Design in Society

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Design in Society 4B Economics
Production
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4B Economics Production

• For this part of the examination you need to
• understand the economic factors of one-off,
  batch, high volume and continuous production
• Know the sources, availability and costs of
  materials
• Know the advantages of economies of scale of
  production
• Understand the relationship between design,
  planning and production costs
• Understand the material and manufacturing
  potential for a given design solution

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A2 Design Technology 4B Economics Production
Economic factors in the production of one-off,
batch and mass-produced products
The production chain is the sequence of
activities required to turn raw materials into
finished products and it is the manufacturing
companies aim to do this in a cost effective
manner to maximize profit. The total product
costs for manufacturing companies are divided
into two
Variable Costs (Direct costs) The cost of
Production (depending upon the scale, materials,
services, wages, energy and packaging,
transportation
Fixed Costs (Indirect costs) The cost of
overheads which have to be paid at regular
intervals EVEN if production is stopped,
including routine marketing maintenance, rent and
rates, depreciation of plant and equipment
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A2 Design Technology 4B Economics Production
A company will see the best price as the one that
generates the maximum profit, not necessarily the
one that sells the most products
VARIABLE (DIRECT COSTS)
FIXED (INDIRECT COSTS)
Profit- the amount left of the selling process
after all of the expenses have been
paid Non-production overheads- design,
administration, management, office rents, retail
outlets Production overheads- storage,
warehousing, heating, staff facilities,
transportation
Variable costs- the cost of what is actually used
to make the product including materials,
services, energy, packaging and labour
Production costs come from these three
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A2 Design Technology 4B Economics Production
The relationship between fixed and variable costs
Total unit cost
Direct costs
Fixed costs
Increasing numbers of product
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A2 Design Technology 4B Economics Production
The Production Chain
A Production Chain is the sequence of activities
required to turn raw materials into finished
products
TIMBER
BAUXITE
IRON ORE
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A2 Design Technology 4B Economics Production
The Production Chain
Primary Sector
The extraction of natural resource as in
agriculture, forestry, mining and quarrying. Less
Economically Developed Countries (LEDCs) often
rely heavily upon the export of raw materials
Secondary Sector
The processing of primary raw materials and the
manufacture of products. This sector employs a
decreasing proportion of the workforce in the
More Economically Developed Countries (MEDCs),
such as the USA
Tertiary Sector
The provision of services, which include
education, retailing, advertising, marketing,
banking and finance. This is a growing sector in
MEDCs and the largest employer
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A2 Design Technology 4B Economics Production
Productivity and Labour costs and the scale of
Production
Productivity is a measurement of the efficiency
with which the raw materials (production inputs)
are turned into products (manufactured
outputs) Productivity is measured as output per
worker, or labour costs per unit of
production Productivity is encouraged by
setting up an internal market within the company
where departments buy and sell their services and
also setting budgets for each department
Labour costs are linked to the type and length of
any production process. Introducing an
additional process will increase labour,
production and end-product costs
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A2 Design Technology 4B Economics Production
Profit margin and product cycle
Product price (Revenue)
Profit
Total unit costs
Product cycle (time)
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A2 Design Technology 4B Economics Production
Scale of Production

• The scale of production is important as it
  involves a production process as a response to
  inputs, such as materials, resources, people,
  money, information, etc. and results in outputs,
  such as new and improved products, satisfied
  customers as well as possibly unwanted waste
  products.
• The scale of production chosen will be the one
  that best suits the type of product and volume of
  production required

Job, Custom, One-off Production
Mass or Line Production
Batch Production
SCALE
Continuous or Flow Production
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A2 Design Technology 4B Economics Production
Job, Custom, One-off Production
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A2 Design Technology 4B Economics Production
Batch Production
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A2 Design Technology 4B Economics Production
Mass or Line Production
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A2 Design Technology 4B Economics Production
Flow or Continuous Production
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A2 Design Technology 4B Economics Production
Sources, availability and costs of materials
All manufacturers require a reliable supply of
raw materials The sources, availability and
costs of materials depend on the type and
quantity of materials required Larger
manufacturers need more materials and can
negotiate lower price The price of materials
increases as a result of limited supply, high
demand, complex processing requirements and
transportation costs
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A2 Design Technology 4B Economics Production
Timber, manufactured board, paper
Softwood and Hardwoods
Manufactured Boards Paper
Manufactured board is made in high volume and is
widely used in self-assembly furniture, shop
fittings and flooring
Softwoods (Pine) is grown in colder regions of
N.Europe and N.America

