Production Processes
Different Production Processes and Their Impact on Businesses
Job Production
A production process where items are made individually and each item is finished before the next one is started. Each product is unique and made to customer specifications.
✓ Benefits of Job Production
- High quality products that meet specific customer needs, which leads to higher customer satisfaction and positive word-of-mouth recommendations
- Workers are more motivated as work is varied and skilled, which reduces staff turnover and absenteeism
- Can charge premium prices for unique products, which increases profit margins and revenue per unit sold
- Flexible - can easily change design to meet customer requirements, allowing the business to respond quickly to changing customer demands
✗ Drawbacks of Job Production
- Labour intensive and time-consuming, which limits the number of products that can be made and reduces overall output
- Production costs are high per unit, which means lower profit margins unless premium prices can be charged
- Requires highly skilled workers (expensive wages), which increases total labour costs and may be difficult to recruit
- Hard to achieve economies of scale, meaning the business cannot reduce unit costs through bulk purchasing or mass production
Real Business Example: Job Production
Rolls-Royce Motor Cars (UK) uses job production to manufacture luxury cars. Each Rolls-Royce is built to individual customer specifications, with customers able to choose everything from the paint colour to the type of wood used in the interior. This allows Rolls-Royce to charge prices exceeding £250,000 per vehicle, but means production is slow with only around 5,000 cars made annually.
Batch Production
A production process where a group of identical products (a batch) are made together. Once one batch is finished, production switches to making a different batch.
✓ Benefits of Batch Production
- Produces standardised products more efficiently than job production, which increases output and reduces production time
- Lower unit costs than job production, which improves profit margins or allows competitive pricing to attract more customers
- Allows product variety - can make different batches, which means the business can respond to different customer preferences and market segments
- Can use some specialist equipment to speed up production, which improves productivity and reduces labour requirements
✗ Drawbacks of Batch Production
- Downtime between batches when equipment is cleaned/reset, which reduces productivity and wastes time that could be used for production
- Storage costs for holding stock between batches, which increases overheads and ties up working capital
- Less flexibility than job production, making it harder to respond quickly to individual customer requests for customised products
- Workers may find work repetitive and boring, which can reduce motivation and increase staff turnover
Real Business Example: Batch Production
Greggs (UK) uses batch production in its bakeries. They produce batches of sausage rolls, then switch to making batches of pasties, then batches of doughnuts. This allows Greggs to offer variety to customers while keeping costs lower than making each item individually. Fresh batches are made throughout the day to ensure product quality.
Flow Production
A production process where items are produced continuously on an assembly line. Large quantities of identical products are made without stopping.
✓ Benefits of Flow Production
- Very low unit costs due to economies of scale, which allows businesses to charge competitive prices and increase profit margins
- Large volumes can be produced quickly, which enables businesses to meet high demand and increase market share
- Consistent quality through standardisation, which builds customer trust and reduces product returns
- Can operate 24/7 for maximum output, which maximises use of expensive equipment and spreads fixed costs across more units
✗ Drawbacks of Flow Production
- High initial investment in machinery and equipment, which may strain cash flow and requires significant capital or borrowing
- Very repetitive work leads to demotivated workers, which can increase absenteeism, staff turnover and reduce productivity
- Breakdown of one machine stops entire production line, resulting in lost output and potentially delayed customer orders
- Inflexible - expensive to change product design, making it difficult to respond to changing consumer tastes and market trends
Real Business Example: Flow Production
Cadbury (UK) uses flow production to manufacture chocolate bars at its Bournville factory. Dairy Milk bars move continuously along assembly lines where they are moulded, cooled, wrapped and packaged. This allows Cadbury to produce millions of chocolate bars per week at very low unit costs, making products affordable for mass market consumers.
The Influence of Technology on Production
Automation
The use of machinery and technology to perform tasks with minimal human intervention. Automated systems can operate continuously and perform repetitive tasks consistently.
✓ Benefits of Automation
- Increased speed of production, which allows businesses to meet higher demand and increase sales revenue
- Lower labour costs in the long run, which improves profit margins and reduces the business's dependence on scarce skilled workers
- Improved consistency and quality, which reduces waste, returns and enhances the business's reputation
- Can work 24/7 without breaks, which maximises production capacity and spreads fixed costs over more units
- Reduced human error, which decreases the number of faulty products and costly recalls
✗ Drawbacks of Automation
- High initial capital investment required, which may require borrowing and strain cash flow for smaller businesses
- Job losses - redundancies required, which can damage employee morale, harm the business's reputation and create costs for redundancy payments
- Expensive to maintain and repair specialist equipment, which increases operating costs and may require specialist technicians
- Less flexible - hard to change production quickly, making it difficult to respond to changing customer demands or introduce new products
- Workers may need retraining, which is time-consuming and costly, and some workers may struggle to adapt to new technology
Computers and Robotics
Computer-aided design (CAD) and computer-aided manufacture (CAM) allow businesses to design products digitally and control machinery. Robotics involves programmable machines that can perform complex tasks.
