Manufacturing Operations and Production Economics
Production Process and Operations
The production area is responsible for the procurement of necessary productive factors and their subsequent transformation into goods and services.
Types of Production Systems
- Depending on the destination of the product, production can be custom or market.
- Depending on the degree of product homogeneity, a distinction is made between craft production and mass production.
- According to the temporal dimension of the process, we distinguish between continuous and intermittent production.
Cost of Production
The cost of production for a good or service is the monetary value of the factors used to obtain them.
Direct and Indirect Costs
- Direct Costs: These are directly linked to production, and therefore, the quantity corresponding to each product can be easily identified.
- Indirect Costs: These affect the company as a whole and are common to various products.
Productivity Analysis
Productivity = Production achieved / Units of labor employed.
Causes of Productivity Growth
- Capital investment.
- Improving human capital.
- Technology adoption.
- Quality of resource management.
Research and Investment (L + D + I)
This comprises creative work undertaken systematically in companies, universities, and public research centers to increase human knowledge and use it in new applications to generate income. Firms consider their spending on research and investment as intended to achieve a competitive advantage. A company can obtain these benefits in two ways:
- Getting a better product than its competitors (differentiation).
- Developing production methods to increase productivity (cost leadership).
Inventory Management (Stock or Number of Units)
The total amount of materials and items for sale a company has stored at any time is called inventory.
Types of Inventory
- Stock of stored materials.
- Stock of products being manufactured.
- Stock of finished goods.
Costs associated with inventories include storage or maintenance costs, ordering costs, and inventory breakdown costs.
Wilson Model Basis
This model is based on the following assumptions:
- The annual demand of the product (D) is constant and known.
- The supplier always takes the same time to serve the order.
- Entries into the store are made in batches or orders of the same size.
- The storage cost is proportional to the average stock level.
Sustainability Ratios
Ratios aim to provide products that satisfy human needs and improve quality of life at a competitive price, while progressively reducing environmental impact and resource intensity to at least a level consistent with nature's regenerative capacity. Its advantages include cost savings and an improved image.