• Production is the provision of a product or a service to satisfy consumer wants and needs
  • This process often involves firms adding value to a product
InputFactors of Production
OutputProducts which satisfy the customers


  • Productivity is the measure of production
  • Productivity is the output measured against the inputs used to create it
  • It is also termed as efficiency or quality
  • The formula to define productivity is: output/input (e.g. number of employees)
  • As employees become more efficient, the output will rise and therefore cost of production falls
  • Reasons to increase productivity include:
    Generate profit
    Become more competitive
    Remain trading

Methods of Production

  • Job Production
  • Batch Production
  • Flow Production

Job Production

  • A single product is created at a time
  • Products are made specifically to order
  • Each order is different and may, or may not, be repeated
  • Example: bullet-proof cars, specialist machinery


  • Product meets the exact requirement of the customer
  • Therefore increasing customer satisfaction
  • The workers get more varied jobs
  • This increases their motivation and gives them job satisfaction


  • Skilled labor is costly
  • Total cost is high

Batch Production

  • A quantity of one product is made then a quantity of another item will be produced
  • Similar products re-made in small batches
  • These are often produced to order
  • The products are grouped by specification
  • Example: clothing sizes, furniture production


  • Flexible
  • Variety added to the workers’ jobs
  • Production may not be affected to any great extent if machinery breaks down


  • Transportation cost high
  • The equipment used in batch production must be reset between batches to ensure correct production, which may prove to be time consuming
  • Warehouse space required

Flow Production (Mass Production)

  • Large quantities of a product are produced in a continuous process
  • The products are standardized
  • Products “flow” down the production line
  • Use of robotisation and automation
  • No individuality in products
  • Example: packaged foods


  • Low cost
  • Low price
  • Individuals become better at the job because they are doing the same thing all the time
  • People only have to be trained in one task
  • Capital-intensive techniques can be used
  • Therefore reducing labor costs and increasing efficiency
  • There is no little need for skilled workers therefore little training is required
  • Often high sales due to low price
  • Goods produced cheaply and quickly
  • Less time taken in transportation
  • Low total average cost
  • Economies of scale
  • Standardized products


  • Employee absenteeism
  • High labor turnover
  • Very monotonous
  • Little job satisfaction for workers
  • Capital cost may be high
  • If one machine breaks down, the whole production line will have to be halted- no flexibility whatsoever

Factors Determining What Method of Production to Use

  • Economic, Political, Social situation
  • Environment of the city/market
  • Uniqueness/novelty of good
  • Quality required
  • Quantity required/ Demand

Stock Control

  • Stock levels must be monitored to ensure that there is always enough stock to satisfy demand
  • Stock of raw material and components must be available for a manufacturing company with sufficient lead time- especially in batch and flow production- as there will be delays in production otherwise
  • Lead time is the margin of time between the date when stock is obtained and the date when it is sold on
  • Reasons for stock fluctuation:
    Higher sales than usual
    Delivery of stock may be late
  • Stock may be in the form of raw material, components, unfinished goods, work-in-progress or finished goods

Advantages of high stock level:

  • Reduces average costs (economies of scale)
  • Lean production
  • Time saved
  • Satisfies increased demand

Disadvantages of high stock level:

  • Theft
  • Depreciation
  • Damage
  • Financial loss due to idle stocks
  • Waste of warehouse space
  • Maximum stock level is also known as economic order quantity
  • Minimum stock level is also known as buffer stock
  • In between these two is the reorder level known as optimum stock
  • When stock levels reach the reorder point, they will be reordered to bring stock back up to the max level again
  • Reasons to hold sufficient stock:
Stock ItemReasonCost of Zero Stock
Raw Materials/Work in ProgressMeet production requirementsIdle timeDelayed production
Finished GoodsMeet customer demandLoss of ordersFinancial penalties for missing deadlines
Spares, Equipment, ConsumablesTo support sales and productionIdle timeDelayed Production


Lean Production

  • Techniques used by businesses to cut down on waste and therefore increase efficiency
  • It aims to reduce the time taken for a product to be produced


  • Means continuous improvement through the elimination of waste
  • The improvement comes through the ideas of the workers themselves
  • Small groups meet regularly to come up with solutions since they are the ones who closely know about the problems
  • The idea is to eliminate wastes such as time, piles of stock, unnecessary movement etc.
  • The factory floor is reorganized by repositioning machines tightly together in cells in order to improve the flow of production through the factory


  • Increased productivity
  • Reduced amount of spaces needed
  • Work-in-progress reduced
  • Improved layout of the factory floor may allow some jobs to be combined thus freeing the employees to carry out other jobs
  • Time taken to produce is reduced


  • Production method that involves reducing or eliminating the need to hold stocks of raw materials or unsold stocks of the finished product
  • Supplies arrive just as the time they are needed
  • Reliable suppliers are required
  • Efficient system of ordering raw material/components is required
  • Just-In-Time is usually implemented along with the introduction of cell production


