The Main Production Methods (Cambridge International IGCSE Business)

Different Types of Production Processes

Spec point — "• Features, benefits and limitations of job, batch and flow production • Recommend and justify an appropriate production method for a given situation"

Methods of production

• Businesses can organise their production processes in a variety of ways

• The method of production used by a business will depend upon a number of factors

  • The level of output required to be produced
  • The nature of the product
  • Whether the product is standardised or customised
  • The level of automation used in production

The main methods of production

Explaining the methods of production

1. Job Production

• Manufacturers produce one product at a time as ordered by the customer

• Advantages:

  • High quality product
  • Motivated and highly skilled workers
  • Customised products can be produced

• Disadvantages:

  • Production is slow
  • Labour costs are high

2. Flow production

• Continuous manufacturing of standardised products, usually on a production line

• Advantages:

  • Low unit costs due to economies of scale
  • Rapid production
  • Usually highly automated (capital intensive)

• Disadvantages:

  • Customisation is difficult
  • Capital equipment can be expensive to purchase

3. Batch production

• Groups of the same product are produced as a batch, e.g., 1000 Blueberry muffins

• Advantages:

  • Workers can specialise
  • Production can take place as the previous 'batch' starts running out

• Disadvantages:

  • Requires careful coordination to avoid shortages
  • Money is tied up in stock
  • Completed products need to be stored

Recommending an Appropriate Production Method

Recommending an appropriate method of production

• Small scale businesses often use job or batch production as they lack the resources for flow production
• Large scale businesses are more likely to use flow production to meet high demand for their products
• Several factors may influence a businesses decision as to which type of production methods is used

Factors affecting the choice of production method

A business may change production methods as it grows over time

Explanation of factors

1. The level of demand

• High demand may justify investment in flow production

1. The nature of the target market

• Price-sensitive markets may require high volume, standardised products
• High quality customised products require job production

1. The nature of the product

• It may only be possible to produce certain products using one method, e.g. sports stadiums require job production

1. The comparative costs of labour and capital

• Large firms minimise labour costs by investing in automation
• Cheap labour allows for labour-intensive production methods, which generates the use of job or batch production

1. The nature of the firm itself

• Small firms lack funds to invest in flow production

1. New technologies

• As technologies become cheaper, smaller firms can afford equipment previously inaccessible to them and increase their level of flow production

1. The goals of the business

• Firms seeking to maximise market growth and profitability may invest in flow production
• Small firms may use job production methods to create unique selling points e.g. ‘hand-made’

1. Government policies

• The government may stimulate economic growth by offering subsidies and tax breaks for investment in technology

Exam Hint Carefully consider the needs of the customers to whom a business sells when recommending a suitable method of production. Where the selling price is a key driver of consumer demand, flow production (where unit costs are minimised) is likely to be very suitable. Where demand is driven by quality or where customisation is required, job or batch production is likely to be a better choice.