Friday, August 3, 2012

Chapter 23: Factors affecting production

What is meant by production?
Production is the provision of a product to satisfy wants and needs. The process involves businesses adding value to their products. E.g. The production process of matches involve cutting wood into matchsticks, putting phosaphorus ends on them and packaging them to sell.


Productivity is the outputs measured against the inputs used to create it. This is measured by:

Output (over a given period of time)/Number of employees
If a worker makes more products in the same amount of time, his productivity increases. Firms aim to be productively efficient to be able to make more profits and compete against their competitors.

Methods of production

Job production

  • Goods are made individually, by one person.
  • Goods are usually specialized, no two goods are the same.
  • Usually made to order.

  • The product meets exact requirements of the customer.
  • The workers have more varied jobs.
  • More job satisfaction for workers.

  • Skilled labour is needed.
  • Slower and more expensive than other methods of production.
  • Usually labour intensive.
Batch production

  • Products are made in batches according to order.

  • It is flexible. You can easily change from making one product to another.
  • Still gives some variety to workers jobs.
  • Production is not too affected by machinery breakdown.

  • Expensive to move products around the workplace.
  • Storage space will be needed to store raw materials. Expensive.
Flow production

  • Large quantities of a product are produced in a continuous process.
  • Uses specialization.
  • Benefits from economies of scale.
  • Is capital intensive.

  • Low costs. Low prices. High sales.
  • Increased efficiency.
  • Little training is needed.
  • Goods are produced quickly and cheaply.
  • Goods do not need to be moved around like batch production. Saves time.
  • Quality is high and standardized (courtesy to Muhammad Hassaan Ayyub)

  • Boring for the workers. Little job satisfaction.
  • Needs a lot of capital to set up.
  • If one machine breaks down then the whole production process stops.
Which type of production should be used?

The type of production that should be used varies with how the product is demanded:

  • Job production: Unique and individual service is required.
  • Batch production: Demand is higher but products will not be sold in large quantities. Batches are made to orders.
  • Flow production: Demand for the product is high and steady.

Stock control

Stock control is important so that a business will not
out of stock and be unable to satisfy demands. When stock levels get to a certain point, more goods need to be reordered for the stock level to reach its maximum again. If more goods are not reordered, stocks could run out because of an unexpected
surge in demand. However, keeping a lot of stock costs money, so the level of stock in a company should always be balanced. The following graph demonstrates how stock can be controlled:


Lean production

  • Focuses on cutting down waste, increasing efficiency.
  • It tries to reduce the time taken to produce a product and transport it the selling point.
  • Includes the following methods:
    • Kaizen.
    • JIT production.
    • Cell production.
    • Kanban.

  • Continuous improvement through the elimination of waste.
    • Ideas of workers.
    • Regular meetings of workers to discuss how to increase efficiency.
  • 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 combine jobs of some employees, freeing others to do other things.
Just in time production

  • Eliminating the need to hold stocks.
  • Goods are delivered to the selling point just when they are needed.
  • JIT production needs:
    • Reliable suppliers.
    • Efficient system of ordering raw materials.
Cell production

  • Production line is divided into cells.
  • Each cell makes an identifiable part of the finished product.
  • Boosts morale.

  • A system of ordering used with JIT production.
  • Operates with two component bins.
    • When one is emptied, production begins to fill it.
    • The other one is then left to be emptied.
    • The first one is filled up when the second one is emptied.