✓ Benefits of Computers and Robotics
- Greater precision and accuracy in production, which reduces waste and improves product quality
- Can perform dangerous tasks, improving worker safety and reducing compensation claims and absenteeism
- Easy to modify designs using CAD software, which speeds up product development and allows businesses to respond quickly to customer feedback
- Faster product development time, which helps businesses get products to market before competitors and capitalise on trends
- Robots can work in difficult conditions, such as extreme temperatures or hazardous environments where human workers cannot safely operate
✗ Drawbacks of Computers and Robotics
- Very expensive to purchase and install, which may be unaffordable for small businesses or require significant borrowing
- Significant job losses in manufacturing, which can damage local communities and create negative publicity for the business
- Requires specialist technicians to program and maintain, which increases wage costs and may be difficult to recruit in some areas
- Risk of technology becoming outdated quickly, meaning the business needs to invest regularly in updates or risk falling behind competitors
- Vulnerable to computer system failures or cyber attacks, which could halt production entirely and compromise sensitive business data
Real Business Example: Technology in Production
Jaguar Land Rover (UK) uses extensive automation and robotics at its manufacturing plants. Robots perform welding, painting and assembly tasks with precision. The company also uses CAD software to design vehicles digitally before production begins. This has improved quality and allowed JLR to compete globally, though it has reduced the number of manual workers needed in factories.
Test Your Knowledge
Quality of Goods and Services
The Concept of Quality
Quality
Quality refers to how well a product or service meets customer expectations and is fit for purpose. A quality product should be reliable, durable and perform as expected. Quality service should meet or exceed customer needs.
Quality is important for businesses because:
- It builds the reputation of the business
- It helps to gain and retain customers
- It reduces product returns and recalls
- Customers are willing to pay higher prices for quality products
- It gives businesses a competitive advantage
Methods of Ensuring Quality
Quality Control
Quality control involves checking and inspecting products after they have been made to identify and remove defective items before they reach customers. Inspectors examine finished products against set standards.
✓ Benefits of Quality Control
- Defective products are identified before reaching customers, which protects the business's reputation and prevents negative reviews
- Clear responsibility - specialist inspectors check quality, which ensures expertise and allows production workers to focus on their core tasks
- Standards are maintained consistently, which builds customer trust and meets legal requirements
- Reduces returns and complaints, which lowers costs and improves customer satisfaction
✗ Drawbacks of Quality Control
- Expensive - need to employ quality inspectors, which increases wage costs and reduces profit margins
- Waste - faulty products may need to be scrapped or reworked, which increases costs and is environmentally damaging
- Time-consuming to inspect all products, which can slow down production and delay delivery to customers
- Does not prevent defects occurring in production, meaning problems in the production process continue uncorrected
- Workers may be less careful if they know products will be inspected later, which can lead to more defects being produced
Real Business Example: Quality Control
Marks & Spencer (UK) uses quality control inspectors to check food products and clothing before they are sold in stores. Inspectors check that food meets food safety standards and that clothing items have no manufacturing defects. Any products that fail inspection are rejected. This helps M&S maintain its reputation for quality but adds to costs.
Quality Assurance
Quality assurance focuses on preventing defects from occurring in the first place. It involves checking quality at every stage of production and making all workers responsible for quality. Systems and procedures are put in place to ensure quality standards are met throughout the production process.
✓ Benefits of Quality Assurance
- Prevents defects rather than just detecting them, which reduces waste and saves money on scrapping or reworking products
- Reduces waste as fewer faulty products are made, which lowers costs and improves environmental sustainability
- Motivates workers - they feel trusted and responsible, which can reduce absenteeism and staff turnover
- Identifies problems in the production process early, allowing businesses to fix issues before they become serious and costly
- Less inspection needed at the end of production, which reduces the need for quality inspectors and speeds up delivery times
✗ Drawbacks of Quality Assurance
- Requires significant investment in training workers, which is expensive and takes time away from production
- Time-consuming to set up systems and procedures, which means benefits may not be seen immediately
- All workers must be committed to quality - cultural change needed, which can be difficult to achieve and may face resistance from employees
- Can slow down production as quality checks happen throughout, which may reduce output in the short term
Real Business Example: Quality Assurance
Toyota (UK plant in Derbyshire) uses quality assurance throughout its production process. Every worker is responsible for quality and can stop the production line if they spot a problem. Workers check components at each stage rather than waiting until the end. This "right first time" approach has helped Toyota build a reputation for reliability and reduces the cost of fixing defects.
