5.1 Production Methods5.1 Production Methods

Chapter 30Chapter 30

ProductionProduction

How goods and services are produced.How goods and services are produced.

Types of ProductionTypes of Production

Job ProductionJob ProductionBatch ProductionBatch ProductionFlow Production, Line Production, Flow Production, Line Production, or Mass Productionor Mass ProductionMass CustomizationMass CustomizationCell Production Cell Production (HL)(HL)

Job ProductionJob Production

Producing a one-off item specifically Producing a one-off item specifically designed for the customer.designed for the customer.– Can be small or large – but usually uniqueCan be small or large – but usually unique– Examples: Wedding cakes, draperies, Examples: Wedding cakes, draperies,

Yangtze dam in ChinaYangtze dam in ChinaPros:Pros: motivating for workers as they motivating for workers as they participate in the complete productionparticipate in the complete production process processCons:Cons: high unit costs per item high unit costs per item

Batch ProductionBatch ProductionProducts are made in separate groups with each Products are made in separate groups with each group going through the complete process group going through the complete process togethertogether– Examples: a baker making rolls, cheerleading Examples: a baker making rolls, cheerleading

uniformsuniformsPros:Pros: enables economy of scale if batches are large enables economy of scale if batches are large enough, batches can be matched to demand, batch design enough, batches can be matched to demand, batch design can be changedcan be changedCons:Cons: high level of “work-in-progress” for high level of “work-in-progress” for each stage of production, the work may be each stage of production, the work may be boring and demotivating for workers, if boring and demotivating for workers, if batches are small unit costs may be high, batches are small unit costs may be high, cleaning may need to be completed cleaning may need to be completed between batches between batches

Flow Production or Line ProductionFlow Production or Line Production(Mass Production)(Mass Production)

Used when individual products move through one stage Used when individual products move through one stage of production to next when the product is ready.of production to next when the product is ready.– Examples: soda, pencilsExamples: soda, pencils

Pros:Pros: capable of producing large quantities in short time frames, capable of producing large quantities in short time frames, and standardized items, labor costs are low because automated and standardized items, labor costs are low because automated equipment is used, inputs can be easily determined because of equipment is used, inputs can be easily determined because of constant known output, quality is consistent and easily checked at constant known output, quality is consistent and easily checked at multiple stages of productionmultiple stages of productionCons:Cons: high setup costs, boring repetitive tasks, demotivating for high setup costs, boring repetitive tasks, demotivating for employeesemployees

Video:Video: http://science.discovery.com/videos/how-its-made-pencils.htmlhttp://science.discovery.com/videos/how-its-made-pencils.html

Mass CustomizationMass Customization

Combines job production with mass Combines job production with mass production to customize products to suit production to customize products to suit individuals.individuals.– Examples: computers, automobile assemblyExamples: computers, automobile assembly

Pros:Pros: designs include customized elements to designs include customized elements to standardized parts reducing consumer alienation, standardized parts reducing consumer alienation, differentiated products for consumers, low unit cost differentiated products for consumers, low unit cost for “customized” product, reducing boring and for “customized” product, reducing boring and repetitive tasksrepetitive tasksCons:Cons: high setup costs and equipment costs high setup costs and equipment costs

SummarySummary

JobJob BatchBatch Flow/Line/MassFlow/Line/MassMass Mass

CustomizationCustomizationMain FeatureMain Feature Single one-off itemsSingle one-off items Group of identical Group of identical

products pass products pass through each stage through each stage togethertogether

Mass production of Mass production of standardized productsstandardized products

Flow production with Flow production with many standardized many standardized components but components but customized differences customized differences tootoo

EssentialEssentialRequirementsRequirements

Highly skilled workforceHighly skilled workforce Labor and Labor and machines must be machines must be flexible to switch to flexible to switch to making batches of making batches of other designsother designs

Specialized, often Specialized, often expensive, capital expensive, capital equipment – but can be equipment – but can be very efficientvery efficient

High steady demand for High steady demand for standardized productstandardized product

Many common Many common componentscomponents

Flexible and multi-skilled Flexible and multi-skilled workersworkers

Flexible equipment – Flexible equipment – often CAM to allow for often CAM to allow for variations in the productvariations in the product

Main Main AdvantagesAdvantages

Able to undertake Able to undertake specialist projects or jobs, specialist projects or jobs, often with high value often with high value addedadded

High levels of worker High levels of worker motivationmotivation

Some economies of Some economies of scalescale

Faster production Faster production with lower unit costs with lower unit costs than job productionthan job production

Some flexibility in Some flexibility in design of product in design of product in each batcheach batch

Low unit costs due to Low unit costs due to constant working of constant working of machines, high labor machines, high labor productivity and economies productivity and economies of scaleof scale

JIT stock management JIT stock management easier to apply than with easier to apply than with other methodsother methods

Combines low unit costs Combines low unit costs with flexibility to meet with flexibility to meet customers’ individual customers’ individual requirementsrequirements

MainMainLimitationsLimitations

High unit production High unit production costscosts

Time consumingTime consumingWide range of tools and Wide range of tools and

equipment neededequipment needed

High levels of High levels of stocks at each stocks at each production stageproduction stage

Unit costs likely to Unit costs likely to be higher than with be higher than with flow productionflow production

Inflexible – often very Inflexible – often very difficult and time consuming difficult and time consuming to switch from one type of to switch from one type of product to anotherproduct to another