• Plywood and Blockboard are more expensive than
  MDF as they are made from better quality timber.
• Plywood is made from birch or meranti fast
  growing hardwood
• Blockboard is made from birch and pine. Birch for
  the facing as it is more durable and Pine for the
  core as it is fast growing and relatively
  consistent in quality
• MDF, card and paper is less expensive than all
  other manufactured boards as it is made from
  small particles of recycled reconstituted wood or
  shredded bark during the felling process

Hardwoods (Oak, Teak, Ash) are slower growing and
therefore more expensive than softwoods. They
come from broad leaved deciduous trees from cold
and tropical climates. The climate and origin of
hardwood has huge costing implications due to the
trees reaching full maturity
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A2 Design Technology 4B Economics Production
Metals
Metals are extracted from ores, which occur
naturally in rocks and minerals. Aluminium and
iron are the commonest ores, accounting for
almost 95 of the total tonnage of all metal
production. Smelting ore close to its source
can reduce transport and labour costs
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A2 Design Technology 4B Economics Production
Oil and Plastics

• Crude oil is untreated oil and is the worlds
  major source of energy, thermoplastics and
  thermosetting plastics.
• The main sources of oil are controlled by the
  Organisation of Petroleum Exporting Countries
  (OPEC), a cartel of countries from the Middle
  East, South America, Africa and Asia.
• Plastics are available in sheet, rod or as
  granules for extrusion and injection moulding.
  Plastic resins are supplied in liquid form.
• Because plastics are widely available, cost
  effective and require less complicated
  processing, can be easily recycled, they have
  replaced many other materials such as PET has
  replaced glass bottles.

• OPEC sets output quotas in order to control crude
  
  oil prices.
• Other oil producing areas include the USA, Russia
  
  and the North Sea.

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A2 Design Technology 4B Economics Production
Advantages of economies of scale of production

• Economies of scale are the savings in cost
  brought about by producing products in larger
  numbers. One-off products do not benefit from
  such economies of scale.
• Products manufactured in high volume and
  continuous production enjoy lower costs and
  higher savings due to
• Specialising of labour leading to increased
  
  productivity
• The spread of fixed costs
• Bulk buying of raw materials at lower unit costs
• Lower borrowing costs to fund capital investment
• The concentration of industry, which allows a
  
  specialist labour force to develop
• The development of local supply and support
  
  networks

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A2 Design Technology 4B Economics Production
Mass production and the development of new
products
The increased pressure to remain competitive
forces companies to continually develop new
products. The costs of developing new products
is high due to the level of investment
required. There is a constant need to reduce the
time-to-market of new products. The most
successful companies produce the right products
at the right time, in the right quantity and at
the right cost.





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A2 Design Technology 4B Economics Production
The relationship between design, planning and
production costs
Total costs and the products selling price must
be set at an appropriate level in order to
achieve profit. All costs in a manufacturing
company are set in the design phase and Designing
for Manufacture (DFM) is directly related to
designing for cost. The main aims of DFM are
minimisation of components and assembly costs,
minimisation of product cycles, and to produce
higher quality products.
Monocoque moulded plastic chair
Three part office chair (mild steel and plastic
seat with fabric cushioning)
Multi-parts office chair
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A2 Design Technology 4B Economics Production
The cost of Quality
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A2 Design Technology 4B Economics Production
Profit margin and product cycle Profit is the
amount left of the Selling Price
Product price (Revenue)
Net profit is gross profit minus tax Net profit
is used to pay dividends to shareholders, bonuses
to employees, reinvestment in new machinery,
research and development (RD) of new products
and repayment of debts Gross profit is
calculated by deducting variable plus fixed costs
from the sales revenue The break-even point will
show the minimum number of units that need to be
sold before costs are covered and profitability
is reached Other factors influencing demand
supply and price include
Net Profit
Gross Profit
Profit
Costs
Quantity

• What customers perceive as value for money
• What the competition is offering
• How essential the product is to consumers
• Political influences

• Changes in legislation
• Economic conditions
• Changes in fashion and trends

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The material and manufacturing potential for a
given design solution

• Once a design solution has been developed,
  decisions have to be made relating to pricing
• Materials
• Manufacturing Processes
• Quality and Quality Control
• Scale, Size of Production runs
• Choice of Manufacturing process

• The Designer will have to adapt any designs to
  suit the chosen manufacturing process.
• It is important to plan QC carefully before
  manufacturing commences. The production process
  is often represented as a flow chart showing
  where and how QC procedures will be carried out.