Manufacturing
and production
Once a firm has decided what goods or services to make, its directors have to
choose the method of production that best suits consumer demand, the product,
and the market, as well as one that will be the most profitable. Companies work in
three general areas of industry, which together form a production chain to provide
consumers with finished goods or services.
Production methods
Before the Industrial Revolution, products were made
by craftsmen. Then factories brought people together to
work on machines. Typically, this was job production, with
one person making one item. Economist Adam Smith first
introduced the concept of division of labor, which led to
mass production, with car-maker Henry Ford bringing in
the moving assembly line at the start of the 20th century.
Today, manufacturers can combine the best of all methods,
with large-scale production of personalized products.
Production typically involves three stages—here, from
navy bean to canned beans sold in supermarkets.
Primary production
The acquisition and processing of raw materials—in this
case, navy beans, as well as tomatoes for the sauce
Job production Items are made individually.
See pp.272–273.
Batch production A number of items are all made
together at the same time. See pp.274–275.
Flow production Suitable for mass-producing identical
items on an assembly line. See pp.276–277.
Mass customization Mass product is customized by
buyer. See pp.278–279.
Continuous production 24/7 line of production, for
products with consistent demand. See pp.280–281.
Hybrid processes Mixing batch and flow production
or combining other processes. See pp.282–283.
CHOOSING THE BEST METHOD
PRODUCTION IN PRACTICE
Native to South America, navy beans are grown either for the
immature green pods, eaten fresh as green beans, or for the
beans themselves. These are dried and used most commonly
in baked beans, a dish that originally came from Boston, MA.
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how operations and production work
Manufacturing and production
$2.33
trillion
the value of China’s annual
manufacturing output in
2011—the largest in the world
To make products, businesses need
several resources
Capital Money invested in business, including
money spent on production tools, such as
equipment, machinery, and buildings
Land Natural resources used to create goods
and services—for example, physical land or
extractable resources such as minerals, lumber,
oil, or gas
Labor People employed in a business to
produce the goods and services
Enterprise Entrepreneurs and/or leaders
who bring the factors of production together
to make the whole process happen
KEY PRODUCTION FACTORS
Secondary production
The manufacture and assembly of raw
materials to turn them into a product
or service; in this instance, canned beans
Tertiary production
Services that support the production and distribution
of the baked beans, such as transportation, advertising,
warehousing, and insurance
The raw beans are mixed with tomato
sauce, sugar, salt, and secret spices. The
ingredients are cooked in vast pressure
cookers, ensuring consistent texture and
a long shelf life, and then sealed in tins.
The labeled cans are transported to warehouses and from
there to supermarkets and other outlets to be sold. Several
brands vie for market supremacy of this popular convenience
food, using advertising, price, and taste differentiation.
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how operations and production work
Manufacturing and production
$2.33
trillion
the value of China’s annual
manufacturing output in
2011—the largest in the world
To make products, businesses need
several resources
Capital Money invested in business, including
money spent on production tools, such as
equipment, machinery, and buildings
Land Natural resources used to create goods
and services—for example, physical land or
extractable resources such as minerals, lumber,
oil, or gas
Labor People employed in a business to
produce the goods and services
Enterprise Entrepreneurs and/or leaders
who bring the factors of production together
to make the whole process happen
KEY PRODUCTION FACTORS
Secondary production
The manufacture and assembly of raw
materials to turn them into a product
or service; in this instance, canned beans
Tertiary production
Services that support the production and distribution
of the baked beans, such as transportation, advertising,
warehousing, and insurance
The raw beans are mixed with tomato
sauce, sugar, salt, and secret spices. The
ingredients are cooked in vast pressure
cookers, ensuring consistent texture and
a long shelf life, and then sealed in tins.
The labeled cans are transported to warehouses and from
there to supermarkets and other outlets to be sold. Several
brands vie for market supremacy of this popular convenience
food, using advertising, price, and taste differentiation.
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How it works
Job production is best suited to a
business that has to meet specific
customer requirements. Typically,
these are unique requests, which
an individual or a team handles
from start to finish. Made-to-
measure suits, or custom-made
furniture are examples. The scale
may be small, and firms often start
with job production because it is
simple and little investment
is required. Job production can
also be used for complex projects
and those involving leading-edge
technology, including film
production, major constructions
such as ships for the navy,
architect-designed buildings,
and structural engineering
projects including bridges
and tunnels.
In job production, items are made individually. Each item is one job,
which is usually finished before another is started. This method is
typically used for small-scale production or for large one-time projects.
Job production
Wedding dress production
A bride-to-be can choose to buy a dress off the rack
(typically made by batch production) or have one specially
designed and made for her, which costs significantly more.
Dressmaker commissioned
A dressmaker is engaged to
design a wedding dress to the
bride-to-be’s specifications.