The Importance of Quality
Reputation of the Business
Quality has a direct impact on business reputation. High quality products and services lead to positive customer reviews, word-of-mouth recommendations and brand loyalty. A strong reputation for quality allows businesses to charge premium prices. However, poor quality can quickly damage reputation through negative reviews and social media complaints, which can take years to rebuild.
To Gain and Retain Customers
Quality is essential for attracting new customers and keeping existing ones. Customers are more likely to try a product or service with a reputation for quality. Once customers are satisfied with quality, they become repeat customers and develop brand loyalty. In competitive markets, quality can be the key factor that differentiates a business from rivals. Poor quality leads to lost customers who switch to competitors.
Reduce Product Returns and Recalls
Good quality reduces the number of faulty products that customers return. Returns are expensive for businesses - they must refund customers, pay return shipping costs, and may have to scrap or repair products. Product recalls are even more costly and damaging, involving retrieving products from customers and stores. Recalls damage reputation and can result in legal action. By ensuring quality, businesses avoid these costs and maintain customer trust.
Real Business Example: Importance of Quality
Dyson (UK) has built its business on high quality innovative products. James Dyson spent years developing bagless vacuum cleaners that work better than competitors. This quality focus has allowed Dyson to charge premium prices (£300+ for vacuum cleaners) and build strong customer loyalty. Customers trust the Dyson brand and are willing to pay more because they know products will be reliable and perform well. This demonstrates how quality builds reputation, gains customers and justifies higher prices.
Test Your Knowledge
Case Study: Operations Decision
Harrison's Furniture Ltd
Harrison's Furniture is a small UK business that currently makes high-end dining tables using job production. Each table is custom-made to individual customer specifications, taking 2-3 weeks to complete. The business employs skilled craftspeople and charges £2,500 per table. Owner Sarah Harrison has identified growing demand for mid-range dining tables priced at £800-£1,200.
Sarah is considering switching to batch production to target this market. This would involve making batches of 20 identical tables in popular designs, then switching to different styles. Sarah believes batch production could help her business grow, but some of her craftspeople are concerned about the changes. The business currently makes 80 tables per year. With batch production, Sarah estimates they could produce 300 tables annually.
Question 1: Analyse one benefit to Harrison's Furniture of continuing to use job production.
[3 marks]
Question 2: Analyse one benefit to Harrison's Furniture of switching to batch production.
[3 marks]
Question 3: Recommend whether Harrison's Furniture should continue with job production or switch to batch production.
[3 marks]
Exemplar Responses
One benefit to Harrison's Furniture of continuing to use job production is that they can charge premium prices. This is because job production allows each table to be custom-made to individual customer specifications, meaning customers get exactly what they want in terms of size, wood type and design. As a result, customers are willing to pay £2,500 per table, which generates higher profit margins for Harrison's than they could achieve with standardised tables. This is particularly beneficial as it allows the business to maintain profitability despite lower sales volume.
One benefit to Harrison's Furniture of switching to batch production is increased output and sales revenue. Batch production would allow the business to make groups of identical tables more efficiently than making each one individually. Sarah estimates production could increase from 80 tables per year to 300 tables annually. Although each table would be sold for less (£800-£1,200 rather than £2,500), the significant increase in volume from 80 to 300 units means total revenue would likely increase substantially, helping the business grow and potentially increase overall profits.
Harrison's Furniture should switch to batch production. While continuing job production would maintain premium prices of £2,500 per table, batch production offers greater potential for business growth as Sarah has identified "growing demand" for mid-range tables. Producing 300 tables annually at £800-£1,200 each could generate £240,000-£360,000 in revenue compared to just £200,000 from 80 custom tables at £2,500. Although the craftspeople have concerns, this growth opportunity outweighs maintaining the status quo, especially as demand exists in the mid-range market that Harrison's currently cannot serve.
Lower Scoring Responses
One benefit of job production is that it allows high quality products to be made. This means that products are made to a high standard and customers will be satisfied. As a result, the business will gain a good reputation and customers will return.
One benefit of batch production is lower unit costs. This is because when businesses make products in batches, they can produce them more efficiently than making individual items, which reduces the cost per table. This means the business can either increase profit margins or reduce prices to attract more customers, making the business more competitive in the market.
Harrison's Furniture should switch to batch production.