Expensive to set up flow-Expensive to set up flow-line machinery and each line machinery and each section needs to be section needs to be carefully synchronizedcarefully synchronized

Expensive product Expensive product redesign may be needed redesign may be needed to allow key components to allow key components to be switched to allow to be switched to allow varietyvariety

Expensive flexible Expensive flexible capital equipment neededcapital equipment needed

Cell ProductionCell Production

Splitting flow production into self-contained Splitting flow production into self-contained groups that are responsible for whole work groups that are responsible for whole work units.units.Performance Standards:Performance Standards:

Productivity measured, quality, lead timesProductivity measured, quality, lead times

Pros:Pros: worker commitment and motivation is high worker commitment and motivation is high because there is team work and sense of because there is team work and sense of ownership in the work performed; job rotation within ownership in the work performed; job rotation within the cell, increased productivitythe cell, increased productivityCons:Cons: need multi-skilled workers need multi-skilled workers

HL

Cell ProductionCell ProductionSplitting flow production into self-contained Splitting flow production into self-contained groups that are responsible for whole work units.groups that are responsible for whole work units.Performance Standards:Performance Standards:

Productivity measured, quality, lead timesProductivity measured, quality, lead times

Pros:Pros: worker commitment and motivation is high because worker commitment and motivation is high because there is team work and sense of ownership in the work there is team work and sense of ownership in the work performed; job rotation within the cell, increased productivityperformed; job rotation within the cell, increased productivityCons:Cons: need multi-skilled workers, need to be flexible, need multi-skilled workers, need to be flexible, workers need to be responsibleworkers need to be responsible

HL

Machining of components and quality checks

Sub assemblies produced and quality checks

Final assembly, quality checkspackaging

Bought-incomponents

Finished goods

Switching from Job to Switching from Job to BATCHBATCHConsiderations when changing from job Considerations when changing from job production methods to batch.production methods to batch.– FinanceFinance

Cost of equipment to handle larger volume of the batchCost of equipment to handle larger volume of the batchHigher stocking levels require more financeHigher stocking levels require more finance

– Human ResourcesHuman ResourcesLess emphasis in an individual’s craft could demotivate Less emphasis in an individual’s craft could demotivate employeesemployees

– MarketingMarketingProduct is no longer customProduct is no longer customMay have to promote lower prices and consistency in qualityMay have to promote lower prices and consistency in quality

Switching from Job or Batch to Switching from Job or Batch to FLOWFLOW

Considerations when changing from job or batch Considerations when changing from job or batch production methods to flow. production methods to flow.– FinanceFinance

Cost of equipment to handle a large volume of productionCost of equipment to handle a large volume of productionProduction delays during change over could create cash flow Production delays during change over could create cash flow problemsproblems

– Human ResourcesHuman ResourcesLow motivation and boredom could occurLow motivation and boredom could occur

– MarketingMarketingMarket research becomes important to target larger marketsMarket research becomes important to target larger marketsAccurate sales forecasting to match demand with outputAccurate sales forecasting to match demand with outputPromotion and pricing will have to change to be geared Promotion and pricing will have to change to be geared toward a mass market approach….this could change the toward a mass market approach….this could change the direction of the business.direction of the business.

Switching from Batch or Flow to Switching from Batch or Flow to CELLCELL

Considerations when changing from batch Considerations when changing from batch or flow production methods to cell.or flow production methods to cell.– FinanceFinance

Cost of equipment to handle multiple products Cost of equipment to handle multiple products within a cellwithin a cell

– Human ResourcesHuman ResourcesRecruitment or training of multi-skilled workersRecruitment or training of multi-skilled workersCreation of work teamsCreation of work teams

– MarketingMarketingProductivity should create more competitive pricingProductivity should create more competitive pricingQuality improvements should improve productQuality improvements should improve product

Choose a Production MethodChoose a Production Method

Size of MarketSize of Market– Very small markets are suited for job or batch Very small markets are suited for job or batch

productionproduction– Flow production is useful for producing a large Flow production is useful for producing a large

quantity of identical products for very large quantity of identical products for very large markets with consistent demand.markets with consistent demand.

– Batch production is suited for large production Batch production is suited for large production runs at intervals of time….3X per yearruns at intervals of time….3X per year

Choose a Production MethodChoose a Production Method

Amount of Capital AvailableAmount of Capital Available– Large amounts of capital are required for flow Large amounts of capital are required for flow

production systemsproduction systems– Small amounts of capital can be used to set Small amounts of capital can be used to set

up job or batch production methodsup job or batch production methods

Choose a Production MethodChoose a Production Method

Available ResourcesAvailable Resources– Flow production requires large amounts of Flow production requires large amounts of

unskilled workersunskilled workers– Flow production requires land for large Flow production requires land for large

factoriesfactories– Job and batch production requires a skilled Job and batch production requires a skilled

work forcework force

More than One WayMore than One Way

Most businesses use more than one way Most businesses use more than one way of producing their products.of producing their products.

Land RoverLand Rover– Line production of the standard productsLine production of the standard products– Batch production of their military versionBatch production of their military version– Job production for special orders that will be Job production for special orders that will be

hand assembled (bullet proof glass, gold hand assembled (bullet proof glass, gold plated trim, Italian leather seats)plated trim, Italian leather seats)