OPERATION
MANAGEMENT
5.2 operations methods
What do we mean by production
methods?
◦ Labour Intensive – When the majority of the production costs come from
labour. This is usually the case in highly-skilled professions. Most
personalized, job producing businesses will be labour intensive.
◦ Capital Intensive – These businesses require high capital investment,
including mass producing firms. Their main costs come from
the machinery, raw materials, etc.
◦Production is the process of turning inputs into outputs
◦Operations methods refers to the specific methods by
which production takes place
Types of production:
1. Job production
2. Batch production
3. Mass/ flow production
4. Mass customization
1. Job Production
Producing a one-off item specially designed for the customer. The same person or
team of people will work on it during this entire time. The business is able to tailor
the needs of the customer to the final product, making it unique. This production
method allows the highest degree of customization, and is labour intensive.
https://www.youtube.com/watch?v=GRZFzRfAk7Q
ADVANTAGES DISADVANTAGES
The product exactly meets the customer’s This is more expensive and labour intensive
requirements, meaning that it is higher
quality
Inspection and supervision are easier Production is more time consuming
The customer can make alterations to the The business will have a longer working capital
design during the process, increasing cycle
their flexibility
Uniqueness results in added value to the Since they are not producing in bulk, they
product allowing a high mark-up price. cannot really benefit from economies of scale
Requires teamwork, helping employee
satisfaction and motivation
2. Batch Production
In this type of production, a group of similar, identical products are
made simultaneously in one batch through one stage of production before
passing onto the next stage. Then a degree of customization can be applied
to them. A new batch can be made once the first one is complete.
https://www.youtube.com/watch?v=bNuGCB7U7FA&t=209s
ADVANTAGES DISADVANTAGES
The same machinery can be used, which There is less flexibility as the batch cannot be
means that they economise on it stopped once it has started
Can respond to customer orders faster by There are greater storage costs for work-in-
bring work-in-progress to final production progress
stage
Better economies of scale Employees may become bored with producing
the same things all the time.
Allows a degree of customization Re-set time is needed to prepare the following
batch making it slower than flow production.
Allows for specialisation of the workforce
There is still enough variety to suit a
range of customer needs
Mass Production/ flow production
Mass Production :This is production on a large scale, often using assembly lines or
automation technology. The products tend to be standardized. There are good economies
of scale due to the high level of productivity. The business can also be highly specialized
with the specific equipment as it depends on capital intensive.
An essential aspect of mass production is specialization – the use of dedicated capital
equipment and skilled labor to carry out a different function essential to the overall
production process, resulting in a reduction in average cost of production enabling the
business to experience economies of scale
Flow Production: is a form of mass production that uses continuous and progressive
processes, carried out in sequence. Once on task is completed , the next stage of production
starts immediately, it relies heavily on automated systems with very few workers required
https://www.youtube.com/watch?v=G6O2zTuGOVQ
ADVANTAGES DISADVANTAGES
Less waste as this employs just-in-time The work can easily become boring and repetitive
techniques which demotivates workers.
Lower labour costs as robots and good planning Breakdowns or delays will have a huge impact
are used on productivity
Quality can be easily detected by deviations in Almost no flexibility, so the customers’ tastes are not
the line and controlled always met. (some do allow a small degree of
flexibility & customization as in the furniture and car
industry but the options remain limited)
Less work-in-progress, therefore lower storage Operations must halt for problems to be rectified.
space and there is less handling Breakdowns are very costly as the whole assembly
line may have to stop.
Faster conversion from raw materials to sales Lots of storage due to the large production
Average costs are lowered as it achieves a high High set up costs for the business (Highly specialized-
economies of scale. mass production machines are very expensive)
The business is very dependent on a steady demand
from a large segment of the market.
Mass Customization
Mass Customization is the use of flexible manufacturing
systems to mass produce products that meet individual
consumers needs and wants
This method benefits from the low unit cost of mass/flow
production process with the flexibility of individual
customization of the product
Offer customers a basic package of the product and then
offer them a range of features they can add or subtract .
Example Coca-Cola and Cadbury use mass
customization offering their customers the option to
have their names printed on the packaging
ADVANTAGES DISADVANTAGES
Mass customization offers greater choice for Mass customization relies on creating more
customers and a higher degree of customer options (or additional extras) to entice
satisfaction, and hence can create competitive customers, but such investments can be highly
advantages for the business expensive for the business.
The flexibility of mass customization enables It requires a greater need for effective stock
far more customers to have their individual control (inventory management), which can be
needs and preferences met, without the high both time consuming and costly for the
costs associated with job production. business.
It enables the business to enjoy higher profit he flexibility of customization means this
margins due to the premium prices charged for operations method is more expensive than
mass customized products mass production.
Mass customization involves elements of job
rotation, which can be motivational. Job
rotation is a form of non-financial reward used
to maintain motivation and productivity
amongst workers in order to avoid repetition of
work.
Factors that affect the choice of
production methods:
Changing production methods
◦ Changing Production Methods can be difficult and costly to change. At the very least it
involves retooling machines , redeploying human resources and refinancing the new system
◦ Changing production methods would have implication on the other business functions
◦ HR :
◦ Workers may have to change jobs, be retrained or fired
◦ Refining roles requires careful planning
◦ Marketing:
◦ Changing products available to consumer can affect their perception of the business
◦ Distribution channels may be affected
◦ Changes in cost of production may be passed on to consumer
◦ Finance
◦ Production changes impacts stock control, affects costs
◦ Changes take time, could cause delays in production
◦ Change needs financing
What is the appropriate method of production for a given
situation
◦ Varies from business to business. There is no correct method
◦ Factors affecting include:
◦ The target market – are you producing a high-volume, low-cost product for a very large
market with little disposable income
◦ The state of existing technology which can limit how flexible production can be
◦ Availability of resources: , fixed capital, working capital and human capital
◦ Government regulations: waste emission
◦ The relative cost of labor and capital
◦ The aims and objectives of the organization
Once a business has a production method in place , it is not easy to change it , due to the
opportunity cost involved.
◦ Businesses often combine methods of production in order to be most efficient
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