Unit 5.1 Production Methods

Operations Management ( Production) –
 is
concerned with producing the right goods and services in the
right quantities and at the right quality level in a cost-effective
and timely manner

3 Main sectors applied to
 Primary
sector - extraction of raw materials
 Secondary
 Teritiary
sector – turn raw materials into finished goods
sector – provision of services, finance, education,
health care
Main
role of production
Turn
factor inputs into outputs in a cost
effective way
4
factors of Production –
land,
labor, capital, and enterprise
 Marketing
& Production Managers refer to it at the 5 Ms
 Materials, Manpower, Machines, Money and
Management
 Operations Management must consider
 Methods of production
 Size, scope and timing of production
 Production planning
 Quality
control systems
 New products and innovation
Production Methods
4
main methods of production – Job,
Batch, Mass & Cell productions
Job Production
 Involves
creating an individual product from start to
finish, tailor made to meet the specific requirements
of the customer.
 i.e….
unique items, wedding dress, haircut, music
composition
 Job
production covers a whole range of tasks from
small scale involving little or no technology to
complex.. construction of a hotel or theme park.
Job Production advantages
 Quality
- of production and service because highly
skilled labor is used
 Motivation
project
– workers can feel proud of the finished
 Uniqueness
- helps with motivation but also adds
value to the production process
 Flexibility
-- each products design and specifications
can be altered to the customers requests such as the
type of car and flowers for the wedding
Job Production Disadvantages
 Tends
to be labor intensive and therefore a relatively
expensive production method
 Relatively
 Likely
time consuming
to be a relatively long working capital cycle/
 i.e
Ferrari has 9 to 12 month waiting list.. customers
do not pay for their purchases until the final
product is delivered.
 Few
economies of scale can be enjoyed since each
good is likely to be unique
Batch Production
Involves
producing a limited number of
identical products
Small
bakery 12 loaves of bread,
before switching to make 24 blueberry
muffins
Clothing
outlets have their clothes
produced in batches
Batch Production -- Advantages
 Economies
of scale can be enjoyed as machines
can be used to produce much larger quantities
 Specialization
– in various production processes is
likely to lead to increased productivity
 Birthday
tailored
 Variety
cakes can made in batches can still be
can reduce risks of producing just a single
product with a limited sales potential
Limitations of Batch Production
A
degree of inflexibility- once production
run for a batch is started it is difficult to
switch or to work another batch
Storage
-- batch production may require a
large amount of stock- could increase
storage costs insurance costs
Jobs
may become repetitive leading to
boredom
Flow, Line and Mass production

Focus on a continuous production process of manufacturing
standardized or homogenous products in large quantities

Flow Production
 Different
operations are continuously and progressively
carried out in sequence
 Producers

of bottled water, beer and oil refinery
Line Production ( assembly line)
 Form
of flow production whereby the product is assembled in
various stages on a conveyor belt until finished product is
made.. I.E ford motor
Mass Production
 Manufacturing
products
 Highly
 Units
of large amounts of standardized
capital intensive
of costs of production are relatively low
 Essential
 i.e
part of mass production is specialization
mobile phones and dvd players
 ford
heavily influenced by the work of FW Taylor
Advantages
 High
volume of a output is produced at a relatively low cost
 Samsung
minutes
and phillips can produce DVD players within
 Machines
can work 24 hours a day if necessary – reducing
Average Fixed Costs
 Products
are of standardized quality
 Labor
costs are low as relatively unskilled workers are required
to operate much of the machinery
 Black
and decker plant in china pays workers $2 a day for
10 hours of work.
Disadvantages
 Work
is likely to be monotonous and therefore
boring—motivation low
 Any breakdowns on the assembly line will cause
major problems for the business
 Very little inflexibility
 Mass production is capital intensive and thus
involves huge set- up costs
 Mass production means the need for an effective
storage system because there will be a large
volume of stock
Labor and Capital Intensity
 Labor
intensity – production methods that use great
amount of labor
 i.e rural farming in developing countries to
management consultancy services in advanced
economies.
 Job Production and the service sector tend to be
Labor INTENSIVE
 Capital
intensity -- industries that have high level of
capital costs
 i.e batch and mass production
Capital Intensity
 Increasing
capital investment leads to
improved levels of output and productivity
 However,
there must be sufficient demand for
the product to justify its mass production
 DRAWBACK
No
unique selling point
Standardization
will result in lower selling
price with lower profit margin
Labor Intensity
80%
of a school’s budget typically goes
towards the payment of staff salaries.
Lawyers,
financial consultants
BENEFIT
Offers
a personalized service
Determination of Labor or Capital
Intensive
 Relative
 Size
cost of labor and capital
of the market
 Larger
markets tend to use more capital intensive
technology
 Aims
and Objectives of the organization
 Profit
motive may want large markets
 Worried
about survival during a recession may
consider labor intensive as costs reduction and cost
controls are much easier.
Production Methods and Business
Strategy
Efficiency
– occurs when a business
operates at its maximum output with
minimum costs per unit of output
Productivity
– is the rate at which inputs
are transformed into outputs and are a
good measure of a firms efficiency

BUSINESSES CANNOT SIMULTANEOUSLY AND
CONTINUOUSLY OFFER HIGH QUALITY PRODUCTS
AT LOW PRICES

Business must focus on either high profit margins
by selling unique products of outstanding quality
or on selling mass market products that earn low
profit margins but sell in large volumes