Understand the 5 P’s of Production
Know & understand economies of scale in
Relation to BSB
Know and understand the need for Quality
Control at BSB
There are 5 P’s of production decision making that you
may also find useful to recall They are:
Product – will it sell? Will the design allow it to be made quickly
and easily? What materials will be used? What will they cost?
Plant – what buildings/equipment will be needed? How will they
be laid out?
Processes – will the product be made as a one off? In batches?
Continuously on a production line? Or some other way?
Programmes – how will different strategies and functions be
programmed to achieve an organised timetable of production?
People – what does the firm need to consider about the people
involved in the production of a good or service?
Internal Economies of Scale
Types
This is when a firms unit of cost of production falls as the output
and scale of operation increases
Technical economies
Larger firms can afford research &
development costs and buy sophisticated
equipment
Managerial economies
Employ specialist managers to improve
efficiency
Financial - economies
Larger firms are more stable financially –
easier to negotiate lower interest on loans
Risk –bearing economies
As firms grow – more product range –
diversification spreads risk over more
markets
Purchasing economies
Larger firms can have discounts from buying
in bulk
Marketing economies
Larger firms are able to buy services for
specialist advertising agencies – more types
of promotion.
Economies of scale
• This refers to the factors that cause cost per
spices pouches to decrease as BSB increase
the scale of its production. For example-
Technical economies- BSB depends heavily
on technology as it expands. Productivity
increases, spreading the costs and making
the individual cost per spice pouch less.
Is there something that needs improving
here?????
Managerial economies –BSB
Specialist HR
Highly skilled blenders These will improve
efficiency. DIVISION OF LABOUR – small very specialised
tasks – repetitive – people become excellent
at jobs (has disadvantages) Can BSB improve?
Bulk buying (Purchasing)economiesBSB will be purchasing bigger quantities of
stock from suppliers, so can negotiate higher
discount rates.
Financial economies- banks would give BSB
a lower interest rates on future loans
because BSB is considered to be reliable as
it is successfully expanding.
Risk bearing economies- BSB sells a variety
of spice pouches, and don’t depend on one
flavour as its main source of revenue- this
spreads the risk of failure.
• Look at the following
label used by BSB for
their spice pouches.
• On the post it note
provided, write down
3 recommendations
to improve it.
Use of technology in the BSB
case study
Recap on types of production.
Explain the pro and cons of using a JIT stock
system.
Discuss the benefits and drawbacks of BSB
using technology.
Analyse the importance of quality
management to BSB.
Exploration of the new build factory
extension to various stakeholders.
• Room 1 of the BSB factory uses JIT stock ordering
system.
ACTIVITY- discuss the pro and con of BSB relying on
a JIT system.
Note down what you think is the most important
and most important disadvantage BSB must consider
when using JIT. Explain why.
BSB’s use of technology.
• Automation- the full use of machinery during the manufacturing
process.
• Mechanisation- the use of machinery and labour during the
manufacturing process.
1)
2)
Annotate which rooms use which of the two technological
processes mentioned above.
Annotate which rooms use skilled and unskilled workers.
The importance of labour to BSB… why has the Human
resource manager hired two very different workers?
Advantages and disadvantages?
• Skilled workers
• unskilled workers
Hint- think in regards to specialisation, division of labour,
costs, training, motivation etc.
Past exam question
Ade and spices…
• Ade had experience as a
production Manager in
a factory which made
caravans.
• In your writing books,
note down the pros and
cons of Ade’s skills in
the new business
“BSB now produces a range of spice
blends. It is noted particularly for its
distinctive blends which are sold
under the BSB brand. The spices are
roasted, blended and packaged in
the factory. The spices are packaged
either in heat-sealed foil pouches or
in glass bottles. The pouches and
bottles are bought in bulk by BSB
and labels are attached to them to
identify the brand and the spice
blend.”
What type of production method (s)
do you think BSB use?
Practice writing skills exercise
• For each of the following production methods,
describe how it is relevant or not relevant to BSB.
(2 marks per method explained).
• Explain answers with ‘this is because’…
•
•
•
•
Job.
Batch.
Flow.
Process.
http://www.youtube.com/watch?v=CLPFG5QCx0g
Past exam question adapted
E.g. Human resource manager, spice
blender workers etc.
BSB
Past exam question adapted
BSB
Past exam question adapted
BSB
Practice writing skills exercise
• Discuss the benefits and drawbacks of BSB using
technology.
1) State 2 benefits. Analyse each benefit through chain
writing- “this is good because..” (4 marks)
2) State 2 drawbacks. Analyse each drawback through
chain writing- “this is bad because..” ( 4 marks)
3) Conclusion- give your opinion- do you think it is a
good business decision for BSB to rely on technology.
How does it link to other concepts like cash flow,
sources of finance and quality management? (3
marks).
Example of past exam question
The key issue with using technology is
the high costs involved…
• Chloe and Ade need to consider various
sources of finance for such expensive
machinery. Explain how they could use the
following sources of finance:
1. Leasing.
2. Find a new partner.
3. Share issue.
BSB produces spices in either heat sealed foil pouches or
in glass bottles. Give 3 examples of how each type of
packaging could be manufactured as poor quality.
Why should BSB be concerned about producing high quality
goods? Complete the following chain analysis diagrams?
Develops competitive
advantage
Increases customer
satisfaction
Ability to charge
high prices
(skimming)
http://www.youtube.com/watch?v=Cs0egDUI3AU&list=PLF97E21F2311FFF0F
Let’s imagine a fault develops in the BSB factory and
produces poor quality spice pouches (glass fragments in
the pouches). These are sold on in the supermarkets to
the public. Mind map the issues BSB will face from this.
EXTENSION- write down a solution on how BSB can
deal/ counter that issue.
The problems of BSB selling on poor
quality spice pouches to the public?
Use business
terminology!
BSB could introduce TQM to manage
quality more effectively.
• TQM is best described as being an “attitude” in a
business where everyone in the business is committed
to achieving quality – not just the people in the Quality
Control or production departments.
• It means that quality is being checked at every stage of
the production process, as all employees are trained to
check their own work (self-checking).
• The main aims of TQM are “zero defects” and “total
customer satisfaction”.
Note down what you think is the most
important and most important disadvantage for
BSB implementing TQM in the spice factory.
Explain why.
Past exam question adapted
BSB
Past exam question
Discuss in pairs how could the following stakeholders be
affected by the expansion of a new spice factory on the
outskirts of Bowton:
• Farmer.
• Local Bowton community.
• Environmental pressure groups.
• Bowtown council.
• BSB’s employees.
• BSB’s customers.
http://www.youtube.com/watch?v=GGkqQ0l7BmY
Past exam question adapted
BSB new factory
new factory
Past exam question adapted
of BSB
from the factory expansion