Improvements in technology
Here are some things that technology does in the production process:

  • Automation: Equipment in the production process is controlled by a computer.
  • Mechanisation: Tasks are done by machines operated by people.
  • CAD (computer aided design): Used for designing 3-D objects.
  • CAM (computer aided manufacture): Computers control machines in the production process.
  • CIM (computer integrated manufacture): CAD and CAM are used together. The computer that uses CAD is directly linked with the one that controls the production process.
Here are some things that technology does in shops:

  • EPOS (electronic point of sale): When products' bar codes are scanned and the information is printed out on a receipt. Data is also sent to a computer to keep track of stocks.
  • EFTPOS (electronic fund transfer at point of sale): When the cash register is connected to the retailer's main computer and banks. The customer's credit/debit card is swiped and the money is debited from the customer's bank account. A receipt is printed out to confirm the transaction.
The advantages of new technology

  • Increased productivity.
  • Boring jobs done by machines. Boosts motivation.
  • Training is needed to operate new machines. Workers become more skilled.
  • Better quality.
  • Better stock control.
  • Quicker communication and reduced paperwork.
  • Info is available faster, resulting in faster decision making (for managers).
The disadvantages of new technology

  • Unemployment
  • Expensive
    • To invest in new technology.
    • To replace outdated technology.
  • Employees are unhappy with changes in the workplace.

Quality control

There are three ways to control quality:

Quality control

  • Involves checking and removing faulty products at the end of the production process.
  • Wastes a lot of money.
Quality assurance

  • Involves inspecting during and at the end of production.
  • Aim to
    • Stop faults from happening.
    • Set a quality standard that all products have to achieve.
  • Need teamworking and responsibility.
Total quality management

  • Encourages everyone to concentrate on quality.
  • Quality is the main aim for all staff.
  • Products need to satisfy all customer needs.


  1. Thanks a lot MrSpitfire. BTW there is a typing error, it is Lean Production.

  2. Another advantage of Flow production would be that the quality is high and is standardized, so consumers can expect all goods to be of the highest quality and identical to each other.

  3. EFTPOS stands for Electronic Funds Transfer at Point Of Sale, not Electronic at Point Of Sale

    1. u guys suck i mean he has made so awesome notes

  4. Hes done an extremely good job!
    Stop finding mistakes, and appreciate the effort.
    Thanks man! Really helps! :D

  5. Thankyou for posting this study guide. It really helped me in my business project. :)

  6. Thank you sir but may you at please put some questions

  7. Thanks for spotting out the mistakes :D

  8. This is very easy to understand. Thank you. :)

  9. Thank you so muchhh MrSpitfire! All your business studies pages are helping me so much! I would like it if it was in a little more details, but amazing job nonetheless!

  10. thank you MrSpitfire... this really helped... i wonder if you(as owner of this website) are a sole trader or u are interested in getting more partners.... send me an email if u are interested....

  11. Hey Whats Lean production? I did not find it here. Otherwise good explanations sir :)

    1. It is mentioned here as Lead production so there is a spelling mistake.

  12. Thanks a lot really helped in studying :D

  13. Thnak you mrspitfire you provided me with a unique type of help. I actually am a PE student who loves business too but couldnt study until now your notes are my text book and all i know about business comes from here


  15. Really Helps when your running out of time and instead of going through the numerous pages of the textbook (yes i have the same one) i have quick to read revision notes. really saves time and reduces pressure. thanks a ton for uploading! :)

  16. I would like to ask u to check ur quality management , assurance and control notes as its a bit wrong and confusing people please do consider the textbooks too otherwise u have done a great job! :)

  17. thanks it is more easy to understand and remember it quickly

  18. is it according to curriculum content

  19. nice it is simple than reading a 500 page book

  20. This is simply AWESOME!!!

  21. I woulde like to congratulate the efforts. Please make a small correction it is LEAN Production and not Lead Production

  22. Thanks! Lean Production and quality circles really helped me :)

  23. whats the pros and cons

  24. Thanks fot the notes, makes for easy reading

  25. In Job Production advantages, goods are diversified and not specialized. Specialize means producing same products. Diversification means having varied tasks.

  26. heyy thank you soooo sooo much for this site this helps me a lot in business

  27. Thank you MrSpitFire for these notes, really helped me out!

  28. aaaahhhhh thanks a lot man this really helped me and stop complaining faggots

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