Production

1. LECTURE FOUR: PRODUCTION METHODS
Learning Objectives:
By the end of this lesson a trainee will be able to:
Define production
Describe the factors of production
Describe the types of production and methods
Outline the characteristics of each production methods
Mention the advantages and disadvantages of each
production systems
Describe impacts of new technology in production.

2. CONCEPT OF PRODUCTION
Production/operations management is the process, which
combines and transforms various resources used in the
production/operations subsystem of the organization into value
added product/services in a controlled manner as per the policies of
the organization.
Production function is that part of an organization, which is
concerned with the transformation of a range of inputs into the
required outputs (products) having the requisite quality level.
Production is defined as “the step-by-step conversion of one form
of material into another form through chemical or mechanical
process to create or enhance the utility of the product to the user.”
According to Bates and Parkinson “Production is the organised
activity of transforming resources into finished products in the
form of goods and services; the objective of production is to satisfy
the demand for such transformed resources”.

3. WHAT IS THE DIFFERENCE BETWEEN
MANUFACTURING AND
PRODUCTION?
Manufacturing is a process of converting raw material
into finished product by using various processes,
machines and energy.
But in manufacturing, the company procures the raw
material from outside, and then makes the final product.
Production is a process of converting inputs into outputs.
In production, the raw material is not procured from
outside, the company owns it and after processing and
make the final product.

4. THE DIFFERENCE BETWEEN MICRO AND
MACRO ECONOMICS
Microeconomics is the study of economics at an individual,
group or company level that means on issues that affect
individuals and companies.
This could mean studying the supply and demand for a
specific product, the production that an individual or business
is capable of, or the effects of regulations on a business.
Macroeconomics, on the other hand, is the study of a national
economy as a whole that means on issues that affect the
economy as a whole.
Some of the most common focuses of macroeconomics are
unemployment rates, the gross domestic product of an
economy, and the effects of exports and imports.

5. FACTORS OF PRODUCTION
Production of a commodity or service requires the use of certain
resources or factors of production.
Since most of the resources necessary to carry on production are scarce
relative to demand for them, they are called economic resources.
Figures 4.0 and 4.1 shows the factors of production and the organization
of production, respectively. See lecture book page 33.
Fig.4.0 Factors of production
Fig.4.1 Organization of production

6. TYPES OF PRODUCTION
For general purposes, it can be classified into three main groups:
Primary Production
Primary production is carried out by ‘extractive’ industries like agriculture, forestry,
fishing, mining and oil extraction.
These industries are engaged in such activities as extracting the gifts of nature from the
earth’s surface, from beneath the earth’s surface and from the oceans.
Secondary Production
This includes production in manufacturing industry, turning out semi-finished and
finished goods from raw materials and intermediate goods— conversion of flour into
bread or iron ore into finished steel.
They are generally described as manufacturing and construction industries, such as the
manufacture of cars, furnishing, clothing and chemicals.
Tertiary Production
Industries in the tertiary sector produce all those services which enable the finished goods
to be put in the hands of consumers. In fact, these services are supplied to the firms in all
types of industry and directly to consumers.
Examples cover distributive traders, banking, insurance, transport and communications
and government services, such as law, administration, education, health and defense.

7. PRODUCTION SYSTEMS/METHODS
The production system of an organization is that part, which
produces products of an organization.
Characteristics of production system are:
Production is an organized activity, so every production
system has an objective.
The system transforms the various inputs to useful outputs.
It does not operate in isolation from the other organization
system.
There exists a feedback about the activities, which is
essential to control and improve system performance.

8. CLASSIFICATION OF PRODUCTION
SYSTEMS
Production systems can be classified as
Job Shop,
Batch,
Mass,
Continuous Production and
Just In Time (JIT) systems.
These can be described separately accordingly;

9. JOB SHOP PRODUCTION
A single product is produced from start to finish as a result of
an individual customer order.
Tends to be a labour-intensive production process. Examples of
job shop production are making a birthday cake, welding dress,
painting a house etc.
Characteristics of job-shop production system are:
High variety of products and low volume
Uses of general-purpose machines and facilities
Highly skilled operators who can take up each job as a
challenge because of uniqueness
Large inventory of materials, tools, parts
Detailed planning is essential for sequencing the requirements
of each product, capacities for each work entire and order
priorities.

10. JOB SHOP PRODUCTION
Advantages
Each piece is made to the customer’s exact requirements
Job satisfaction is high for the worker
Quality of the goods is very high
The design is flexible and can be changed
Full potential of operators can be utilized.
Opportunity exists for creative methods and innovative ideas.
Disadvantages
The products are very expensive due to frequent set up changes.
The work is very time consuming
Production planning is complicated.
Larger space requirements.

11. BATCH PRODUCTION
Is used to produce a number of similar products - a batch. When
an order has been completed another batch is produced.
All of the items in the batch are the same, so production is
speeded up. This reduces the cost of labour and results in the final
product being less expensive for the customer. Examples of batch
production are Baked goods, Clothing and Electrical goods.
Characteristics of batch production system are following:
When there is shorter production runs.
When plant and machinery are flexible.
When plant and machinery set up is used for the production of
item in a batch and change of set up is required for processing the
next batch.
When manufacturing lead time and cost are lower as compared to
job order production.

