Production: The provision of a product or a

service to satisfy consumer wants and needs.

Operations Manager is responsible for

making sure that raw materials are provided
and made into finished goods or services.
Factory Manager who will be responsible for
the quantity and quality of products coming off
a production line.
Purchasing Manager who will be responsible
for providing the materials, components and
equipment required for the production.
Research and Development Manager who
will be responsible for the design and testing
of new production processes and products.
Productivity: The output measured against
the inputs used to create it.
Benefits of increasing
efficiency/productivity:
» Reduced inputs needed for the same output
level.
» Lower costs per unit (average cost).
» Fewer workers may be needed, possibly
leading to lower wage costs.
» Higher wages might now be paid to workers,
which increases motivation.
Buffer inventory level: The inventory held to
deal with uncertainty in customer demand and
deliveries of supplies.
Lean production: Techniques used by
businesses to cut down on waste and therefore
increase efficiency.
Types of waste that can occur in
production:
» Overproduction - producing goods before
they have been ordered by customers. This
results in high storage costs and possible
damage to goods while in storage.
» Waiting - when goods are not moving or
being processed in any way, waste is
occurring.
» Transportation - moving goods around
unnecessarily causes waste and is not adding
value to the product. Goods may also be
damaged when they are being moved around.
» Unnecessary inventory - if there is too much
inventory then this takes up space, may get in
the way of production and costs money.
» Motion - any actions, including bending or
stretching movements of the body of the
employee, wastes time. It may also be a health
and safety risk for the employees. This also
applies to the movement of machines which
may not be necessary.
» Over-processing - if complex machinery is
being used to perform simple tasks, then this
is wasteful. Some activities in producing the
goods may not be necessary and may be
because the design of the product is poor.
» Defects - any faults require the goods being
fixed and time can be wasted inspecting the
products.
Benefits of lean production
Costs are saved through:
» Less storage of raw materials or components
» Quicker production of goods or services
» No need to repair defects or provide a
replacement service for a dissatisfied
customer
» Better use of equipment
» Cutting out some processes, which speeds
up production
» Less money tied up in inventories
 » Improved health and safety, leading to less
time off work due to injury.
Lean production methods:
» Kaizen
» Just-in-time (JIT)
» Cell production
Kaizen
Kaizen: Japanese term meaning 'continuous
improvement' through the elimination of
waste.

The advantages of Kaizen:

» Increased productivity
 » Reduced amount of space needed for the
production process
» Work-in-progress is reduced
» Improved layout of the factory floor may
allow some jobs to be combined, thereby
freeing up employees to carry out some other
job in the factory.

Just-in-time (JIT)
Just-in-time (JIT): A production method that
involves reducing or virtually eliminating the
need to hold inventories of raw materials or
unsold inventories of the finished product.
» All this reduces the costs of holding
inventory, as no raw materials and
components are ordered to keep in the
warehouse just in case they are needed
» Warehouse space is not needed, again
reducing costs.
» The finished product is sold quickly and so
money will come back to the business more
quickly, helping its cash flow.
Cell Production
Cell Production: A manufacturing system
where the workforce is divided into self-
contained teams designed to complete a
particular manufacturing process or product.
» The employees feel more valued and are less
likely to strike or cause disruption.
» This method of production improves the
morale of the employees and makes them
work harder so they become more efficient.

Methods of
production
Job production
Job production: Where a single product is
made at a time.
Advantages of job production:
» It is most suitable for personal services or
'one-off' products.
» The product meets the exact requirements
of the customer.
» The workers often have more varied jobs
(they don't carry out just one task).
 » More varied work increases employee
motivation - giving them greater job
satisfaction.
» It is flexible and often used for high-quality
goods and services, meaning that a higher
price can be charged.
Disadvantages of job production:
» Skilled labor is often used and this raises
costs.
» The costs are higher because it is often labor
intensive.
» Production often takes a long time.
» Products are specially made to order and so
any errors can be expensive to correct.
» Materials may have to be specially
purchased, leading to higher costs.

Batch production
Batch production: Where a quantity of one
product is made, then a quantity of another
item will be produced.
Advantages of batch production:
 » It is a flexible way of working and production
can easily be changed from one product to
another.
» It still gives some variety to workers' jobs.
» It allows more variety to products which
would otherwise be identical. This gives more
consumer choice (for example, different
flavors of ready-meals).
» Production may not be affected to any great
extent if machinery breaks down.
Disadvantages of batch production:
» It can be expensive as semi-finished
products will need moving about to the next
production stage.
» Machines have to be reset between
production batches which means there is a
delay in production and output is lost.
» Warehouse space will be needed for
inventories of raw materials, components and
finished batches of goods. This is costly.

