5.2 Operations methods

Operations methods

Specific methods of production

4 operations methods

1. Job production

2. Batch production

3. Mass / flow standardized production

4. Mass customization

Job production

• Manufacturing a unique individual product / one-off job

• Completed by 1 person or team of ppl (tailor / architects)

• Made to meet specific needs of customer

• Eg haircut / wedding dress

Is job production labor or capital intensive

Labor

• Labour accounts for largest proportion of firms production costs

Pros of job production

1. High quality production bc high skilled labor

2. Highly motivated workers

3. USP bc unique product

4. Flexibility / choice

Cons of job production

1. Time consuming bc specific needs

2. Labor intensive → expensive

3. Long working capital cycle

4. Few EoS bc small scale production

5. Irregular orders → CF problems

Batch production

• Produce a limited no. of identical products

• Fully complete work on each batch before production switches to a new batch

• Use same team of workers, machinery

Which businesses is batch production highly suited for?

That produce a range of products

• Eg bakery. Finish cupcake production before moving onto cookies

When is batch production normally used?

• Unclear level of demand

• So estimate sales volume + adjust output

Is batch production only for small quantities being produced?

No- can be for large

Pros of batch production

1. EoS bc larger quantities

2. Specialisation → increase productivity

3. Wider product portfolio → higher sales

4. Variety → reduces risk

Cons of batch production

1. High storage costs

2. Repetitive jobs → boring

3. Inflexibility → hard to switch to other batch

4. Rely on machinery → high production costs

Mass production

• Manufacturing a standardized product on a large-scale

• Relatively low unit CoP

• Capital intensive, relies on automation

• Involves assembly of individual components

Is mass production capital or labour intensive?

Capital

Labour intensive

• Production relies heavily on labor inputs

• Cost of labour accounts for largest proportion of firms overall production costs

• Common in provision of personalised services

Capital intensive

• Production relies heavily on machinery + equipment

• Cost of capital accounts for largest proportion of firms overall production costs

• Eg automated production system

In mass production why are average CoP low?

EoS- specialisation

• Increases productivity

• Use specialised capital equipment + skilled labor ro perform diff functions in production process

Batch vs mass production

Mass- standardized products produced on larger scale

Standardization

Producing identical (homogeneous) products in large quantities

Flow production

• Form of mass production

• Diff operations are continuously + progressively carried out in sequence, with a v large volume of output.

• 1 task complete- → next stage of production starts immediately

• Relies on entirely automated systems. V few workers needed

• Eg water bottles

What does flow production use continuous production processes to do?

Manufacture standardized products in large quantities

Purpose of flow production (running 24/7)

• Maximise output

• Eliminate waste (extra costs of starting + stopping production process)

Basic flow production process diagram

Pros of mass / flow production

1. Large volume of output

2. Capital-intensive → technical EOS

3. Worker specialisation → low defect rate

4. Unskilled workers → low labour costs

5. Standardized quality

Why is using machinery less expensive than labour?

No wages, breaks, or motivating → reduces costs

Cons of mass / flow production

1. Cons of specialisation → repetitive, boring

2. Standardized product → limited choice

3. Machinery = expensive

4. Inflexible systems

5. Breakdowns → delays

6. Large amount of stock = large storage system

Mass customization

• Uses flexible manufacturing systems to mass produce products that that meet individual customers n+w

Which businesses use mass customisation?

That produce large quantities of goods via batch or mass/flow production

• But products are tailored to meet customers’ needs

Pros of mass customization

1. Low unit costs (like mass production)

2. Flexible- individual customisation

Pros of labour intensive production

Can offer personalised services

Which firms is labour intensive production v suited for?

1. Make highly customised products

2. In tertiary sector

3. Operate farming in economically developing countries

Pros of capital intensive production

1. High levels of output

Cons of capital intensive production

1. Identical products → no USP from customisation

• No premium price → lower PM

Which firms is capital intensive production v suited for?

• Have goods that can be batch / mass producted AND

• Operate in large markets that demand large volumes
  AND/OR

• Have ambitious growth objectives.

Type of operations method (labour/capital) depends on?

1. Size of market

2. Relative costs of labour + capital

3. Corporate aims / objectives

How does size of market affect type of operations method chosen?

• Large = capital intensive → mass / flow

• Small = batch / job

How does relative cost of labour + capital affect type of operations method chosen?

High labour costs → use capital intensive methods (batch / mass)

How does corporate objectives affect type of operations method chosen?

• Profit → operate in mass market → capital intensive (to minimise ACoP)

• Survival during recession → smaller scale → easy to control costs