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Factors of ProductionProduction - when an individual, business, or organization makes a product, provides a service, or generates an idea or concept

Six Factors of Production

1.Natural resources2.Raw materials3.Labour4.Capital5.Information6.Management

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Natural ResourcesSix types of natural resources:

1. agriculture

2. fishing and trapping

3. mining

4. water

5. fuel and energy

6. logging and forestry

Extractive industries - primary industries that take something out of the earth or sea

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Raw Materials

Raw materials - any goods used in the manufacturing of other goods.

Two Main Types

1. Ingredients ― raw materials that are combined or converted and become a part of the finished product

2. Supplies ― raw materials that do not become a part of the finished product, but are used in the creation process

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Two Main Raw Materials

Pants

Fabric

Rivets

Zipper

Thread

Air filters for ventilation systems

Sewing machine oil

Paper for invoices

Ingredients

Supplies

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LabourLabour - all of the physical and mental work

needed to produce goods and services.

Ways to save on Labour Costs:

1. Automation - many tasks are performed by more then one person using machines

2. Consolidation - when small manufacturing sites close down and are centralized into one large site

3. Outsourcing - hiring of another company to perform tasks for your company

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Capital - the money invested in the business

Liquid capital - can be transformed into other items to run the business ie. a new truck

Non-liquid capital - part of the business operations, and cannot be converted into liquid capital easily ie. buildings or equipment -these items are also called capital goods

Intellectual property - the ideas or the talent of a business’ workforce

Capital

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Information

To produce goods and services in a competitive global market, businesses require more information about

•new technology•customers•Competition•political conditions•sources of supply

Accurate and usable information reduces a business’ risk and can enhance its profitability.

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Management

-the people who run the business and control or direct the factors of production

- also allocate company resources and makes decisions that affect the day-to-day and long-term operations of the business

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Purchasing

Purchasing of the raw materials to produce the product or service may be the responsibility of a purchasing department, purchasing agent, buyer, or owner.

Some considerations when making purchasing decisions include

• the quality• the price• any additional costs

Four Stages of the Production Process

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Processing

conversion processing - convert one item into another through processing

Examples of raw materials that are refined to produce semi-finished or finished products include

• bauxite aluminum • sugar cane sugar• wheat flour• timber or logs paper

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Quality control- standards that ensure all produced

products conform to prescribed levels of excellence.

These standards are set by the company, the government, or another organization such as the International Organization for Standards (ISO).

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Grading

-the act of checking products for size and quality against fixed standards for the product or product category. -grading allows consumers to make informed purchasing decisions

“seconds” - products do not meet manufacturer's standards and are often sold as is, containing slight defects, such as towels or sheets

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Improving Productivity

Increased productivity consists of the following:

• maintaining quality while increasing speed• increasing quality while maintaining speed• increasing both quality and speed at the same time

Improving and maintaining productivity is often dependent on

• training• capital investment• investment in technology• new inventory systems

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Training

Four Major Types of Training1. Initial training2. Ongoing training3. Retraining4. Specialized training

Capital InvestmentInvestment of capital into items, such as new computers, machinery, buildings, and facilities, contribute to increased productivity.

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Investment in TechnologyUtilizing up-to-date technology enables companies to maintainand improve their competitive edge. Ie. Robotics for automation

New Inventory Systems

Just-in-time (JIT) inventory systems allow businesses to coordinate suppliers, monitor warehouse storage, and keep track of factory production to deliver goods on time. -Saves time, money, space and reduces waste-having the right material, at the right time, at the right place, and in the right amount.