A company producing garden furniture must decide whether to make its products in large batches held in stock, or in smaller batches made to order. Analyse t...
Question 1 Report
A company producing garden furniture must decide whether to make its products in large batches held in stock, or in smaller batches made to order. Analyse this decision, referring to cost, capacity, stock and customer service. [8]
Answer Details
The decision is a trade-off between efficient, low-cost production and avoiding stock risk while meeting customer expectations.
| Area | Large batches made to stock | Smaller batches made to order |
|---|---|---|
| Cost | Each changeover is spread across many units, reducing unit cost. [1] | More frequent setups increase time and cost per unit. [1] |
| Capacity | Plant runs efficiently, but may be occupied for a long time so urgent work cannot be fitted in. [1] | Can respond to particular orders, but capacity must be available when orders arrive. [1] |
| Stock | Uses money and storage space and risks unsold seasonal garden furniture. [1] | Little finished stock is held, so less capital is tied up and fewer unsold goods are made. [1] |
| Customer service | Products can be delivered immediately from stock, which can win orders. [1] | Customers wait for production, but the firm does not make goods that are not sold. [1] |
A supported judgement is to make the best-selling, predictable lines in larger batches while making less certain lines to order. This combines fast delivery where demand is known with lower stock risk elsewhere. Sustained analysis across at least three areas and a judgement gains [7–8].
Download The App On Google Playstore
Everything you need to excel in your exams