Flow production
Flow production: Where large quantities of a
product are produced in a continuous process.
It is sometimes referred to as mass production.
Advantages of flow production:
» There is a high output of a standardized
product.
» Costs of making each item are kept low and
therefore prices are also lower.
» It is easy for capital-intensive production
methods to be used - reducing labor costs and
increasing efficiency.
» Capital-intensive methods allow workers to
specialize in specific, repeated tasks and
therefore the business may require only
relatively unskilled workers - little training may
be needed.
» It may benefit from economies of scale in
purchasing.
» Low average costs and therefore low prices
usually mean high sales.
» Automated production lines can operate 24
hours a day.
 » There is no need to move goods from one
part of the factory to another as with batch
production, so time is saved.
Disadvantages of flow production:
» It is a very boring system for the workers, so
there is little job satisfaction, leading to a lack
of motivation for employees.
» There are significant storage requirements -
costs of inventories of raw
materials/components and finished products
can be very high unless just-in- time systems
are used.
» The capital costs of setting up the
production line can be very high.
» If one machine breaks down the whole
production line will have to be halted.

Factors affecting which method

of production to use:
» The nature of the product. If a fairly
unique product or an individual service is
required, job production will be used. If the
product can be mass produced using an
automated production line, then flow
production will be used.
» The size of the market. If demand is
higher and more products can be sold but not
in very large quantities, batch production will
be used. The product will be produced in a
certain quantity to meet the particular order.
Small local markets or niche markets will be
served by businesses using job or batch
production. International markets are served
by businesses using flow production.
» The nature of demand. If there is a large
and fairly steady demand for the product, such
as soap powder, it becomes economical to set
up a production line and continuously produce
the product (flow production). If demand is less
frequent, such as for furniture, then production
may be more likely to be job or batch
production.
» The size of the business. If the business is
small and does not have the access to large
amounts of capital then it will not produce on a
large scale using automated production lines.
Only large businesses can operate on this
scale. Small businesses are more likely to use
job or batch production methods.
» Automation is where the equipment used in
the factory is controlled by a computer to carry
out mechanical processes, such as paint-
spraying on a car assembly line. The
production line will consist mainly of machines
and only a few people will be needed to ensure
that everything proceeds smoothly.
» Mechanization is where the production is
done by machines but operated by people, for
example, a printing press. Robots are
machines that are programmed to do tasks,
and are particularly useful for unpleasant,
dangerous and difficult jobs. They are quick,
very accurate and work non-stop, 24 hours a
day.
» CAD (computer-aided design) is computer
software that draws items being designed
more quickly and allows them to be rotated to
see the item from all sides instead of having to
draw it several times. It is used to design new
products or to re-style existing products. It is
particularly useful for detailed technical
drawings.
 » CAM (computer-aided manufacture) is where
computers monitor the production process and
control machines or robots on the factory floor.
For example, on the production line of a car
plant computers will control the robots that
spot- weld the car body together or the robots
that spray paint the car.
» CIM (computer-integrated manufacturing) is
the total integration of computer- aided design
(CAD) and computer-aided manufacturing
(CAM). The computers that design the
products are linked directly to the computers
that aid the manufacturing process.
» EPOS (electronic point of sale). This is used
at checkouts where the operator scans the
barcode of each item individually. The price
and description of the item is displayed on the
checkout monitor and printed on the till
receipt. The inventory record is automatically
changed to show one item has been sold and if
inventory is low (at the reorder point) then
more inventory can be automatically ordered.
» EFTPOS (electronic funds transfer at point of
sale). This is where the electronic cash register
is connected to the retailer's main computer
and also to banks over a wide area computer
network. The shopper's card will be swiped at
the till and the bank information will
automatically be read from the card. The
money will be directly debited from the
customer's account after they have signed for
the debit to be made or have entered their
PIN. A receipt will be printed as confirmation
that the payment has gone out of the
customer's account.
» Contactless payment is increasingly being
used in many countries. It is a fast, easy and
secure way to pay for purchases that are less
than a small amount, for example, in the UK
this is £30 or less.
The advantages of new technology:
» Productivity is greater as new, more efficient
production methods are used, reducing
average costs.
» Greater job satisfaction stimulates workers,
as routine and boring jobs are now done by
machines.
» More skilled workers may be needed to use
and maintain the new technology. Businesses
must offer training to existing workers in the
use of new technology. The workers may
become more motivated and therefore
improve the quality of their work.
» Better quality products are produced owing
to more accurate production methods.
» Quicker communication and reduced
paperwork, owing to computers, lead to
increased profitability.
» The information that is available to
managers through the use of IT is much
greater and this should result in better and
quicker decision making.
» New 'high tech' products are introduced as
new technology makes completely new
products available.
The disadvantages of new technology:
» Unemployment could rise as
machines/computers replace people on the
factory floor and in offices.
» It is expensive to invest in new technology
products and machinery. This increases the
risks as large quantities of products need to be
sold to cover the cost of purchasing the
equipment.
» Employees may be unhappy with the
changes in their work practices when new
technology is introduced.
» New technology is changing all the time and
will often become outdated quite quickly and
need to be replaced if the business is to
remain competitive.