MANAGEMENT OF BUSINESS

UNIT 2 REVISION NOTES

MODULE 1
THE NATURE OF PRODUCTION
THE PRODUCTION PROCESS
The production process outlines the steps involved in converting input to output.

Input

Throughput

Output
INPUT
This is the raw materials or components of production. It represents the items that a firm is
going to convert to a finished product.

THROUGHPUT
This is the process that the raw materials or components go through before being converted
into finished products. This may include things such as: crushing, melting, moulding,
welding, cooking and baking.

OUTPUT
This is the outcome of the conversion of inputs (raw materials). the output represents the
finished goods that have been generated from production.

FACTORS OF PRODUCTIONS
These are land, labour, capital and entrepreneurship and they represent inputs into production
for the purpose of making a profit.

PRODUCTION METHODS
JOB PRODUCTION
This is used when a single product is produced to meet individual specifications. Such
products are usually a one-time production built to buyer’s design and specifications. Job
production usually involves a single worker or group of workers. Some characteristics:
  The product is usually highly priced
 Only one product is made at a time
 The labour force is high versatile and skilled

ADVANTAGES
 The product is tailored to the needs of the consumer
 The product is usually of high quality
 It is easier to isolate any problem that may arise

DISADVANTAGE
 Very high per unit cost
 Requires a very skilled and flexible labour force
 High spending on machinery and equipment

BATCH PRODUCTION
This method allows a group of products to undergo a production process at the same time.
With batch production the work can be organised into a number of steps, with each batch of
products going through each step before moving to the next step. Some characteristics:
 Appropriate for repeated customers orders
 Produces a standardised product
 Usually has a high inventory of work in progress

ADVANTAGES
 Lower machinery requirement compared with job production
 Quality control can be done as the products pass through each process
 Takes less time to complete a product, so firms can respond quickly to orders
DISADVANTAGES
 Cash may be tied up in work in progress
 The level of motivation may be lower for the workforce
 Small batches of products may lead to an increase in unit cost

FLOW PRODUCTION
This involves the organisation of the work process in sequential steps so that each item passes
through each stage before moving to the next. It uses a series of repetitive processes to
produce standardised products. This method is used to mass-produce products and meet high
demand. There are different forms which are:
  Mass production- which involves the production of identical and standardised
products. It is done on a very large scale and requires the production of goods in a
relatively short time.
 Continuous production- this is where the product being produced goes through a
continuous series of processes. There is no stoppage until the product is complete.
 Process production- this involves the products going through different processes until
completion.
Some characteristics are:
 Uses a greater amount of semi-skilled or unskilled workers
 Firms experiences economies of scale
 Large amounts of raw materials and components

ADVANTAGES
 Lower ‘per unit’ costs as a result of economies of scale
 Larger amounts of goods can be produced quickly
 Can be used to meet the ever-growing demands of the market

DISADVANTAGES
 Very high set-up cost
 Quality is sometimes sacrificed for quality
 Work can be repetitive and boring, which leads to low motivation for workers

CELLULAR PRODUCTION
Also know as ‘cellular manufacturing’, this involves dividing the factory into cells that will
carry out specific task on the product. Each cell is equipped with machinery needed to
complete that part of the product. Once completed the products will then move to the next
cell.
Cell production could also be used to produce a particular product or product family. It also
promotes teamwork and each member is responsible for maintaining quality and design of the
product.

ADVANTAGES
 Team working normally leads to increased motivation
 Quality is improved, as each cell has to ensure that quality is maintained
 Improvement in the skill level of employees

DISADVANTAGES
 The level of output maybe less than if using a flow production method
 Capital and equipment costs could be very high