Business (9225) | Production processes

🏭 Chapter 3: Production Processes – How Businesses Make Things!

Hey there, future business leaders!

This chapter is fundamental to understanding how any business works, whether they are selling burgers or building bridges. We are diving into the world of Business Operations, specifically focusing on Production Processes.

In simple terms, production is the engine of the business. You will learn the different ways businesses organize themselves to turn resources (like labour and materials) into finished products or services.

Don't worry if some of the terms seem technical at first; we’ll break them down using simple examples!

What is Production? (A Quick Review)

Before looking at how things are made, remember production is the process of converting inputs (raw materials, labour, machinery) into outputs (finished goods or services).

• Input: Flour, sugar, baker, oven, electricity.
• Output: Bread, cakes, and cookies.

The method a business chooses for this conversion is called its production process.

---

1. The Three Main Methods of Production

Businesses generally choose one of three main methods, depending on the volume of goods they need to make and how unique those goods must be.

1.1. Job Production

Job Production means making a single, unique item based specifically on a customer's individual order or needs. It is highly customized.

Analogy: Think of a commissioned portrait painting. Only one exists, and it was made for one specific client.

Key Features of Job Production

• Low volume (only one item).
• Skilled labour needed (often craftspeople).
• High selling price due to the customization and effort involved.

Advantages (+) and Disadvantages (-)

+ Customers get exactly what they want (high satisfaction).

+ Workers are often highly motivated by interesting, varied work.

- Very high cost per unit.

- Takes a long time to complete (slow production).

- Difficult to use automated machinery.

Memory Trick: Think Just One Bespoke item.

1.2. Batch Production

Batch Production involves creating a limited group of identical products (a 'batch') at the same time. Once one batch is finished, the equipment might be cleaned or slightly adjusted to make a different batch of product.

Example: A bakery making 100 loaves of white bread, then cleaning the mixer, and making 80 loaves of brown bread.

Key Features of Batch Production

• Medium volume (more than Job, less than Flow).
• Items are identical within the batch.
• Allows for variety (e.g., different colours, sizes, or flavours).

Advantages (+) and Disadvantages (-)

+ Lower unit costs than Job Production (due to producing multiple items simultaneously).

+ Can offer variety to customers (e.g., all the flavours of crisp packets).

- Time is wasted when equipment needs to be reset or cleaned between batches.

- Requires careful management of stock of part-finished goods (waiting for the next stage).

1.3. Flow Production (or Mass Production)

Flow Production (also known as Mass Production) involves producing high volumes of identical products continuously, usually on an assembly line.

Analogy: Think of a car factory or a bottling plant. The process never stops, and every item looks exactly the same.

Key Features of Flow Production

• Very high volume.
• Highly standardized products (minimal or no customization).
• Often uses specialized machinery and automation.

Advantages (+) and Disadvantages (-)

+ Extremely low unit costs (due to economies of scale and high efficiency).

+ Production can run 24/7 if needed (high output).

- Huge initial cost to set up the assembly line and specialized machines.

- Very inflexible—if the customer suddenly wants a different product, the whole line must be redesigned.

- Work can be repetitive and boring for employees, leading to demotivation.

---

2. Measuring Success: Productivity and Efficiency

Once a business starts producing, it needs to know how well it’s doing. This is where productivity and efficiency come in. These concepts are key to controlling costs and maximizing profit.

2.1. Productivity

Productivity measures how much output (goods or services) is generated per unit of input (like per employee or per hour).

It answers the question: "How many items did we get for the effort we put in?"

The most common measurement is labour productivity:

$$ \text{Productivity} = \frac{\text{Total Output}}{\text{Number of Employees (or Labour Hours)}} $$

Example: If a factory makes 5,000 chairs in a week using 10 employees, the productivity is 500 chairs per employee (5,000 / 10).

Why is High Productivity Important?

• Lower Unit Costs: If one worker produces 10 items instead of 5 in the same amount of time, the labour cost for each item halves!
• Increased Competitiveness: Lower costs allow the business to sell products at lower prices, attracting more customers.
• Increased Profits: If prices stay the same, the extra output directly increases profit.

How can a Business Improve Productivity?

1. Training: Better skilled workers make fewer mistakes and work faster.

2. Technology/Automation: Using machinery to do repetitive tasks quickly.

3. Motivation: Happy workers are often hard workers (e.g., offering bonuses or better working conditions).

2.2. Efficiency

While productivity is about output volume, efficiency is about minimizing waste (of time, materials, energy, or money).

A business is efficient when it uses the least amount of resources to produce the maximum output.

Think of it this way:

A runner who finishes a marathon quickly is productive. A runner who finishes the marathon quickly without wasting any energy on unnecessary movements is efficient.

Efficiency and Waste Reduction

Efficiency aims to reduce:

• Waste materials (e.g., throwing away fewer faulty products).
• Waste time (e.g., reducing the time products spend waiting in storage).
• Waste energy (e.g., using energy-saving machinery).

3. The Role of Technology in Production

Technology has revolutionized how businesses produce goods and services, particularly in Batch and Flow production methods.

3.1. Automation

Automation is the use of machinery (like robots or computerized systems) to control the production process, reducing the need for human input.

Impacts of Automation

• Increased Speed and Precision: Machines work faster and make fewer errors than humans.
• Reduced Costs: While initial setup is expensive, in the long run, businesses save money on wages.
• Improved Quality: Automated processes ensure consistency, which is vital for high quality.
• Loss of Jobs: A major drawback is that machinery often replaces unskilled workers, leading to unemployment (though new jobs are created maintaining the machinery).

3.2. CAD and CAM

Two key technologies often used are:

• CAD (Computer-Aided Design): Using computer software to design products (e.g., designing a new car model). This makes design faster and easier to modify.
• CAM (Computer-Aided Manufacturing): Using computer software to control the machinery that makes the products (e.g., robotic arms on an assembly line). This improves accuracy and speed.

Did you know? The transition from Job Production to Flow Production was largely due to inventions during the Industrial Revolution, but modern technology allows even small businesses to use automated tools efficiently!

---