Cutting out the dress
The dressmaker makes a pattern
and cuts one dress from the
bride-to-be’s chosen fabric.
Bride-to-be at the store
The bride cannot find the dress
of her dreams and opts to pay for
a custom garment.
Job production can also apply to
services, such as hairdressing or
processing an order for pickup.
Airline flights come under the same
umbrella—flight attendants tailor
their services to passengers’ dietary
requirements and special needs for
items such as wheelchairs.
SERVICES
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how operations and production work
Manufacturing and production
Pros
Products generally of high
quality
Great job satisfaction and
pride in work followed
through from start to finish
Producer can satisfy
individual customer needs
Can make a profit with
only a few customers
For small jobs, word-of-
mouth recommendations
reduce marketing costs
Cons
Does not allow for
economies of scale,
so high production costs
Labor-intensive
Special materials and
investment in skills may
be required
High price may put off
customers, especially in
times of recession
Heavy reliance on just a
handful of customers
JOB PRODUCTION PROS AND CONS
Sewing the dress
The dressmaker focuses on stitching
and finishing the one garment.
Dress fitting
After any alterations, the dressmaker
is satisfied that the dress fits the bride-
to-be and meets her requirements.
Completing the dress
The price is high, but the dress is exactly
what the bride-to-be wants. Now the
dressmaker can start on another dress.
$
$
$
$1,211
the average cost of a
wedding dress in the
US, in 2014
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how operations and production work
Manufacturing and production
Pros
Products generally of high
quality
Great job satisfaction and
pride in work followed
through from start to finish
Producer can satisfy
individual customer needs
Can make a profit with
only a few customers
For small jobs, word-of-
mouth recommendations
reduce marketing costs
Cons
Does not allow for
economies of scale,
so high production costs
Labor-intensive
Special materials and
investment in skills may
be required
High price may put off
customers, especially in
times of recession
Heavy reliance on just a
handful of customers
JOB PRODUCTION PROS AND CONS
Sewing the dress
The dressmaker focuses on stitching
and finishing the one garment.
Dress fitting
After any alterations, the dressmaker
is satisfied that the dress fits the bride-
to-be and meets her requirements.
Completing the dress
The price is high, but the dress is exactly
what the bride-to-be wants. Now the
dressmaker can start on another dress.
$
$
$
$1,211
the average cost of a
wedding dress in the
US, in 2014
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How it works
Batch production allows a firm to make a quantity
of items in one production run. Factory equipment
is geared up in terms of scale and special tools
that can be changed for each batch. For example,
equipment is set up to make 200 size 8 dresses in
red fabric and then adjusted to produce 400 size 10
dresses in blue fabric. Quantities can vary from as
Batch production
few as four identical items for a local supplier
to thousands for a department store, and
batches can be made as often as required.
Batch production is common in the food, clothing,
footwear, paints, adhesive, and pharmaceutical
ingredients industries. Each batch must be
traceable, with clear date stamping, in order
to comply with laws and standards.
When a number of the same items are made together, it is called batch
production. One batch finishes each stage of the production process
before the next batch starts, using the same equipment and steps.
Mix bulk ingredients
Ingredients for the batch of white
rolls are mixed to form a dough.
Divide dough
After machine-mixing, the bulk
dough is divided into small pans.
Proof dough
The dough is left to
rise (proof) in pans.
Batch 1
Batch 2
Divide dough
After machine-mixing, the bulk
dough is divided into large pans.
Proof dough
The dough is left to
rise (proof) in pans.
Bread by the batch
Bread is commonly made in batches. A baker might
make 100 white rolls, then 50 large brown loaves.
Adjust for second batch
The equipment is recalibrated to
make 50 large brown loaves. Bulk
ingredients for the batch of brown
bread are mixed to form a dough.
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How operations and production work
Manufacturing and production
De-pan and cool rolls
The rolls are removed from
their pans.
Bag up to complete
All the rolls finish the production
process together.
12
million
loaves of bread were
sold every day in the
UK, in 2014
De-pan and cool bread
The large brown loaves are removed
from their pans.
Slice and bag
loaves
The loaves
are sliced and
packed for sale.
Pros
Economies of scale: low unit
costs, as large number is made
Customer offered choice
of, for example, size, weight,
and flavor
Output and productivity
increases with use of specialty/
dedicated machinery
Cons
Repetitive work, so workers
may be less motivated
Costly because may require
storage of raw materials, work
in progress, and finished items
(see p.139)
Requires detailed planning
and scheduling
BATCH PRODUCTION PROS AND CONS
Bake rolls
The whole batch is
baked at the same
time at the same
temperature.
Bake loaves
Baking time is longer
than for Batch 1, as
the units are larger.
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