  • Work-in-progress is reduced
  • It reduces the cost of holding stocks by the elimination of warehouse space
  • The finished product is quickly sold so the money will come back immediately
  • Thus helping the cash flow
  • No extra stock is kept

Cell Production

  • The production line is divided into separate, self-contained cells
  • Each cell makes an identifiable part of the finished product


  • Improves the morale of the employees and makes them work higher
  • Efficiency of the workers increases, thus total efficiency increases
  • The employees feel more valued and are less likely to strike or cause disruption


  • System of ordering used alongside Just-In-Time production
  • It operates by having two component bins, one on the production line and one being made ready
  • When the first is empty, it is wheeled with its Kanban order card to the section of the factory that produces those components
  • This triggers the production of the components which should then be ready before the second component bin is empty


  • This reduces the amount of part-finished stock
  • Everyone must work together and efficiently so that production does not stop

Improvements in Technology (External Influence)

  • Technology reduces costs in the long run
  • It advances techniques and makes firms more competitive
  • It also makes it easier for a company to satisfy the demand
AutomationEquipment used in the factory is controlled by a computer to carry out mechanical processes. Only a handful of people will be needed and the production line will consist of mainly machines e.g. paint-spraying
MechanizationProduction is done by machines but operated by people e.g. printing press
RobotisationRobots are machines that are programmed to do tasks that are unpleasant, dangerous or difficult. They are quick, very accurate and can work non-stop.
CAD(computer aided design)Computer software that designs items. It can be used to design new products or to restyle existing ones. It is particularly useful for detailed technical drawings
CAM(computer aided manufacture)Computers monitor the production process and control machines or robots on the factory floor
CIM(computer integrated manufacturing)Total integration of CAD and CAM.
EPOS(electronic point of sale)Used at checkouts where the bar code is scanned and the price and description of the item is displayed as well as printed on the receipt. The stock record is automatically changed and if necessary, automatically reordered.
EFTPOS(electronic funds transfer at point of sales)Electronic cash register is connected to the retailer’s main computer as well as the banks. The shopper’s card will be swiped and the money will be automatically transferred.


Advantages of TechnologyDisadvantages of Technology
Productivity increasedUnemployment
Greater job satisfactionExpensive to invest in technology
Machines can do the routine/boring jobsIncreases risk
Workers motivated by the advanced technology and the training they are being givenEmployees are unhappy with the change
Improved quality of workLow morale of workers
Improved quality of goodsCost of training
Improved production methodsCapital cost
Improved quality controlTechnology needs constant updating and replacing
Better customer serviceSpam
Better stock monitoringViruses
Quicker communicationBrick and mortar companies suffer
Reduced paperworkEmployee dissatisfaction causing strikes
More information present to make better and quicker decisionsShorter product lifecycles
New products can created/tested 
Better business relationships 
Reduced average cost 
Better coordination 
Better image 



Reasons for Quality Control and Quality Assurance:

  • Better reputation
  • Higher sales
  • A business needs to try to ensure that all the products it sells are free of faults or defects
  • Satisfy the customer
  • Good design

Quality Control

  • Inspectors check finished goods
  • Detection of components or products that are faulty
  • Considerable waste involved
  • Take samples at regular intervals to check for errors
  • Stringent checking
  • Policy of continuous checking
  • Quality to be maintained at every step of the production line
  • Eliminate errors before they occur
  • Find defective products before they leave the factory
  • This method is very expensive
  1. Checking
  2. Proof-checking
  3. Detecting errors
  4. ISO 2000 stamp once quality is confirmed

Quality Assurance

  • Inspection during and after production
  • Aim is to stop faults from happening
  • Pre-standard of products is set
  • Teamwork and responsibility
  • Quality standards are set and apply throughout the business
  • To ensure that the customer is satisfied with the aim of achieving greater sales, increased added value and increased profits.
  • Design, components, materials, delivery schedule, after-sales service, QC procedures all fall under these standards
  • Workforce must support the use of this system
  • QC is used to verify the quality of the output whereas QA is the process of managing for quality

Total Quality Management

  • Total Quality Management is the continuous improvement of products and processes by focusing on quality at every stage of production
  • Encourages everyone to think about quality
  • Quality is the main aim for all staff
  • Customers’ needs are paramount
  • It tries to get it right the first time and not have any defects
  • This way, the customer is always satisfied- as are the workers
  • Quality is maintained throughout the business
  • All employees are concerned with ensuring that a quality good is delivered
  • The total average cost will fall
  • It is closely linked with Kaizen and Quality Circles
  • Creates a Quality Culture

Ways to Increase Productivity

  • Improved quality control/assurance reduces waste
  • Improve employee motivation
  • Use of modern equipment
  • Machines instead of people
  • Train staff to be more efficient
  • Improve stock control

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