IB Business Management OPERATIONS MANAGEMENT 5.2 Production Methods

Production methods:

1. Job production

2. Batch production

3. Flow production and mass production

4. Mass customisation

5. Cell production

Job production

Producing a one-off item specially designed for the customer

Batch production

Producing a limited number of identical products - each item in the batch passes through one stage of production before passing onto the next stage

Flow production

Producing items in a continually moving process - also known as line production

Mass production

Producing large quantities of a standardised product

Mass customisation

The use of flexible computer-aided production systems to produce items that meet individual customer requirements at mass production cost levels

Factors influencing choice of production method:

1. Size of the market

2. The amount of capital available

3. The availability of other resources

4. Market demand for products adapted to customer requirments

Impact of changing production methods from Job to Batch

Finance:

- cost of equipment needed to handle large numbers in each batch

- additional working capital needed to finance high levels of stocks and work in progress

Human Resources:

- less emphasis placed on individual's craft skills

Marketing:

- can no longer promote product as being 'customised to each consumer'

- may have to promote the benefits of lower prices and consistent quality

Impact of changing production methods from Batch to Flow

Finance:

- cost of equipment needed for flow production

- any production delays during the change-over period may impact cash flow

Human Resources:

- risk of low motivation and boredom if traditional line production techniques are used

Marketing:

- mass production requires mass marketing so market research will be essential to identify largest market segments

- accurate estimates of future demand to ensure that output matches demand

- promotion and pricing decisions will have to be geared towards a mass marketing approach - not niche marketing, so the orientation of the business may have to change

Impact of changing production methods from Batch or Flow to Cellular Production

Finance:

- expensive CAM methods may be needed to allow cells to switch from one product to another

Human Resources:

- recruitment of flexible, adaptable staff keen to work in teams

- staff training will be needed to achieve multi-skilling

Marketing:

- productivity and quality improvements should allow competitive pricing and promotion of the improved quality products

Capital intensive

The manufacturing or provision of a product relies heavily on machinery and equipment, such as automated production systems. Hence, the cost of capital accounts for a higher proportion of a firm's overall production costs.

Productivity

Measures the level of labour and/or capital efficiency of a business by comparing its level of inputs with the level of its output

Production process

The method of of turning inputs into outputs by adding value in a cost-effective way

Specialisation

The division of a large task or project into smaller tasks that allow individuals to concentrate on one or two areas of expertise. Specialisation is an essential part of mass production.

Standardisation

Producing an identical or homogeneous product in large quantities, such as printing a particular magazine, book or newspaper

Main feature of job production

Single one-off items

Main feature of batch production

Group of identical products pass through each stage together

Main feature of flow/mass production

Mass production of standardised products

Essential requirements of job production

Highly skilled workforce

Essential requirements of batch production

Labour and machines must be flexible to switch to making batches of other designs

Essential requirements of mass/flow production

- Specialised, often expensive, capital equipment - but can be very efficient

- High steady demand for standardised products

Essential requirements of mass customisation

- Many common components

- Flexible and multi-skilled workers

- Flexible equipment - often CAM to allow for variations in the product

Main advantages of job production

- Able to undertake specialist projects or jobs, often with high value added

- High levels of worker motivation

Main advantages of batch production

- Some economies of scale

-Faster production with lower unit costs than job production

-Some flexibility in design of product in each batch

Main advantages of mass/flow production

- Low unit costs due to the constant working of machines, high labour productivity and economies of scale

- JIT stock management easier to apply than with other methods

Main limitations of job production

- High unit production costs

- Time consuming

- Wide range of tools and equipment needed

Main limitations of batch production

- High levels of stocks at each production stage

- Unit costs likely to be higher than with flow production

Main limitations of flow/mass production

- Inflexible - often very difficult and time consuming to switch from one type of product to another

- Expensive to set up flow-line machinery and each section needs to be carefully synchronised

CAM

Computer Aided Manufacturing

Computer Aided Manufacturing

Using computers to operate and control machines and processes to manufacture a product

Economies of scale

Factors that cause a producer's average cost per unit to fall as output rises

Cell production

Splitting flow production into self-contained groups that are responsible for whole work units