MODULE 1: TOPIC 1: NATURE OF PRODUCTION

PRODUCTION PROCESS

The use of inputs/factors of production (land, labour, capital, entrepreneurship) to produce output (finished goods, services, intermediate goods/components for other firms)

PRODUCTION METHODS

Job production Batch production Flow production Cell production

Whether a business uses job, batch or flow production depends on:1. Size of market2. Amount of capital available3. Availability of other resources e.g. labour, land4. Flexibility with mass production (to achieve low cost and differentiated products)

LOCATIONCELL PRODUCTION form of flow production system separated into a number of self-contained mini production units (cells) each has a team leader & multi-skilled staff, performance is measured against targets each responsible for quality, leads to commitment and motivation

FLOW PRODUCTION individual products move from stage to stage of production when they are ready, without having to wait on others (independent) large output in short time, demand must be high and consistent no disruptions in system needed low labour costs, high mechanisation which may be expensive (high set up costs) quality is consistent and high use of JIT stock control to plan inputs inflexible

PRODUCTIONMETHODSBATCH PRODUCTION production in separate batches where products in the batch go through the whole production process together every unit in batch pass through an individual production stage before the whole batch moves to another stage division of labour, economies of scale high levels of work in progress stocks at each stage boring& demotivating for worker

JOB PRODUCTION single, one off products that are unique each individual product has to be completed before the next product is started specialised products workers are motivated expensive, time consuming labour intensive, highly skilled workers

Revenue: affected by proximity to target marketVariable Costs:wage rate transport costsFixed Costs:rent, purchaseof land

Quantitative FactorsQualitative Factors

Site CostsInfrastructure transport communication links

Regional incentives short term grants rent free accommodationEnvironmental and planning issues poor public relations pressure groups

Transport costs manufacturing businesses need to consider transport of raw materials, components and finished goods service needs to be close to marketManagement preferences to set up in an area with good quality of lifee.g. schools, shopping areas

Labour costs quality & productivity of labour needs to be consideredClustering same businesses locating in one area benefit of proximity to existing and potential customers & suppliers, supply of labour

Revenue generation location increases sales due to prestige of area/market proximity

Consider the effect of E-COMMERCE on location