Methods of Production

Intermediate II and Higher Business Management

Production Methods

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Whilst all output can be classed as production, different production methods may be more appropriate for different products or services.

Agriculture tends to be very land intensive – efficiency could be measured in terms of output per acre/hectare

Production Methods

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As technology and analysis of production methodology has improved, methods have changed dramatically – what used to be labour intensive production methods are now capital intensive

Production Methods

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Bottle production lineCopyright: Photolibrary Group

The choice of production method and the factor inputs depends on such things as:

• the nature of the product

• factor costs

• the scale of production

Production Decisions

Which method? Type of Product

One-Off Order?

Mass Market product?

Batch?

Market size and Segment

Factor Costs – Land, Labour and

Capital

Complexity of design

Methods of Production• Job Production

• Batch Production

• Flow Production

MASS PRODUCTION IN LARGE FACTORY

Production Methods• Job Production – One-off production -

each item might have particular specifications

• Flow Production – suitable for mass market products that are identical

• Batch Production – each stage of the production process has an operation completed on it before moving on to the next stage – allows modifications to be made to products that otherwise are the same

Job Production

• A house built to your own design

• A custom-built boat

• A piece of artwork

• A hand-turned wooden bowl

Job Production

• Advantages:-– Customers demands

can be exactly met.– A high price may be

charged.– Specifications can

be changed even if production has started.

– Workers motivated as variety of skills required.

• Disadvantages:-– Expensive due to

skills required.– High R&D, transport

and admin costs.– Variety of

equipment and tools required.

– Lengthy lead times.

Batch Production

• A number of similar products (repeated jobs)

• The same house repeated on a building site

• Bakery produce - each batch may differ slightly

Batch Production

• Advantages– Batches can be

changed to meet specific customer requirements.

– Reduced need for highly skilled staff.

– Machinery can be relatively standardised.

• Disadvantages– Machines/workers may sit

idle between stages.– Expensive machinery may

be required due to less skilled staff.

– Stock levels may be high.– Staff may be less

motivated due to repeating the same task in batches.

– If batches are small, costs will be high.

Flow Production

• Mass production of almost identical products

• Cars

• Washing machines

Flow Production

• Advantages– Costs spread over a

large number of goods.– Bulk discounts– Huge quantities can be

produced.– Automation often used

which reduces chance of human error.

– Machinery can work 24/7

• Disadvantages– Huge set up costs.– Individual customer

requirements cannot be met.

– Equipment may be inflexible.

– Worker motivation can be low because of the repetitive nature of the job.

– Breakdowns can be very costly.