4.1 Production processes

Different production processes and their impact on businesses

Methods of production

• Job
• Batch
• Flow

Job production – Specialised items produced to meet customers' needs

• Specific to customers' needs, higher customer satisfaction, more brand loyalty
• Higher quality products with a unique selling point, can command a higher price from customers (price inelastic), develop a brand reputation of being high quality, increase customer retention, increase market share
• Higher quality of raw materials used, higher cost per unit, businesses have to charge higher prices, deter customers, lower sales
• Labour intensive, requires a high skilled workforce, higher wages, longer to achieve break-even, lower profits

Batch production – Similar items produced together

• Variations appeal to different consumers with different preferences, ensures multiple segments are satisfied, less reliance on one revenue stream
• Save on costs from buying in bulk, economies of scale from batches produced, lower cost per unit, lower prices to attract more customers or increase profit margins
• Takes time to switch machines between batch variations, wasted time in the production process that could be used elsewhere, opportunity cost
• Products are typically of average/low quality, heavy dependence on price competitiveness in mass market, low profit margins, requires high sales to reach the break-even point
• Tasks are repetitive, low motivation, lack of commitment, lower productivity, increased mistakes, increased wastage, lower efficiency

Flow production – Continuous movement of items through the production process, usually on an assembly line

• Capital-intensive system, can work constantly, products are produced quickly, more efficient
• Mass production, benefit from economies of scale, cost per unit is cheaper, higher profit margins
• Need enough capital to buy machinery, may need sources of finance, debt? Equity? Internal? ensure market research is done effectively, higher risk if no demand for the product
• Tasks are repetitive, low motivation, lack of commitment, lower productivity, increased mistakes, increased wastage, lower efficiency
• Capital-intensive system is inflexible, less differentiation for customers, can't command a higher price from customers

The influence of technology on production and the impact on businesses

Technology can be broken down into automation, robotics and computers. These are all examples of how technology can be used in production processes.

Robotics – Can be programmed to do tasks e.g. painting cars with a spray.

Computers – Can be programmed to control machines and workers also use them e.g. managing finance on spreadsheets.

Automation – This is where machinery completes repetitive tasks. For example, a machine adds juice to cups in McDonald's and adds the lid on top.

Advantages of using technology in production

• Machines can replace workers, reducing costs as they don't have to be paid hourly.
• Work faster and produce more. They can operate 24/7 and never need time off work. This reduces costs and increases output.
• Wastage is reduced as machines are usually more accurate than humans.

Disadvantages of using technology in production

• Technology can be expensive to buy, this may mean the business has less money to spend elsewhere. E.g. improving marketing
• Machines can break down, disrupting production. This may reduce sales.