12. BATCH PRODUCTION
Advantages
Workers may specialise to some
degree
Labour costs reduced so final price
is lower
Machinery may be used
Production is faster
Begins to take advantage of
economies of scale
Lower investment in plant and
machinery.
Flexibility to accommodate and
process number of products.
Job satisfaction exists for
operators.
Disadvantages
The work is less interesting and
very repetitive.
More space is required for
working and storage.
Larger stocks of raw materials
must be kept compared to
continuous production.
Machines have to be re-set
between batches, losing time.
Material handling is complex
because of irregular and longer
flows.
Production planning and control
is complex.

13. MASS PRODUCTION
Also known as flow production or assembly line production.
The machines are arranged in a line or product layout. Product is passed along
a production line -raw materials to ready for sale.
Examples of mass production are canned goods and household appliances.
Characteristics of mass production are following:
Standardization of product and process sequence.
Dedicated special purpose machines having higher production capacities and
output rates.
Large volume of products.
Shorter cycle time of production.
Lower in process inventory.
Perfectly balanced production lines.
Flow of materials, components and parts is continuous with no back tracking.
Production planning and control is easy &material handling can be completely
automatic.

14. MASS PRODUCTION
Advantages
The final product is inexpensive.
Large quantities can be made.
The quality of the product is
standardised.
Machinery can be used so labour
costs are reduced.
Unskilled wages further reduce
costs.
Assembly lines can run
continuously.
Production is fast.
Takes full advantage of
economies of scale.
Disadvantages
The work is repetitive.
There is an increased risk of
accidents.
Employee motivation is low.
The products are all identical.
Large capital investment is
required.
Larger buildings are usually
needed.
Large stocks of raw materials
must be kept.
Machinery breakdown can halt
production.
There is a loss of traditional skills.

15. CONTINUOUS PRODUCTION
Production facilities are arranged as per the sequence of
production operations from the first operations to the finished
product.
The items are made to flow through the sequence of operations
through material handling devices such as conveyors, transfer
devices, etc. Examples of continuous production are tomato sauce,
juice production, ice cream and mayonnaise production.
Characteristics of continuous production are following:
Dedicated plant and equipment with zero flexibility
Material handling is fully automated.
Process follows a predetermined sequence of operations.
Component materials cannot be readily identified with final
product.
Planning and scheduling is a routine action.

16. CONTINUOUS PRODUCTION
Advantages
Standardization of product and
process sequence.
Higher rate of production with
reduced cycle time.
Higher capacity utilisation due to
line balancing.
Manpower is not required for
material handling as it is completely
automatic.
Person with limited skills can be
used on the production line.
Unit cost is lower due to high
volume of production.
Disadvantages
Flexibility to accommodate and
process number of products does
not exist.
Very high investment for setting
flow lines.
Product differentiation is
limited.

17. JUST IN TIME (JIT) PRODUCTION
JIT production uses stocks that are delivered to the
production line ‘just in time’ to be used.
Toyota is one of the most well-known examples of
companies using the JIT method. When a client places an
order, Toyota only receives raw materials in the factory when
it is ready to start building the automobile.
Characteristics of JIT production are following:
The business needs less factory space, as it holds smaller
stocks; but it depends on suppliers agreeing to meet delivery
requirements.
The business does not have as much money tied up in stock,
warehousing costs or unsold finished products.
The reliability of the supplier in delivering good-quality
stock on time is crucial to keeping the production process
running smoothly.

18. JUST IN TIME (JIT) PRODUCTION
Advantages
Capital is used very effectively.
Warehousing is not needed for
storage.
If faults occur in supplies, the
business does not have a large
number of faulty items.
There is no waste by having
excess stocks.
The finished product should be
cheaper for the consumer to buy.
Reduce manufacturing time.
Improve productivity.
Disadvantages
The business is very dependent
on having a very efficient
ordering system.
Production could be halted if
the wrong goods were delivered
at the last minute.
It puts pressure on suppliers.
The company and its suppliers
must work together closely.

19. CUSTOMER
SATISFACTION
HIGHER PROFITS
LOWER COSTS
NEW
PRODUCTS
INCREASED
PRODUCTION
IMPROVED
COMMUNICATION
REDUNDANCIES
RETRAINING
COSTS
CAPITAL COSTS
MOTIVATION
QUALITY
TECHNOLOGY IN
PRODUCTION
Impacts of technology in production

20. IMPACTS OF NEW TECHNOLOGY ON
PRODUCTION
Benefits
Improvement of the quality of the
finished product
Development of new products
Increase in the business’s
production level
Decrease in the production costs
per unit
Higher profit level
Greater customer satisfaction
Improved motivation of workers
Improved information and
communication systems
Drawbacks
Possible redundancies
Retraining programmes
Capital costs

21. THE END; Thank you for your
attention