Lecture Four: Production Methods

Learning Objectives:
By the end of this lesson a trainee will be able to:
 Define production management
 Define production
 Describe the production methods
 Outline the characteristics of each production
methods
 Mention the advantages and disadvantages of each
production systems
 Describe the importance of technology in
production
 Production Management

 Production/operations management is the process,

which combines and transforms various resources
used in the production/operations subsystem of the
organization into value added product/services in a
controlled manner as per the policies of the
organization.
 Therefore, it is that part of an organization, which is
concerned with the transformation of a range of
inputs into the required (products/services) having
the requisite quality level.
 Concept of Production
 Production function is that part of an organization, which is
concerned with the transformation of a range of inputs into
the required outputs (products) having the requisite quality
level.

 Production is defined as “the step-by-step conversion of one

form of material into another form through chemical or
mechanical process to create or enhance the utility of the
product to the user.”

 According to Bates and Parkinson “Production is the organised

activity of transforming resources into finished products in the
form of goods and services; the objective of production is to
satisfy the demand for such transformed resources”.
 What is the difference between
Manufacturing and Production?
 In production, the raw material is not procured
from outside, the company owns it and after
processing and make the final product.
 But in Manufacturing, the company procures the
raw material from outside, and then makes the final
product.
 Manufacturing is a process of converting raw
material in to finished product by using various
processes, machines and energy.
 Production is a process of converting inputs into
outputs.
 The Difference between Micro and Macro Economics

 Microeconomics is the study of economics at an individual,

group or company level.
 Macroeconomics, on the other hand, is the study of a national
economy as a whole.
 Microeconomics focuses on issues that affect individuals and
companies. This could mean studying the supply and demand
for a specific product, the production that an individual or
business is capable of, or the effects of regulations on a
business.
 Macroeconomics focuses on issues that affect the economy as
a whole. Some of the most common focuses of
macroeconomics include unemployment rates, the gross
domestic product of an economy, and the effects of exports
 Types of Production

For general purposes, it can be classified into three main groups:

 Primary Production
• Primary production is carried out by ‘extractive’ industries like agriculture,
forestry, fishing, mining and oil extraction. These industries are engaged in such
activities as extracting the gifts of Nature from the earth’s surface, from beneath
the earth’s surface and from the oceans.
 Secondary Production
• This includes production in manufacturing industry, turning out semi-finished and
finished goods from raw materials and intermediate goods— conversion of flour
into bread or iron ore into finished steel. They are generally described as
manufacturing and construction industries, such as the manufacture of cars,
furnishing, clothing and chemicals.
 Tertiary Production
• Industries in the tertiary sector produce all those services which enable the
finished goods to be put in the hands of consumers. In fact, these services are
supplied to the firms in all types of industry and directly to consumers.
• Examples cover distributive traders, banking, insurance, transport and
communications. Government services, such as law, administration, education,
 Factors of Production

• Production of a commodity or service requires

the use of certain resources or factors of
production.
• Since most of the resources necessary to carry on
production are scarce relative to demand for
them they are called economic resources.
 Production Systems/Methods
• The production system of an organization is that
part, which produces products of an organization.
Characteristics of production system are:
 Production is an organized activity, so every
production system has an objective.
 The system transforms the various inputs to useful
outputs.
 It does not operate in isolation from the other
organization system.
 There exists a feedback about the activities, which is
essential to control and improve system
performance.
 Classification of Production Systems

