Topic 10 – Production Methods

Higher Business Management

1

Learning Intentions / Success Criteria

Learning

Intentions

Different

methods of

production.

Success Criteria

By end of the topic you will be able to describe and

compare:

• production methods used by large organisations

• the costs and benefits of:

- capital-intensive production

- mechanised production

- automated production

- labour-intensive production

• reasons for production choices and the effect of

that choice on efficiency.

2

Methods of Production

When deciding which method of production, there are different factors

to think about:

• The actual product being made.

• The quantity of the product that needs to be made.

• The way the business will make sure the product is of a high quality.

• The way stock is managed.

• The resources available (e.g. staff and machinery).

• The method of distribution.

• The technology available.

There are three main methods of production: job, batch and flow. 3

Job Production

• Job production is when one product is made

from start to finish before another one is made.

• The product is made to the customer’s own

requirements and this results in a unique or one-

off product being made.

• Products made by job production are usually

made by hand by someone who is very skilled

at what they are doing.

Examples: wedding cakes, handmade

chocolates, pieces of art, sandwich being made

to order in a sandwich shop.

4

Advantages/Disadvantages of Job

Production Advantages

• The customer gets exactly what they

want and this can increase their

satisfaction.

• High prices can often be charged

because it is a unique/one-off product.

• Designs can be changed to suit each

customer’s own requirements even

when production has begun.

• Employees experience making a range

of products using different skills.

• Employees can be motivated by seeing

the product being made from start to

finish.

Disadvantages

• Highly skilled employees are required

to make each different product and

this can be expensive (labour

intensive).

• Specialist tools and equipment might

be needed that can be expensive to

buy.

• Can’t always buy raw materials in

bulk and might miss out on cost

savings from bulk buying (economies

of scale).

• Can take a long time to make a

unique product and this might mean

the employee loses motivation.

5

Batch Production

• Batch production is when one group of identical

products are made at anyone time.

• All products in the batch move onto the next

stage of production at the same time.

• Machinery and equipment can be cleaned and/or

changed between batches to produce a different

product.

• Batch production is often used when

manufacturing a product that comes in different

varieties, styles or sizes.

Examples: cakes, newspapers/magazines, bread.

6

Advantages/Disadvantages of

Batch Production Advantages

• Batches can be changed to suit the

requirements of the customer which

results in higher customer satisfaction.

• Raw materials can be bought in bulk

therefore saving money.

• Cost savings can be made, as

standardised machinery is used.

• The need for highly skilled workers is

reduced.

Disadvantages

• Equipment and employees might not

have anything to do between batches,

which costs money.

• Any mistakes in one item can result in

the whole batch being wasted, which

costs money and wastes time.

• The cost of each item might be high if

the batch size is small therefore the

price charged to the customer might

be higher.

• Employee motivation can be less than

with job production, as they carry out

the same, often repetitive, task.

7

Flow Production

• Flow production (sometimes

known as line production) is

when parts are added to the

product as it moves along the

production line.

• The final product will have been made by the time it reaches

the end of the production line.

• As the product moves along the production line, machinery

and workers have very specific tasks to do: one might screw

something in and one might paint a very specific part before

moving on to the next task (this is known as division of

labour).

Examples: cars/vans, computers and other electrical items. 8

Advantages/Disadvantages of Flow

Production Advantages

• Large amounts of identical

products are made.

• Raw materials can be bought in

bulk, saving the business money.

• Production often uses lots of

machinery (capital intensive) that,

compared to humans, can work

for longer and without breaks.

• Quality can be easily checked at

different stages of production.

Disadvantages

• The individual customer’s

requirements cannot be met

because each product is identical.

• If a fault occurs during production

this can cause the whole

production line to stop.

• Large demand for products is

needed because they are made in

large quantities.

• Motivation can be low among

employees due to the repetitive

nature of the work they have to do.

9

Capital and Labour Intensive

The quantity of capital (machinery, equipment and technology) or

labour used in an organisation determines whether it is capital or

labour intensive.

• Automation

• Mechanisation

10

Capital-intensive Production

• Products are made using

technology (machines

and equipment).

• The initial set-up of this

type of production is

very expensive.

11

Advantages/Disadvantages of

Capital-intensive Production Advantages

• A large volume of identical

products can be made in this

way at a more economical

cost.

• Machinery can work 24/7 so

production can keep going

24/7.

• Machines can produce a

consistent and standardised

accuracy and quality of

work.

Disadvantages

• Individual requirements

can’t be met.

• Breakdowns can be very

costly, and idle time can be

an additional financial drain.

• Employees manning the

machines can find their job

monotonous and this can

lead to lack of motivation.

12

Labour-intensive Production

• Products are made using

labour (human effort).

• Often the business is

smaller and produces

smaller quantities of

products.

13

Advantages/Disadvantages of

Labour-intensive Production Advantages

• Employees can use their

own skills and initiative,

which gives them job

satisfaction.

• It is cheaper for the

organisation than buying

expensive machinery.

• Products can be tailored

to suit customer

requirement.

Disadvantages

• Wages are higher because

specialised skills are required.

• It is costly to recruit and train

employees.

• If a member of staff is absent,

production might have to wait

until they return.

• Accuracy and quality can vary

because human beings and not

machines are doing the work.

14

Automated Production

Machinery has completely

replaced the need for

labour.

15

Advantages/Disadvantages of

Automated Production Advantages

• Production time is quicker and

can be repeated constantly

with no errors.

• Accuracy is far greater because

there is no human error.

• There is no requirement for

workers to man the machinery,

so this saves money.

• The work environment is safer

as employees will not be in

automated work areas while

production takes place.

Disadvantages

• There is no flexibility as the

machinery can only do what it

is programmed to do.

• More machinery to complete

production means more

pollution and, in some cases,

environmentally unfriendly

fumes.

• It causes unemployment to

increase, which has an

economic impact on a country.

• Machinery breakdown are

expensive. 16

Mechanised Production

Production requires a mix

of both machinery and

labour to operate it.

17

Advantages/Disadvantages of

Mechanised Production Advantages

• Standardisation can be pre-

programmed, allowing

production to be consistent.

• Machinery improves the

accuracy of work and

completes difficult tasks for

the worker.

• Using labour allows for

production issues to be flagged

up quickly.

• Labour can be trained in

becoming expert at operating

machinery.

Disadvantages

• The initial set-up costs are

high.

• Machinery could break down

and idle time is a negative

factor.

• Machinery needs to be updated

and upgraded every so often,

which can be expensive.

• Labour needs to be trained,

which is an expense. They will

probably also require training

whenever machinery is

upgraded. 18

Factors affecting Methods of

Production Factor Description

Quantity of

goods

required

If large quantities are required, flow or batch production will be

more suitable than job production.

Skills of the

workforce

If the workforce is highly skilled, their expertise would be

better suited to job production.

Cost of

labour

Rising labour costs (perhaps due to a rising minimum wage)

could mean that the business should move to capital-intensive

production.

Finance

available

Large amounts of finance are required to equip factories or hire

the number of staff needed for large-scale flow production.

Technology

available

If the business doesn’t have the technology required for capital-

intensive production, labour intensive is the only option.

19