The Main Production Methods (Cambridge (CIE) O Level Business Studies): Revision Note

Methods of production

• Businesses can organise their production processes in a variety of ways

• The method of production used by a business will depend upon a number of factors

  • The level of output required to be produced

  • The nature of the product

  • Whether the product is standardised or customised

  • The level of automation used in production

Explaining the methods of production

1. Job Production

• Manufacturers produce one product at a time as ordered by the customer

• Advantages:

  • High quality product

  • Motivated and highly skilled workers

  • Customised products can be produced

• Disadvantages:

  • Production is slow

  • Labour costs are high

2. Flow production

• Continuous manufacturing of standardised products, usually on a production line

• Advantages:

  • Low unit costs due to economies of scale

  • Rapid production

  • Usually highly automated (capital intensive)

• Disadvantages:

  • Customisation is difficult

  • Capital equipment can be expensive to purchase

3. Batch production

• Groups of the same product are produced as a batch, e.g., 1000 Blueberry muffins

• Advantages:

  • Workers can specialise

  • Production can take place as the previous 'batch' starts running out

• Disadvantages:

  • Requires careful coordination to avoid shortages

  • Money is tied up in stock

  • Completed products need to be stored

Recommending an appropriate method of production

• Small scale businesses often use job or batch production as they lack the resources for flow production

• Large scale businesses are more likely to use flow production to meet high demand for their products

• Several factors may influence a businesses decision as to which type of production methods is used 

Factors affecting the choice of production method

Explanation of factors

1. The level of demand

• High demand may justify investment in flow production

2. The nature of the target market

• Price-sensitive markets may require high volume, standardised products

• High quality customised products require job production

3. The nature of the product

• It may only be possible to produce certain products using one method, e.g. sports stadiums require job production

4. The comparative costs of labour and capital

• Large firms minimise labour costs by investing in automation

• Cheap labour allows for labour-intensive production methods, which generates the use of job or batch production

5. The nature of the firm itself

• Small firms lack funds to invest in flow production

6. New technologies

• As technologies become cheaper, smaller firms can afford equipment previously inaccessible to them and increase their level of flow production

7. The goals of the business

• Firms seeking to maximise market growth and profitability may invest in flow production

• Small firms may use job production methods to create unique selling points e.g. ‘hand-made’

8. Government policies

• The government may stimulate economic growth by offering subsidies and tax breaks for investment in technology