So production might not be the most riveting topic to study – but it encompasses quite a few different elements that are important to understand when looking at businesses and how they operate.
So let’s start with the basics – what is production? Well it’s simply the process of changing inputs, such as labour, capital and raw materials into goods and services that a business can sell.
This may be in a manufacturing sense, whereby raw materials are converted into a product, or in a service sense, such as gathering together the resources required to run a furniture shop.
For the production process to work, a business must combine a number of resources, such as materials (e.g. shop items), people (e.g. managers), machinery and equipment (e.g. vehicles) and premises (e.g. office space).
Some businesses will choose low cost production because, unsurprisingly, it keeps costs low (clue is in the name). However it is also important that these companies are able to strike a balance between cost and product quality.
Whilst keeping costs down is important, is it important that quality remains at a high enough level that the product will still sell. If quality drops too low it may start to negatively impact a business, even with low production costs.
Alternatively, some companies do not take part in low cost production but instead opt for job production.
Job production is a type of production that creates a product specifically suited to specific customer requirements.
This means that each product supplied by a business is specifically created for the customer that is buying it, rather than the customer choosing from a set of standard products. Businesses that use job production may include restaurants, tailors and interior designers.
Using job production can hold a lot of advantages for a small business. For example, even though a small business is unlikely to be able to rival a larger business in terms of the amount it supplies or the costs it supplies goods at, it may gain a foothold or be able to justify a higher price because it offers a more personal service.
Furthermore, using job production may be advisable when a business is unable to use technology or machinery to produce things in large quantities.
However, job production also comes with some disadvantages. For instance as each product is different, the production process will probably have to be changed regularly. Furthermore, because of this, the business will need to spend more time and money employing and training highly skilled employees. Finally, if a business isn’t sure that its high prices are viable, then making a profit may be difficult.
It’s important to remember though that in most cases a business is able to choose a production method when considering what their product is and what they’re trying to achieve.