CHAPTER 13
PRODUCTION & BUSINESS OPERATIONS
13.1 OBJECTIVES

Describe the role of producers in the economy
and the forms of production

Differentiate among the various types of
manufacturing
PRODUCTION IN THE ECONOMY
Economy begins with production
 Consumers need products/services to satisfy
their needs and wants

ROLE OF PRODUCERS

3 categories of products used by people
 Natural
 Raw
resources
materials supplied by nature
 Agricultural
 Crops
products
and animals raised by farmers
 Processed
 Products
goods
whose forms have been changed to increase
their value and usefulness to people
ROLE OF PRODUCERS (CONT.)

4 types of businesses that are responsible for
production of goods/services

Producers
 Develop

products to sell to other businesses or consumers
Extractors
 Find
natural resources like water, oil, coal, timber from the
earth to be processed and used

Farmers
 Tend
land to grow crops and livestock that are later sold and
processed

Manufacturers
 Get
materials from other producers and convert them into
products for sale to consumers
FORMS OF PRODUCTION

Forms of production are
 Extraction
& cultivation
 Processing
 Manufacturing
All needed to make
products for customers

EXTRACTION & CULTIVATION
Products are obtained from nature
 Makes sure that there is always an available
supply of natural resources
 Also makes sure that crops, livestock, fish are
available at all times
 Most basic form of production

PROCESSING
Changing & improving the form of a product
 Not many products are used exactly how they
are found in nature
 Most are processed before being used
 Water, Cotton, Timber, Oil, Cows

MANUFACTURING
Combines raw materials and processed goods
into finished products
 Businesses and consumers use these
 Can be simple (cabinetmaking) or complex
(designing a computer microchip)

MANUFACTURING EXAMPLES
One manufacturer might use steel and plastic
to make many parts for a snowmobile
 Another may purchase meat, vegetables and
fruit from farms to create frozen TV dinners
 Another might take timber from a forest and
process it into lumber and plywood for a
construction company to buy to build houses
with

MANUFACTURING PROCESSES
Usually, several manufacturers are a part of the
total activity needed to produce goods that we buy
 EX: a textile mill in North Carolina buys cotton from
an Alabama farm. It spins the cotton into yarn and
makes the yarn into fabric. A plant in Boston then
colors and prints the cloth. A clothing
manufacturer in New York then buys the cloth and
makes it into jeans
 Working together is what fulfills consumer needs

TYPES OF MANUFACTURING PROCEDURES

3 main types of Manufacturing procedures
 Mass
production
 Custom manufacturing
 Materials processing
MASS PRODUCTION
An assembly process that makes a large number
of identical products using a continuous, efficient
procedure
 Sometimes called repetitive production
 EX: automobile or bottling plants
 Every employee has a specific task
 Training costs are lower and quality is higher
 Can also be boring and decrease motivation
 Machines now assist with many assembly lines

CUSTOM MANUFACTURING
Manufacturers make products to meet specific
needs and standards of customers/businesses
 Products range from dentures to concert halls
 Building a product for a specific use
 Work closely with the customer to plan and design
product to fit their requests
 May call for unique materials/special process
 EX: bridges, buildings, piece of airplane, special
running shoe for particular athlete

MATERIALS PROCESSING
Changing the form of raw materials so they can be
consumed or used to make other products
 EX: oil companies refine oil to form gasoline; mills
process grain into flour and cereal; digital editors
convert audio/video files into films/CDs
 2 types


Continuous processing
 Raw
materials always move through equipment to change
them into a specific product to buy


EX: milk
Intermittent processing
 Uses
short production times to produce a certain amount of
change to a product. Machines are reset after each set.

