Loss of jobs within business. 2. Quality issues. 3. Customer Resistance. 4. Security. 5. Corporate social Responsibility.