Efficiency is about making best possible use of all a businesses resources.
Production is said to be efficient if average costs are minimised.
Factors influencing efficiency:
1. Standardisation of products.
This involves using using uniform resources or producing a uniform product.
Ryanair only use Boeing 737-800 aircraft. This streamlined fleet helps us to keep their costs down and safety standards up.
2. Outsourcing - other companies providing services for a lower cost.
3. Relocating operations.
Dyson moves production to Malaysia:
This involves closing unprofitable operations.
5. Delayering.
Removing a layer from the organisational hierarchy.
Investing in new technology.
Capital intensive production
This requires extensive equipment and machinery to produce goods.
It therefore requires a larger financial investment.
Labour intensive production
Refers to manufacturing that requires a higher labour input to carry out production activities in comparison to the amount of capital required.
Lean production:
An approach to management that focuses on cutting out waste, whilst ensuring quality.
This approach can be applied to all aspects of a business – from design, through production to distribution.
