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Chapter 5: Production

King City SSKing City SS

Learning Goals: Learning Goals:

We are identifying the factors We are identifying the factors involved in productioninvolved in production

We are describing ways companies We are describing ways companies can improve productivitycan improve productivity

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Success Criteria:Success Criteria:

I can define productivity and provide I can define productivity and provide an examplean example

I can identify the factors of I can identify the factors of production used to produce a new production used to produce a new carcar

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Game PlanGame Plan

Literacy Prep Case: Ganong Bros (20 min)Literacy Prep Case: Ganong Bros (20 min) WOB Handout: Waterslides-Making A WOB Handout: Waterslides-Making A

Splash (video/Q&A)Splash (video/Q&A) The 6 factors of productionThe 6 factors of production Rick Mercer visits GM Oshawa production Rick Mercer visits GM Oshawa production

plantplant Ingredients vs Supplies: What’s the Ingredients vs Supplies: What’s the

difference?difference?

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Rick Mercer Visits GM Rick Mercer Visits GM OshawaOshawa

http://www.youtube.com/watch?v=kgEXpuKi4Uw

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Chapter 5: ProductionChapter 5: ProductionFactors of ProductionFactors of Production

Production happens when an individual, business, or an Production happens when an individual, business, or an organization makes a product, provides a service, or generates an organization makes a product, provides a service, or generates an idea or concept. idea or concept.

SixSix Factors of ProductionFactors of Production

1.1.Natural resourcesNatural resources2.2.Raw materialsRaw materials3.3.LabourLabour4.4.CapitalCapital5.5.InformationInformation6.6.ManagementManagement

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Chapter 5: ProductionChapter 5: ProductionFactors of ProductionFactors of Production

Natural ResourcesNatural Resources

The six types of natural resources that The six types of natural resources that primary industriesprimary industries supply us supply us with arewith are

1.1. agricultureagriculture

2.2. fishing and trappingfishing and trapping

3.3. miningmining

4.4. waterwater

5.5. fuel and energyfuel and energy

6.6. logging and forestrylogging and forestry

Primary industries that take something out of the Earth or the sea Primary industries that take something out of the Earth or the sea can be referred to as can be referred to as extractive industriesextractive industries. . Video: Ginseng Chai Na Ta

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Chapter 5: ProductionChapter 5: ProductionFactors of ProductionFactors of Production

Two Main Raw MaterialsTwo 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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Chapter 5: ProductionFactors of Production:Mini

Raw MaterialsRaw MaterialsRaw materialsRaw materials are any goods used in the manufacturing of other are any goods used in the manufacturing of other goods.goods.

Two Main Types of Raw MaterialsTwo Main Types of Raw Materials1.1. IngredientsIngredients ― ― raw materials that are combined or converted and raw materials that are combined or converted and

become a part of the finished product.become a part of the finished product.2.2. SuppliesSupplies ― ― raw materials that do not become a part of the finished raw materials that do not become a part of the finished

product, but are used in the product creation process.product, but are used in the product creation process.

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Production Plant: Chevy Production Plant: Chevy CamaroCamaro

Identify the factors of production in Identify the factors of production in the following videothe following video

Can you distinguish between Can you distinguish between ingredients and supplies?ingredients and supplies?

http://www.youtube.com/watch?v=t7KYL2lO9-w http://www.youtube.com/watch?v=t7KYL2lO9-w

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Now you do it! Now you do it! Create a T-chart!Create a T-chart!

IngredientsIngredients SuppliesSupplies

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Factors of ProductionFactors of Production

LabourLabourLabour Labour includes all of the physical and mental (cognitive) work includes all of the physical and mental (cognitive) work needed to produce goods and services. Labour is expensive so needed to produce goods and services. Labour is expensive so most businesses seek ways to save on labour costs.most businesses seek ways to save on labour costs. Businesses now Businesses now automateautomate and and consolidate consolidate to save on labour to save on labour costs. Automation means that many tasks are performed by more costs. Automation means that many tasks are performed by more them one person using machines. Consolidation occurs when them one person using machines. Consolidation occurs when many small manufacturing sites close down and are centralized many small manufacturing sites close down and are centralized into one large site. into one large site.

OutsourcingOutsourcing, the hiring of another company to perform tasks for , the hiring of another company to perform tasks for any company, is another cost saving business option.any company, is another cost saving business option.

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Chapter 5: ProductionChapter 5: ProductionFactors of ProductionFactors of Production

CapitalCapitalCapital Capital is the money invested in the business and is the money invested in the business and is often referred to as monetary capital. Capital can is often referred to as monetary capital. Capital can be transformed into other items to run the business be transformed into other items to run the business such as a new truck. This type of capital is called such as a new truck. This type of capital is called liquidliquid..

Some capital such as buildings or equipment are Some capital such as buildings or equipment are non-liquidnon-liquid. It is part of the business operations, and . It is part of the business operations, and cannot be converted into liquid capital easily. These cannot be converted into liquid capital easily. These items are called capital goods.items are called capital goods.

Intellectual propertyIntellectual property, the ideas or the talent of a , the ideas or the talent of a business’ workforce, is a non-tangible form of business’ workforce, is a non-tangible form of capital.capital.

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Chapter 5: ProductionChapter 5: ProductionFactors of ProductionFactors of Production

InformationInformationTo produce goods and services in a competitive global market, To produce goods and services in a competitive global market, businesses require more information aboutbusinesses require more information about new technologynew technology

• customerscustomers• competitioncompetition• political conditionspolitical conditions• sources of supplysources of supply

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

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Chapter 5: ProductionChapter 5: ProductionFactors of ProductionFactors of Production

ManagementManagement

ManagementManagement consists of the people who run the business and control consists of the people who run the business and control or direct the factors of production (natural resources, raw materials, or direct the factors of production (natural resources, raw materials, labour, capital, information, and so on). Management also allocates labour, capital, information, and so on). Management also allocates company resources and makes decisions that affect the day-to-day company resources and makes decisions that affect the day-to-day and long-term operations of the business.and long-term operations of the business.