EX: printer for special stationary
13-1 ASSESSMENT
ANSWER #1-4 ON PAGE 322 BEFORE
CONTINUING NOTES
13.2 OBJECTIVES

Identify the activities involved in production
planning

Describe how manufacturing is organized
PRODUCTION ACTIVITIES
Production processes are very complex
 Involves careful planning and coordination
 Before a company can manufacture a product,
it must have the facilities and equipment to
carry out the production
 It must hire enough people to complete jobs
 It also must check all finished products for
quality and store them until they are sold

PRODUCT DEVELOPMENT
Before production planning can happen, the
company decides what products it will produce
 You can’t expect to sell the same thing every
year; New products will have to be developed
 Product planning has 2 steps:

 New
product research
 New product design
NEW PRODUCT RESEARCH
Goal is to develop new products that customers
will like, meet their customer needs, and improve
current products offered
 Companies perform 2 types of research:


Applied research
 Studies
existing products to develop improvements or new
uses of the product
 EX: auto manufacturers improve fuel efficiency

Pure research
 Research
done with no product in mind; instead, wanting to
discover new solutions to problems
 EX: scientists researching for cures to diseases
NEW PRODUCT DESIGN
Turning an idea into a product a company can
sell and make a profit from
 Designs are tested and best ones are chosen
 After engineers build and test a model, the
business determines all parts/materials
needed for final product
 Financial experts decide on what price to set
 Make sure company makes money AND
customers can afford it

PRODUCTION PLANNING
If a company develops and tests a new product
idea, and they decide they want to proceed,
they will then develop plans to produce it
 Production planning includes 3 activities:

 Develop
a production process
 Collect production resources
 Select and prepare production personnel
DEVELOP THE PRODUCTION PROCESS
Consists of the activities, equipment and
resources needed to manufacture a product
 If you are going to use mass production, this is
where you organize the assembly line
 Figure out which method you are going to use is
a key part of this step

COLLECT PRODUCTION RESOURCES
Order machines, tools required for production
 Business must locate and organize a space to
perform production activities
 Can either buy a new building or remodel their
current space to make bigger and better
 Determine where materials will be coming from
 Identify suppliers and make sure materials are
delivered on time and at the right price

PRODUCTION PERSONNEL
Estimates the number of employees needed to
complete production activities
 Determines skills required of each employee
 Company will check their own employees first,
then hire and train new ones if needed

INVENTORY MANAGEMENT
Inventory is a detailed list of a company’s
materials, supplies and finished products.
 Inventory management keeps track of the
inventory & resources needed for production
 Very important to manufacturing because you
can’t produce products without your inventory
 Managers keep a record of the supply and costs of
resources used in production
 After product is assembled, extra resources are
moved into storage or sold to customers

MANUFACTURING PROCEDURES
Today’s assembly line is quite different than it
used to be
 Employees work in teams
 Parts move along conveyor belts
 Products move quickly through process
 Employees check products for quality at several
points
 When completed, products are packaged, labeled
and moved to a loading area for shipment

ORGANIZING THE WORK AREA
The type of product will determine how the
work area is organized
 Mass production requires a large building
 There must be space for assembly line,
equipment, tools, employee work stations and
storage areas for parts used
 The smaller the product, the larger amount of
workspace each employee will have

IMPROVING MANUFACTURING
Today there are higher costs, more competition,
and more customer demands
 Challenges today are: faster production, increased
quality of products, reduced costs
 Companies are coming out with improved
procedures, better training for employees and a
higher level of quality for products
 Continuous Process Improvement (CPI)has been
added—increases the quality of work by reducing
errors and waste. Processes are reviewed instead
of waiting until a problem comes up.

