Any production method relies on efficiency – this can be viewed in different ways:

Productivity – a measurement of output per unit of the factor used (labour, capital or land)

Total Output

Productivity = ------------------- Units of Factor

Technical Eff iciency – output produced using the fewest possible inputs

Productive Efficiency – output produced at the lowest possible cost

Production decisions involve deciding methods for new production runs and analysis of existing methods.

Decisions may include:◦ Substitute machinery for labour? ◦ Use of new technology? ◦ Organisation of the production layout? ◦ Change of production method?

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Whilst all output can be classed as production, different production methods may be more appropriate for different products or services.

Agriculture tends to be very land intensive – efficiency could be measured in terms of output per acre/hectare

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As technology and analysis of production methodology has improved, methods have changed dramatically – what used to be labour intensive production methods are now capital intensive

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Textile factoryCopyright: Stock.XchngBottle production lineCopyright: Photolibrary Group

The choice of production method and the factor inputs depends on such things as:

• the nature of the product

• factor costs

• the scale of production

Which method? Type of Product

One-Off Order?

Mass Market product?

Batch?

Market size and Segment

Factor Costs – Land, Labour and

Capital

Complexity of design

Job Production – One-off production - each item might have particular specifications

Flow Production – suitable for mass market products that are identical

Batch Production – each stage of the production process has an operation completed on it before moving on to the next stage – allows modifications to be made to products that otherwise are the same

Which is more efficient?

Operation 1 2 3 4 5

6

7

891011Finished Product

This?

Operation 1

1a 1b 1c 1d

2a 2b 2c

3a 3b 3c 3d

4 Finished product

Or this?

Or this?

Cell 1 Cell 2 Cell 3

Finished Product

Finished ProductFinished Product

Answer – it could be any of them! The design of the production space can influence:

◦ Output levels◦ Factor use◦ Efficiency◦ Cost levels◦ Quality assurance procedures

Japanese concept – not made redundant by the decline of the Japanese economy which may be due to other institutional factors!

Focus on gradual and continuous improvement A whole business philosophy Importance of EVERYONE buying into the

concept and the vision

Great attention paid to customer requirements and needs

•Efficient stock control methods help reduce costs and improve cash-flow

•Flexible working practices and empowerment – help increase efficiency, reduce costs and improve motivation

•Leadership seen as vital. Ability to communicate a clear vision, take people along with the vision and to think about where the company needs to be in 5, 10, 15 and 20 years time

•Fundamental principles – often characterised as ‘lean production’ – reducing waste, zero defects, high quality control measures at all stages•Punctuality in all aspects – delivery, supply, manufacture, etc.

Six Sigma Methodology◦ Coined by Motorola Engineer Bill Smith◦ Now a major influence on production methods and

quality assurance ◦ Data and statistical driven approach to eliminate

defects in production◦ Aims to improve processes and reduce variations

in quality◦ Necessitates organisational change, training and

planning