5.

2 Production Methods

Business Management HL & SL

Take a look at the video below. It's a clip from The Science Channel's show, How it's made. This Youtube
channel explains how hundreds of everyday products are manufactured.
Learning Outcomes:
Analyse and apply:
The following production methods;
● Job/customized production (AO2)
● Batch production (AO2)
● Mass/flow/process production (AO2)
● Cellular manufacturing (AO2)
Evaluate:
● The most appropriate method of production for a given situation (AO3)
Key Concept:
Business decisions regarding the most appropriate production methods are
important strategic choices.
Adopting different production methods requires careful management of change -
especially the impacts on employees.
Innovations in production methods is allowing much more flexibility.
For any overview of the main production methods, watch this short video clip.
Production refers to the output of a good or service. Production methods are
the process an organization uses to turn resources inputs into a final goods or
services.
The production or output of goods and services can be provided using any one of
the four main methods of production:
● job (customized) production - custom made cars, a personalized wedding
dress
● batch production - car models with different features, a series of cookies in
different flavours
● mass (flow/process) production - cars that are made in standard design,
identical, undifferentiated cookies made for a mass market
● cell (cellular) production - is a manufacturing system used in mass
production
Job (customized) production (AO2)
Job production is the output of a customized good or service that meets the specific needs of a specific
customer.

This production method involves the output of unique or one-off orders. It is a flexible production
method that allows customers to request and make changes to the product during the production process.

Job production tends to be highly labour intensive as it is reliant on using highly skilled workers. The
employees in service-based industries (such as doctors, lawyers, teachers, and accountants) provide a
personal and unique service for customers, catering for the specific needs of their clients.

Labour-intensive output is an expensive method of production due to the high costs of skilled labour
and limited opportunities to exploit economies of scale.

However, customers are prepared to pay higher prices for the individuality and exclusiveness of the
product that meets their personal requirements.
As you watch the video, notice how the company combines methods that are both capital intensive and labour
intensive in its production.
Advantages of job production
● It is the most flexible production method, allowing output to be catered to the
specific requirements of the customer.
● Due to its uniqueness and exclusivity, the production of the good or service
is of an exceptional quality standard.
● This also means that a premium price can be charged (because of the
product’s originality and exceptional quality). This means the profit margin will
be higher.
● Workers are likely to be highly motivated as they are exceedingly skilled
workers who produce work that is original and which they can be proud of.
Disadvantages of job production
● High labour costs (due to the need to hire highly skilled and experienced
employees) and limited opportunities for economies of scale mean that job
production can be very expensive.
● Long production times as job production cannot rely on technologies used
for mass produced, non-standardised output in order to meet specific needs
of individual customers, e.g. time needed to meet and consult with the
individual client.
Key Concept - Creativity

Creativity involves generating new ideas and considering existing ideas from new
perspectives. Creativity may be evident in the use of inputs, business processes,
product outputs and other solutions. The creation of ideas and solutions involves a
process of synthesising and evaluating in response to changes in the external
environment and consumer needs.

Job production requires a high level of creativity to meet customers’ individual

needs and expectations. Collaboration between the customer and
designer/producer is necessary for job production to be a success.
Possible examples of job production could include:
● Bridges
● Construction of roads, schools, hospitals and hotels
● Garden landscaper
● Hair cuts
● Movies (films)
● Tailor-made suits
● Portrait paintings
● Private music lessons
● Wedding dresses
Job production: The Golden Gate Bridge, San Francisco
Cake Boss - Merlion

- High

● Unique product/ service

prestige/ status of owning
product/service
● Highly skilled workforce - high
wages/salaries
● Labour intensive
● High production cost - high
cost of product/services
● Job satisfaction - increase
motivation and morale
Class Activity - Copy and complete the following table. Consider the products listed and decide whether each would be more suited to job
production or batch production. Explain your reasoning for each.

Learner profile: Thinkers

Approaches to learning: Thinking skills (critical thinking)

Batch production (AO2)
Batch production is a method of production that involves producing a set of
identical products, with work on each batch being fully completed before
production switches to another batch, which may have slightly different
specifications.

For example, a clothes manufacturer might make a batch of 200 medium-sized

white t-shirts, and then switch production to a different batch consisting of 200
large-sized black t-shirts.

Batch production is used where the level of demand for a product is frequent and
steady. It relies on the use of capital intensive output.
Advantages of batch production
● Average costs of production are lower than if job production is used, because batch
production enables the organization to have greater economies of scale. Fewer
workers are needed as there is a reliance on machinery and mechanisation.
● As a variety of products are made, rather than just one product in the case of job
(customized) production, customers have a greater choice. This is likely to lead to
more sales.
● It reduces the risks associated with concentrating on the output of a single
product. For example, not all customers like or want brown leather shoes or chocolate
chip cookies. Batch production enables firms to make a variety of different products,
thereby spreading risks.
● It is suitable for making products when the level of demand for them is not
enough to justify using mass production.
Disadvantages of batch production
● There is less flexibility for customers, compared with job production, as they
can only select from a range of standardised output.
● There is a greater need for capital expenditure, such as the purchase of
machinery and capital equipment. There is also a greater need for working
capital as the business needs to purchase a lot more stocks (inventory such as
raw materials).
● There is idle time the machinery needs to be cleaned and/or changed
(reconfigured) in order to produce another batch of products. This reduces
productivity and can be costly.
● Similarly, reliance on machinery and automation for batch production means
that technical problems or breakdowns would be costly to the organization.
Possible examples of batch production could include the output
of:

● Bread
● Casual clothing (such as t-shirts of various sizes and colours)
● Cookies (biscuits)
● Food items for buffet meals
● Home furniture
● McDonald’s burger meals
● Shoes
This Whoopie Pie factory has a variety of delicious ingredients that give these
traditional treats their signature taste.
Mass (flow/process) production
This is a production method whereby different operations are continuously and
progressively carried out in sequence, with a very large output of standardized
products.

