5.2. Production Methods

  • Job production
    • Creating a product from start to finish that is tailor made to meet customer requirements – usually one-off or unique items (e.g. violin, painting)
    • Only one person or group’s job to complete entire product
    • Small firms are likely to use job production
    • Advantages
      • High quality and uniqueness
      • High motivation of workers
      • More flexibility
    • Disadvantages
      • Labor intensive and expensive
      • Time consuming due to customer requirements
      • Long working-capital cycle (due to slow production)
      • Minimal economies of scale
  • Batch production
    • Producing limited number of identical products (batch) at a time (e.g. chocolates, CPUs, breeding)
    • Usually used when level of demand is not clear and the business produces a range of products
    • Advantages
      • Technical and purchasing economies of scale
      • Specialisation – better quality and productivity
      • Variety – reduce risks of producing single product
    • Limitations
      • Inflexibility – can’t stop once started
      • Storage costs
      • Boredom – reduced motivation
  • Flow/line/mass production
    • Continuous production process of standardized products
    • Flow/line/mass are usually interchangeable
    • Generally capital intensive
    • Flow production
      • Sequence of steps to create product (e.g. newspapers/magazine)
    • Line production
      • Product is assembled in various stages along an assembly line (e.g. car)
    • Mass production
      • Manufacturing large amounts of standardised products (e.g. Chips)
    • Advantages:
      • High production scale at low cost due to economies of scale
      • Initial high costs is spread over high volume of units
      • Standardized quality (assuming low defect rate)
      • Low cost for workers
    • Disadvantages:
      • Low motivation
      • Breakdowns cause major delays
      • Inflexible – no reworking or customization
      • High initial set-up, running, and replacement costs
      • Requires effective storage
  • Cell production
    • Modern adaptation of assembly line
    • Parts of production are delegated to teams or cells for completion
    • Any member of team can contribute to the task
    • Cells work independently but rely on each other to achieve targets
    • Advantages
      • Certain degree of autonomy in decision making
      • Improved standards of quality
        • Greater sense of responsibility and accountability in team
      • Higher levels of motivation (team working, empowerment, etc.)
      • Specialization
    • Disadvantages
      • Output may be lower
      • Higher chances for intra- and intergroup tension and conflict
      • Capital intensive to initiate and sustain
  • Labour and capital intensity
    • Labour intensive
      • Greater proportion of labour cost than capital cost
      • Job production and service sector is often labour intensive
      • Offers personalised service but may have more HR issues
    • Capital intensive
      • High proportion of capital costs compared to labor cost
      • Leads to increased levels of output and productivity
      • Needs sufficient demand to justify capital investment
      • Homogenous products; may have no USP
      • Standardisation means low profit margins and high fixed costs
    • Choice depends on:
      • Relative cost and substitution
      • Market size
      • Aims and objectives of the organization
  • Combining methods of production
    • Businesses usually combine the different methods of production
    • e.g. Burger King: uses batch production (making burgers in batches) and job production (customizable burgers for customers)
    • Possibility of customization, flexibility, and lower costs

 

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