Business 5.2 Flashcards
What is job production
Job production is an operations method that produces one-off items, unique to each customer, allowing flexible production and the ability to meet customer’s specific needs. Labour intensive, service based industry.
A business may choose to use job production because customers have very specific requirements that cannot be met using other operations methods. Another reason for using job production might be if the number of customers is small and demand is low.
Advantage and disadvantage of job production
Advantages of job production
- Flexibility and choice. The product is adapted to meet individual customer requirements.
- High quality. Quality is high due to the highly skilled labour and high-quality materials used in production.
- High profit margins. The product can be sold for a higher price due to its unique specifications.
- High worker motivation. Employees are often more motivated because they can use their expertise and skills.
Disadvantages of job production
- High costs. Production can be costly because it is carried out by specialised and skilled workers using lower quantities of materials. This makes it difficult to achieve economies of scale.
- Time-consuming. Production takes more time because specific customer needs need to be fulfilled.
- Cash flow problems. Large projects, such as bridges or stadiums, will be expensive to produce and there will be fewer of them. Businesses will need to manage cash flow well to ensure they have the funds to produce the product.
What is batch production
Batch production occurs when items move together from one stage of an operations process to another where small changes are made to each batch to fulfil customers’ needs.
May be used when the amount of demand created for certain products in the market is unclear. Appropriate when a business has a range of similar products that meet different consumers’ needs.
Advantage and disadvantage of batch production
Advantages of batch production
- Allows flexibility and variety. Each batch adjusted to consumer needs.
- Economies of scale. As large amounts can be produced.
- Lower risks. Diverted by the range of product portfolio.
- Standardised quality.
Average costs of production are lower than if job production is used, because batch production enables the organization to have greater economies of scale. Fewer workers are needed as there is a reliance on machinery and mechanisation.
As a variety of products are made, rather than just one product in the case of job (customized) production, customers have a greater choice. This is likely to lead to more sales.
It reduces the risks associated with concentrating on the output of a single product. For example, not all customers like or want brown leather shoes or chocolate chip cookies. Batch production enables firms to make a variety of different products, thereby spreading risks.
It is suitable for making products when the level of demand for them is not enough to justify using mass production.
Disadvantages of batch production
There is less flexibility for customers, compared with job production, as they can only select from a range of standardised output.
There is a greater need for capital expenditure, such as the purchase of machinery and capital equipment. There is also a greater need for working capital as the business needs to purchase a lot more stocks (inventory such as raw materials).
There is idle time the machinery needs to be cleaned and/or changed (reconfigured) in order to produce another batch of products. This reduces productivity and can be costly.
Similarly, reliance on machinery and automation for batch production means that technical problems or breakdowns would be costly to the organization.
What is flow/mass production
Mass production is a continuous production process of large amounts of standardised products on an assembly line.
Advantage and disadvantage of mass production
Advantages of mass production
- Large-scale production with efficient capital-intensive production.
- Standardised quality. Produced by machines, allowing uniformed goods.
- Low costs of production, economies of scale as large volumes produced by machines using little costs.
Disadvantages of mass production
- Start-up, usage and storage costs. Expensive machinery and requires large inventory.
- Less flexibility. Product specifications cannot be altered once production began.
- Lower worker motivation. Demotivated by repetitive work.
Advantage and disadvantage of mass customization production
Advantages of mass customisation
- Loyal market. Wide range targeted, allows consumer variety.
- Lower costs.
- Higher prices and profits. Higher price charged as customisation is provided.
Disadvantages of mass customisation
- Handling returns. Returned items are personalised, reselling is hard, businesses may suffer losses.
- Higher costs for customisation. Wider range of stocks and specialised equipment required.
- Time. Supply chain problems due to production of unique products.
What is mass customization
Mass customisation involves producing large quantities of goods that can be adjusted to customer specifications, combining flexibility and personalisation with low unit costs resulting from economies of scale.
Types of mass customisation:
- Collaborative customisation. Business + customer = customer need.
- Adaptive customisation. Customer select pre-set customisations.
- Cosmetic customisation. Appearance of product changed to suit customer needs.
- Transparent customisation. Personalised items recommended by online customer data.
Mass customisation may be appropriate when economies of scale are needed due to intense competition in the industry but, as with a car, where the high prices of the products bring consumer expectations of individual specifications.
