Production is the provision of a product or a service to satisfy consumer wants and needs. The process involves firms adding value to a product.
Productivity: the output measured against the inputs used to create it.
This is measured by dividing the output over a given period of time by the number of employees:
Output (over a given period of time) / Number of employees
As employees become more efficient, the amount of output produced per employee will rise and therefore the cost of producing the product will fall.
There are three main methods of production during the growth of a company:
1. Job production - where a single product is made at a time, because each order is different. Example: cinema films, made-to-measure suits, bridges, ... etc.
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Advantages
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Disadvantages
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Product meets exact requirements of the customer.
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Skilled labour is often used.
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Workers have varied jobs.
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The costs are higher cause it is often more labour intensive.
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More varied jobs increases employee motivation.
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2. Batch production - is where a quantity of one product is made, and then a certain number of another product is made.
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Advantages
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Disadvantages
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Flexible way of working and production can easily be changed from one product to another.
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Can be expensive.
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Gives some variety to workers’ jobs.
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Warehouse space will be needed for stocks and raw materials and other components.
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Production not affected much if machinery breaks down.
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3. Flow production - where large quantities of a product are produced in a continuos process.
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Advantages
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Disadvantages
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Costs are kept low and therefore prices are also lower, which usually mean high sales.
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Very boring system for workers, so little job satisfaction.
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Little training of workers is needed.
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Capital costs of setting up the production line can be very high.
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Goods are produced quickly and cheaply.
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If one machine breaks down, the whole production line will have to be halted.
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The most important factor which determines which method of production to use will be the demand for the product:
- If fairly unique product or an individual service is required, job production will be used.
- If demand is higher and more products can be sold but in not very large quantities, batch production will be used.
- If there is a large and steady demand for the product, flow production will be used.