Production systems can be classified as

 Job Shop,
 Batch,
 Mass,
 Continuous Production and
 Just In Time (JIT) systems.
These can be described separately accordingly:
 Job Shop Production
A single product is produced from start to finish as a
result of an individual customer order.
Tends to be a labour-intensive production process
Characteristics of Job-shop production system are:
 High variety of products and low volume
 Uses of general purpose machines and facilities
 Highly skilled operators who can take up each job as a
challenge because of uniqueness
 Large inventory of materials, tools, parts
 Detailed planning is essential for sequencing the
requirements of each product, capacities for each
 Job Shop Production
Advantages Disadvantages
 Each piece is made to the  The products are very
customer’s exact requirements expensive due to frequent set
 Job satisfaction is high for the up changes.
worker  The work is very time
 Quality of the goods is very high consuming
 The design is flexible and can be  Production planning is
changed complicated.
 Full potential of operators can be  Larger space requirements.
utilized.
 Opportunity exists for creative
methods and innovative ideas.
 Batch Production
 Is used to produce a number of similar products - a batch.
 When an order has been completed another batch is
produced.
 All of the items in the batch are the same, so production is
speeded up. This reduces the cost of labour and results in
the final product being less expensive for the customer.
 Characteristics of Batch production system are following:
 When there is shorter production runs.
 When plant and machinery are flexible.
 When plant and machinery set up is used for the production
of item in a batch and change of set up is required for
processing the next batch.
 When manufacturing lead time and cost are lower as
compared to job order production.
 Batch Production
Advantages Disadvantages
 Workers may specialise to some  The work is less interesting and very
degree. repetitive.
 Labour costs reduced so final price  More space is required for working
is lower. and storage.
 Machinery may be used  Larger stocks of raw materials must
 Production is faster. be kept compared to continuous
 Begins to take advantage of production.
economies of scale.  Machines have to be re-set between
 Lower investment in plant and batches, losing time.
machinery.  Material handling is complex because
 Flexibility to accommodate and of irregular and longer flows.
process number of products.  Production planning and control is
 Job satisfaction exists for complex.
operators.
 Mass Production
 Also known as flow production or assembly line production.
 The machines are arranged in a line or product layout.
 Product is passed along a production line - raw materials to ready for
sale.
 Characteristics of Mass production are following:
 Standardization of product and process sequence.
 Dedicated special purpose machines having higher production
capacities and output rates.
 Large volume of products.
 Shorter cycle time of production.
 Lower in process inventory.
 Perfectly balanced production lines.
 Flow of materials, components and parts is continuous and without
any back tracking.
 Production planning and control is easy.
 Mass Production
Advantages Disadvantages
 The final product is inexpensive  The work is repetitive
 Large quantities can be  There is an increased risk of
manufactured accidents
 The quality of the product is  Employee motivation is low
standardised 
 The products are all identical
Machinery can be used so labour 
costs are reduced Large capital investment is
 required
Unskilled wages further reduce 
costs Larger buildings are usually
 needed
Assembly lines can run 
continuously Large stocks of raw materials
 must be kept
Production is fast 
 Machinery breakdown can halt
Takes full advantage of production
economies of scale  There is a loss of traditional
skills
 Continuous Production

 Production facilities are arranged as per the sequence of

production operations from the first operations to the
finished product.
 The items are made to flow through the sequence of
operations through material handling devices such as
conveyors, transfer devices, etc.
 Characteristics of Continuous production are following:
 Dedicated plant and equipment with zero flexibility
 Material handling is fully automated.
 Process follows a predetermined sequence of operations.
 Component materials cannot be readily identified with final
product.
 Planning and scheduling is a routine action.
 Continuous Production
Advantages Disadvantages
 Standardization of product and
 Flexibility to accommodate
process sequence.
 Higher rate of production with and process number of
reduced cycle time. products does not exist.
 Higher capacity utilisation due to  Very high investment for
line balancing. setting flow lines.
 Manpower is not required for  Product differentiation is
material handling as it is
completely automatic.
limited.
 Person with limited skills can be
used on the production line.
 Unit cost is lower due to high
volume of production.
 Just In Time (JIT) Production
 JIT production uses stocks that are delivered to the
production line ‘just in time’ to be used.

 Characteristics of JIT production are following:

 The business needs less factory space, as it holds smaller
stocks; but it depends on suppliers agreeing to meet
delivery requirements.
 The business does not have as much money tied up in
stock, warehousing costs or unsold finished products.
 The reliability of the supplier in delivering good-quality
stock on time is crucial to keeping the production process
running smoothly.
 Just in Time (JIT)
Production
Advantages Disadvantages
 Capital is used very  The business is very
effectively dependent on having a very
 Warehousing is not needed efficient ordering system
for storage  Production could be halted
 If faults occur in supplies, if the wrong goods were
the business does not have a delivered at the last minute
large number of faulty items  It puts pressure on
 There is no waste by having suppliers
excess stocks  The company and its
 The finished product should suppliers must work
be cheaper for the consumer together closely
to buy
 QUALITY
CUSTOMER
MOTIVATION
SATISFACTION

HIGHER PROFITS CAPITAL COSTS

TECHNOLOGY IN
PRODUCTION
RETRAINING
LOWER COSTS
COSTS

NEW
REDUNDANCIES
PRODUCTS

INCREASED IMPROVED
PRODUCTION COMMUNICATION
 Impact of New Technology
on Production
Benefits Drawbacks
 Improvement of the quality of the  Possible redundancies
finished product  Retraining programmes
 Development of new products  Capital costs
 Increase in the business’s
production level
 Decrease in the production costs
per unit
 Higher profit level
 Greater customer satisfaction
 Improved motivation of workers
 Improved information and
communication systems
 The end;

Thank you for your attention