CPI-CONTINUOUS PROCESS IMPROVEMENT
STEP 1: Involve Everyone
STEP 2: Identify process
activities
STEP 3: Establish quality
performance standards
STEP 4: Select
measurement tools
STEP 5: Monitor
performance continuously
STEP 6: Improve process
quality
CPI (CONT.)
Designed to help an organization achieve its
goals by improving the quality of work
 Standards are developed for quality
performance
 Standards are based on benchmarks (best
practices among all competitors)
 Based on these results, employees look for
ways to improve work procedures so all
products can improve as well

13-2 ASSESSMENT
ANSWER #1-4 ON PAGE 328 BEFORE
CONTINUING NOTES
13.3 OBJECTIVES

Discuss the importance of effective business
operations

Describe tools used to manage business
operations
THE IMPORTANCE OF BUSINESS OPERATIONS

How a business operates day-to-day can
determine if it succeeds or fails
 Work
procedures may not be efficient
 Security issues may result in thefts
 Lack of maintenance could lead to expensive
repairs
 Bad work environment can lead to unhappy
employees
TYPES OF BUSINESS OPERATIONS
Some operations are specific to the type of
business
 Most common types of business operations:

 Facilities
management
 Logistics
 Scheduling
 Safety
and security
FACILITIES MANAGEMENT
Buildings are one of the largest investments of
a business
 They provide space for all of the business
operations and all storage
 Management begins with deciding on the
building that will be needed (new or existing)
 Management also deals with maintenance and
repairs needed to make building better
 Management also keeps energy/utility costs
under control—be as “green” as possible

LOGISTICS
Managing the movement and storage of supplies,
materials and finished products in a business
 A newer term for logistics is: supply chain
management
 Major logistic duties:

Locating/purchasing where to get supplies from
 Transportation of supplies, materials and products
 Communicating with everyone in supply chain
 JUST-IN-TIME: when goods arrive just in time for
production or to sell—instead of just sitting in storage

SCHEDULING
Determining the activities that need to be
completed, who will complete the work, and the
resources needed to complete the task in time
 Factories must maintain the right inventory to
fill each order or customers will wait too long to
receive merchandise
 Employee scheduling is important—full-time,
part-time and temporary employees
 Company must have the right number of people
scheduled to complete the work needed

SAFETY AND SECURITY
Protecting people and property
 Damage/injury can happen due to

Crime
 Accidents
 Natural disasters (tornados, earthquakes)

Security employees study activities of business to
identify possible security problems then come up
with a way to prevent them
 They also try to minimize the amount of accidents
and injuries—give safety training classes and hang
safety posters in employee areas

INFORMATION MANAGEMENT
Uses technology to access & exchange information
to complete the work of an organization
 4 goals:

1.
2.
3.
4.



Collect, organize & maintain needed information
Provide instant access to information required to
perform work and make decisions
Prevent access to unauthorized users
Use technology to improve communication
Types of information used in business: text, data,
graphics, pictures, and videos
Oral (telephone, voicemail, meetings)
Written (letters, memos, reports, emails)
INFORMATION MANAGEMENT (CONT.)
Information managers are responsible for
designing, purchasing, installing and
maintaining the many types of technology used
in business
 They must develop procedures for collecting,
storing and using the information
 They make sure the information collected is
easy to get to, yet still safe and secure
 The internet makes it more difficult to
safeguard against hackers worldwide

TOOLS FOR BUSINESS OPERATIONS

Management Tools
Operational plan: identifies how work will be done, who
will do it and what resources will be needed
 Operating budget: detailed financial plan for a specific
area of the business
 Schedule: time plan for completing activities
 Procedure: list of steps to be followed for performing a
work activity
 Standard: specific measurement against which an
activity or result is judged. Must be clear and realistic
(EX: the number of customers that should be served in
a fast food restaurant at one time)

TOOLS FOR BUSINESS OPERATIONS

Technology Tools
 So
many common business operations can be
completed using computer software like:
 Project
management
 Budgeting
 Scheduling
 Inventory
 Computer security
 Document management
 New
types of software are available to help with
logistics: supply chain management software and
collaboration software (pg 336)
13-3 ASSESSMENT
ANSWER #1-3 ON PAGE 336 BEFORE
COMPLETING OTHER CHAPTER ACTIVITIES
CHAPTER 13: EXTRA CHAPTER ASSIGNMENTS
Chapter 13 Assessment #11-26 (write
definition and word)
 Page 341: Decision Making Strategies #32-33
 Chapter 13: Study Guide Handout