Mass production is the large-scale manufacturing of a homogeneous

(standardized) product. Unit cost of production are relatively low when using mass
production methods.

Flow production is used in mass production when very large numbers of the
same product pass continuously through each stage of production.

Mass and flow production system are capable of producing large quantities of
output in a relatively short period of time.
It works for industries where the demand the product is high and consistent.

It is also suits the production of a standardized item that only requires minimal
alterations. This is why it is often referred to a mass production.

Flow production also takes place on a production line - hence the term line
production.

It relies on using an automated production process, so is highly capital intensive.

This helps to maximise output and cut unit costs of production due to economies
of scale. Mass production uses relatively unskilled workers as the production
process is largely automated.

It is used for products that require large-scale production of standardised products

for mass market products.
Advantages of mass production
● As products are mass produced, the business benefits from economies
of scale, i.e. lower costs per unit of output. This means it can charge lower
prices and/or enjoy higher profit margins. Therefore, customers benefit from
better value for money.
● Automation results in lower labour costs as fewer people need to be
hired, and for shorter periods of time. Labour intensive output (as with job
production) requires workers to have rest breaks and to be paid for their
overtime.
● As production is capital intensive, a large volume can be created, and
often continuously on the production line. Hence, the business benefits from a
faster rate of production.
Disadvantages of mass production
● Due to the standardised (homogenous) output of mass produced goods and their relatively low prices, the
firm earns lower profit margins. This means the business has to rely on selling a large volume of output in order to
break even.
● Unlike job production, or batch production to some extent, there is almost no flexibility with mass production
because large quantities of standardised (identical) goods are produced.
● Flow/continuous production requires effective stock management systems. This may involve stockpiling of raw
materials, semi-manufactured goods, and finished goods for sale. Inventory and storage costs can be very
expensive for a business.
● Start-up costs are likely to be high, especially for new businesses because of the amount of capital
expenditure needed. For example, the business may need to invest in specialised capital equipment, robots,
machinery, and production systems.
● Technical breakdowns will cause major problems for a business, as all production on the assembly line will
come to a complete halt.
● Staff, who are mainly unskilled workers, can become easily demotivated as the tasks they perform are
unchallenging, unexciting and repetitive.
● Mass production on its own does not sell the physical goods that are produced. It still requires marketing
support in order to inform and persuade people to buy these products on a large scale.
Possible examples of mass made products include:
● Ball bearings
● Beer
● Bottled water
● Buttons
● Canned soft drinks
● Paper clips
● Toothpicks
● Zips

Bottled water is made using flow production

How do they make Coca Cola? It is one of a short video in a series of short,
concise videos that reveal the mysteries behind how everyday things happen.

Here the product is standardized in

that it is a can of soft drink of a
standard size.
The system is flow because the
cans move through the various
stages independently.
However, the firm can make
changes to the contents of the cans
and the labeling on them without
having to alter the flow production
system.
They can produce coke, sprite, and
schweppes soda water on the same
production line.
Cell (cellular) production
Advantages of cell production

● There should be improvements in the quality of the output because cells are
responsible for and take ownership of quality assurance.
● Job rotation prevents demotivation associated with mass/flow production.
● Similarly, it involves team working, which is a form of non-financial motivation
according to theorists such as Herzberg.
● Worker are also more likely to be committed and productive, due to being
members of a team and taking responsibility for their role in completing a
whole unit of work. This also gives them a sense of achievement.
Disadvantages of cell production
● Cell production requires capital expenditure, such as the cost of specialised
machinery, equipment and inventory ordering systems. This can be
expensive. Even for existing businesses that choose to adopt cellular
manufacturing, there is a need to reorganize the factory floor in order to
accommodate for the cellular layout. Again, this is often a time consuming
and costly task.
● Machinery and equipment are not used as intensively as with mass / flow
production, so this does not allow the business to make the most out of
potential economies of scale.
● It is time consuming and costly to recruit and train suitable employees to
work in cells.
Watch this short video clip - how Dr. Martens’ makes its iconic "Made in England" collection.
Class Activity - Copy and complete the following table. Consider the products listed and decide whether each would be more suited to mass/flow production
or mass customisation. Explain your reasoning for each.

Learner profile: Thinkers

Approaches to learning:
Thinking skills (critical thinking)
 Be a Thinker - Appropriate Production Methods

Suggest and justify an appropriate production method for each of the following
products:
● Children’s clothing
● Electric plug for kitchen appliances
● Ceramic pots to decorate the home of wealthy customers
● Desktop computers for customer who need slightly different specifications