3. Making the product

Types of production

Production is about creating goods and services. Teams have to decide on the most efficient way of organising production for their particular product.

There are three main types of production to choose from:

Job production where items are made individually and each item is finished before the next one is started. This approach is often used when each customer has a specific, different request e.g. unique design or name. Products that are bespoke are normally made in this way e.g. personalised T-shirts and canvasses have been chosen in the past.

EXAMPLE- Worth watching the first 2 mins of this video for an excellent example of bespoke job production.

Batch production where groups of items are made together. Each batch is finished before starting the next block of goods. E.g. a team may be making 3 different types of cupcake- vanilla, chocolate and lemon and could decide to make in them in separate batches e.g. only starting the chocolate cupcakes when the vanilla are finished.

Flow production where identical, standardised items are produced on an assembly line e.g. a team making simple jewellery might decide that each team member will do a different part e.g. threading coloured beads, attaching a fastener.

EXAMPLE- Want to know how your crisps? This video below shows the stages by which crisps are produced. A good example of the importance of breaking down a process into component parts.

Cell production involves organising the team into groups or ‘cells’ of member who have different skills. Each ‘cell’ then works together to produce a complete item and can see how their work contributes to the finished product. Each cell will work independently from other cells. E.g. this might be useful for teams where they may not all be able to meet together to make the product but can meet in smaller teams by location or school.

Stock Control

Managing and storing stock effectively is important for a business in order to maintain production and sales.

Stock is any item stored by a business for use in production or sales. Stock can be:

• Raw materials and components waiting to be used in the manufacturing process, e.g. flour stored for cupcake baking.
• Finished goods held in store so that a customer order can quickly be met from stock e.g. bought cupcakes

Holding stock can incur costs- MyBnk teams don’t have to pay for storage in cash but it’s likely that there will be a strain on the relationship with their school/college/youth group if they have too much stock. Holding stock also means that teams will not have cash available for other areas e.g. marketing.

Stock control aims to strike a balance between having enough stock for production without incurring costs. Teams will need to consider whether they need to order stock in advance.

There are two methods of stock control - just in case and just in time.

Just in case involves having buffer stock in case there is an unexpected situation e.g. stock melting in the sun or going off.

Just-In-Time is where the level of stock and production is related to the demand for the product. Teams would wait for orders before making products. This would mean that raw materials and stock would only be ordered from suppliers as needed which reduces money tied up in stock. Just-in-time looks to minimise production time, costs and mount of stock held.

EXAMPLE- A team doing Back My Business used just-in-time method in their Valentine’s business. They took orders for Valentine gift bags (including roses and cards) then bought their stock and made their products. The team made £100 at an hour-long marketplace.

There advantages and disadvantages of both systems. Just in case has the advantage of added security but ties up money in stock. Just in time reduces waste and improves cash flow but lack of buffer stock may lead to business having to reject orders that need immediate delivery.

Teams should think carefully about the stock that they need for their business. They should think about:

Lead times- how long does it take to get more stock? E.g. can it picked up in an hour from the local cornershop or does it need to be ordered online and delivered over a couple of days

The expected level of customer demand.

The costs of stockholding- likely to be minimal or non-existent for MyBnk teams but losing goodwill of teachers/support works could be a cost of holding too much stock

The type of stock, whether it is perishable or durable. e.g. is it fruit that will rot?

Materials List

A key way in which teams will know how much stock to order is through a detailed materials list. We put a lot of emphasis on the materials list and ask teams to make one from the very beginning (at loan application for BMB) .

The materials list has to have everything that will be needed to make the product.

EXAMPLE- a team making hotdogs would need to include bread, sausages along with other less obvious materials such as napkins.

Efficiency and Lean Production

Efficiency, productivity and competitiveness are linked. Better productivity means increased efficiency which results in a higher level of competitiveness.

Efficiency is about making the best possible use of resources. Efficient businesses maximise outputs from given inputs, and so minimise their costs. By improving efficiency a business can reduce its costs and improve its competitiveness.

There is a difference between production and productivity. Production is the total amount made by a business in a given time period. Productivity measures how much each team member makes over a period of time. It is calculated by dividing total output by the number of workers. If a team of 5 make 10 necklaces in an hour then the productivity of each team member is :

10 necklaces/5 team members= 2 necklaces.

A team may think about how they could improve their productivity to 5 necklaces or 8 necklaces. If they can do this without any increase in costs then the team has improved efficiency. The resultant lower unit costs increases profit margins.

Productivity can be improved through reviewing processes, improving morale and best using the skills of the team.

Another way of improving efficiency is through Lean production- a set of measures that aim to reduce waste during production. Waste reduction methods, such as just in time ordering of stock, will increase efficiency.

EXAMPLE- Good, clear example for baking industry

EXAMPLE- Companies may also consider how they can make products without damaging the environment. Nike is starting to think about the sustainable production of their footwear.

Quality Control

Ensuring quality means making sure that products are made to a minimum standard or better. The cost of doing this should be covered by extra sales.

What is quality?

Quality is about meeting the minimum standard required to satisfy customer needs. High quality products meet the standards set by customers.

EXAMPLE- Fairy, a high quality washing-up liquid can claim that one squirt is sufficient to clean a family's dirty plates after a meal. A poor quality washing-up liquid requires several squirts.

How to ensure quality

Quality control is the process of checking the quality of raw materials and supplies as they arrive at the business and also of finished products as they leave the business to be received by customers

Quality assurance is where quality is built into the production process. For example, all team members check all items at all stages of the production process for faults. In this way everyone takes responsibility for delivering quality. Successful quality assurance results in zero defect production.

Zero defect production is the ultimate objective for a business, to produce every product with no defects, therefore eliminating waste and the time taken to correct mistakes.

Continuous Improvement (Kaizen)

Kaizen is a Japanese word which means 'change for the better'.

Continuous improvement involves continually updating and improving products and marketing to stay ahead of their competitors and boost revenue and profitability.

The business will need to continually update and improve their products and marketing to stay ahead of their competitors. MyBnk teams can use continuous improvement through the enterprise journey by changing and adapting to what happens on the enterprise journey.

Kaizen aims to eliminate waste, and reduce both the time and the costs of production.

Benchmarking

This refers to a business finding the best methods and processes that are used by other businesses, and then trying to emulate these in order to become more efficient in its operations.

MyBnk teams may consider researching a business that makes the same product as them to see if they can be inspired by their ‘best practice’.

Quality Standards

MyBnk teams will not have the time or funds to gain quality standards during the programme. However, teams that decide to make their product in the future beyond MyBnk may find it helpful to know about them.

The British Standards Institution (BSI) is the body that is responsible for setting quality and performance standards in UK industry.

The BSI 'kitemark' on a product implies to customers that it has been manufactured and produced to a high level of quality, and will be fit for the purpose for which it was advertised.

Quality assurance refers to the attempt to achieve customer satisfaction, by ensuring that the business sets certain quality standards and publicises the fact that these standards are met throughout the business.

British Standard 5750 (BS 5750) was the most common quality certification in the UK. It is now known as ISO 9000, which is an international standard that tells customers that a business has reached a required level of quality in its products and processes.

Food Safety Act

The Food Safety Act, 1990: This states that it is an offence for a business to sell food if it is not registered to do so and also if those handling the food have not been appropriately trained. It also states that the food must be of the expected nature and quality that is demanded by the consumer.