MODULE 1: TOPIC 1: NATURE OF PRODUCTION

PRODUCTION PROCESS
The use of inputs/factors of production (land, labour, capital, entrepreneurship) to produce output
(finished goods, services, intermediate goods/components for other firms)
PRODUCTION METHODS

Job production
Batch production
Flow production
Cell production

Whether a business uses job, batch or flow production depends on:

1. Size of market
2. Amount of capital available
3. Availability of other resources e.g. labour, land
4. Flexibility with mass production (to achieve low cost and differentiated products)

LOCATION
JOB
PRODUCTION

single, one off products that are unique

each individual product has to be completed

Fixed Costs:
before the next product is started
Variable Costs:
rent, purchase
specialised products
wage rate
of land
workers are motivated
transport costs
expensive, time consuming

labour intensive, highly skilled workers

BATCH PRODUCTION

production in separate batches where

products in the batch go through the whole
Revenue:
production process
together
affected by
every unit in batch pass through an individual
proximity to
production stage before the whole batch
target market
moves to another stage
division of labour, economies of scale
high levels of work in progress stocks at each
stage
Quantitative Factors
Qualitative
Factors for worker
boring&
demotivating
Site Costs
Infrastructure
transport
communication links
Regional incentives
Environmental and planning issues
short term grants
poor public relations
rent free accommodation
pressure groups
Transport costs
Management preferences
manufacturing businesses need to
to set up in an area with good
consider transport of raw materials,
quality of life
PRODUCTION
components and finished goods
e.g. schools, shopping areas
METHODS
service needs to be close to market
Labour costs
Clustering
quality & productivity of labour
same businesses locating in one
to be considered
area
FLOW needs
PRODUCTION
benefit of proximity to existing and
individual products move from stage to
potential customers & suppliers,
stage of production when they are ready,
CELL PRODUCTION
supply of labour
without having to wait on others
form of flow production
Revenue generation
(independent)
system separated into a number of self location
increases
sales due
to
large output
in short
time, demand
must
contained mini production units (cells)
prestige
of area/market proximity
be high and
consistent
each has a team leader & multi-skilled staff,
no disruptions in system needed
performance is measured against targets
Consider
the high
effect
of E-COMMERCE on location
low
labour costs,
mechanisation
each responsible for quality, leads to
which may be expensive (high set up
commitment and motivation
costs)
quality is consistent and high
use of JIT stock control to plan inputs
inflexible