Learn: Production

Welcome!Today we'll learn about production, which is how businesses create goods or services for customers. We'll explore different production methods, efficiency, and how businesses manage their operations.

What is Production?Production is the process of transforming raw materials into finished goods or services that customers can buy. It is essential for businesses to meet customer demand and make a profit.There are different methods of production that suit different types of businesses, depending on their size and customer needs.

Job ProductionJob production involves making one product at a time, often customised to the customer's requirements. This method is common for bespoke products like wedding cakes or handmade furniture.It allows businesses to focus on quality but can be time-consuming and expensive.

Flow ProductionFlow production involves continuous production of identical items, usually on an assembly line. This method is efficient and used for products like cars or bottled drinks.It reduces costs per unit but limits flexibility and can lead to repetitive work for employees.

Efficiency in ProductionBusinesses aim to be efficient by producing goods quickly and at the lowest cost. Efficiency can be achieved through techniques like lean production, which reduces waste, and Just-In-Time (JIT) systems, which minimise stock holding and focus on delivering materials as needed.

Just-In-Time (JIT)JIT is a system where businesses order materials only when they are needed for production. This reduces storage costs and helps businesses stay flexible.However, it relies on reliable suppliers and quick deliveries, so delays can cause problems.

Economies of ScaleAs businesses grow, they benefit from economies of scale. This means the cost per unit decreases because they can buy materials in bulk or use efficient equipment.For example, a bakery producing thousands of loaves daily can buy flour more cheaply than a small bakery producing fewer loaves.

Diseconomies of ScaleDiseconomies of scale happen when a business grows too large and becomes less efficient. Problems like poor communication or low employee motivation can increase costs instead of reducing them.

Unit CostThe unit cost is the total cost of production divided by the number of items produced. It helps businesses understand how much it costs to make each product.

Review Time!Great work! You've learned about production methods, efficiency, economies of scale, and unit costs. Now let's test your understanding with a few questions.