In larger companies, higher-level managers and/or the board of In larger companies, higher-level managers and/or the board of directors make decisions regarding profit distribution. In a smaller directors make decisions regarding profit distribution. In a smaller business, a single business manager or owner may make all of the business, a single business manager or owner may make all of the business decisions.business decisions.

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Chapter 5: ProductionChapter 5: ProductionThe Production Process The Production Process

Purchasing, grading, processing, and quality control are the four Purchasing, grading, processing, and quality control are the four stages of the production process.stages of the production process.

PurchasingPurchasingWithin a business, someone is responsible for Within a business, someone is responsible for purchasingpurchasing the raw the raw materials needed to produce the product or service. Purchasing may materials needed to produce the product or service. Purchasing may be the responsibility of a purchasing department, purchasing agent, be the responsibility of a purchasing department, purchasing agent, buyer, or owner.buyer, or owner.

Some considerations when making purchasing decisions includeSome considerations when making purchasing decisions include• the quality of the raw material being purchasedthe quality of the raw material being purchased• the the priceprice of the raw material being purchased of the raw material being purchased• any additional costs associated with the purchase of the raw any additional costs associated with the purchase of the raw

materialmaterial

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Business also requires Business also requires Purchasing Purchasing

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Chapter 5: ProductionChapter 5: ProductionThe Production Process The Production Process

ProcessingProcessingAll non-service businesses convert one item into another through processing. All non-service businesses convert one item into another through processing. This is called This is called conversion processingconversion processing. . Video clip: Coconut Oil

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

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

Quality ControlQuality ControlQuality controlQuality control are standards that ensure all produced products conform to are standards that ensure all produced products conform to prescribed levels of excellence. These standards are set by the company, the prescribed levels of excellence. These standards are set by the company, the government, or another organization such as the government, or another organization such as the International Organization for International Organization for Standards (ISO).Standards (ISO). The latter organization sets worldwide standards for numerous The latter organization sets worldwide standards for numerous industries in 157 countries. industries in 157 countries.

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Chapter 5: ProductionChapter 5: ProductionThe Production ProcessThe Production Process

GradingGradingRelated to quality control, Related to quality control, gradinggrading is the act of checking products is the act of checking products for size and quality against fixed standards for the product or for size and quality against fixed standards for the product or product category. Grading of products allows consumers to make product category. Grading of products allows consumers to make informed purchasing decisions.informed purchasing decisions.

Many other products are not formally graded. These types of Many other products are not formally graded. These types of products do not meet manufacturer's standards and are often sold products do not meet manufacturer's standards and are often sold as “seconds” containing slight defects, such as towels or sheets. as “seconds” containing slight defects, such as towels or sheets. Products with surface damages such as appliances can be sold at Products with surface damages such as appliances can be sold at reduced prices at “scratch and dent” sales. reduced prices at “scratch and dent” sales.

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Chapter 5: ProductionChapter 5: ProductionImproving ProductivityImproving Productivity

ProfitabilityProfitability and and productivityproductivity are closely related. It is important that are closely related. It is important that an increase in productivity results in an increase in profit.an increase in productivity results in an increase in profit. Increased Increased productivity productivity consists of the following:consists of the following:

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

Improving and maintaining Improving and maintaining productivityproductivity is often dependent on is often dependent on• trainingtraining• capital investmentcapital investment• investment in technologyinvestment in technology• new inventory systemsnew inventory systems

Automatic bottle sorting Automatic bottle sorting equipment equipment

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Chapter 5: ProductionChapter 5: ProductionFactors of ProductionFactors of Production

TrainingTrainingTraining programs that develop a person’s knowledge and Training programs that develop a person’s knowledge and experience are essential in the development of a productive experience are essential in the development of a productive employee. Ex: Canadian Management Centeremployee. Ex: Canadian Management Center

Four Major Types of TrainingFour Major Types of Training1.1. Initial trainingInitial training2.2. Ongoing trainingOngoing training3.3. RetrainingRetraining4.4. Specialized trainingSpecialized training

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

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Chapter 5: ProductionChapter 5: ProductionFactors of ProductionFactors of Production

Investment in TechnologyInvestment in TechnologyUtilizing up-to-date technology enables companies to maintainUtilizing up-to-date technology enables companies to maintainand improve upon their competitive edge. Roboticsand improve upon their competitive edge. Robotics andandautomationautomation, the use of computer-controlled machinery to perform, the use of computer-controlled machinery to performrepetitive tasks, is another way companies can improverepetitive tasks, is another way companies can improveproductivity.productivity.

New Inventory SystemsNew Inventory SystemsJust-in-time (JIT)Just-in-time (JIT) inventory systems allow businesses to coordinate inventory systems allow businesses to coordinatesuppliers, monitor warehouse storage, and keep track of factory suppliers, monitor warehouse storage, and keep track of factory production to deliver goods on time. Requiring up-to-date statisticalproduction to deliver goods on time. Requiring up-to-date statisticalinformation, this system saves time, money, space, and reducesinformation, this system saves time, money, space, and reduceswaste to increase productivity. Benefits include having the rightwaste to increase productivity. Benefits include having the rightmaterial, at the right time, at the right place, and in the right amount.material, at the right time, at the right place, and in the right amount.