5.2 Operations methods
Full video class on YouTube, summary and notes on Instagram, class extracts on TikTok, text below. Have fun!
The main point of this class is to understand how different methods of production work.
Methods of production apply to manufacturing of goods. They do not apply to provision of services. Thus, whatever we are discussing in this class is about tangible products (goods) only.
As always, I will try to keep you busy and focused while reading. So, as you read, please fill in the table below.
Job production
Job production is manufacturing of a one-off item, i.e. something that is one of a kind. For example, Batmobile, wedding cake, navy battleship or a spaceship. Even though there may be several identical items of the products in the examples I provided, they will be manufactured on a one-off basis: you start from scratch with one item, finish it, and then you can start producing the next one.
If you remember from Unit 4 how to categorise products using product perception map (PPM), then job production method usually applies to premium products: the ones that are of high quality and high price.
Speaking of the advantages of job production, I believe that, most importantly, it is flexible and completely in line with customer’s needs and wants. Since the product is produced from scratch, there is an opportunity to customise it just the way customer wants, which makes the products so unique (think again about the examples I provided). In addition to an opportunity to customise products, organisations that use job production might enjoy high mark-ups because of so much value added in the production process. Basically, it means that in exchange for high quality and customisation up to the customers’ needs, organisations are able to charge higher prices and thus enjoy higher profits. And lastly, from employees’ perspective, job production is motivating because employees are completely in charge of the entire production process and have a chance to demonstrate their craftsmanship and skills.
On the other hand, of all production methods, job production is the most inefficient. Imagine an exclusive shoemaker who makes the shoe from start to end: there is no automation, there is no flow, there is no division of labour, there is just one person making a shoe little by little every day. In addition, goods that are manufactured using job production are usually expensive and it takes a long time to produce them. Lastly, since job production is usually labour-intensive, there is high reliance on employees. It might be a drawback because if employees are no longer able to work, there will be no output at all because these employees cannot be replaced by unqualified employees or a machine. Actually, they can be replaced, but then it would not longer be job production…
Batch production
Batch production is an operations method whereby a group (batch) of identical products is manufactured. Batch production is common for bakeries (different kinds of bread are made in batches in one and the same oven), pharmaceutical industry (different kinds of pills are produced using the same equipment) and breweries (different kinds of beer are brewed on the same equipment).
If we use product perception map (PPM) from Unit 4 again, then bargain, economy and cowboy products are usually manufactured using batch production. Premium products are generally least likely to be produced using this method.
Batch production is more efficient than job production because it allows to produce a group of products at the same time. Despite that, batch production allows for customisation, because different batches of products can be different. Additionally, batch production allows organisations to use economies of scale by producing larger quantities and reduced the average (unit) costs.
However, despite the ability to customise products, customisation applies to the entire batch only. Unlike job production, batch production doesn’t allow to customise every single item. Additionally, since batch production is more high-scale that job production, it requires higher stock levels of components and raw materials. Besides, maintenance costs are higher, because batch production is more capital-intensive, compared to job production and relies on machinery and equipment more than on skills of workers.
Mass/flow production
Mass (or flow) production is large-scale manufacturing on a production line whereby a product is built up on every stage. In the IB BM course, mass and flow production are used interchangeably, but sometimes, in literature, you may see that these terms mean slightly different things. Simply speaking, they are synonyms, but when you say “mass production” you emphasise high quantity of produced output as a main feature of this production method and when you say “flow production” you emphasise that products are manufactured on a non-stop production line, “flowing” from start to finish.
It’s totally fine for your IB exam if you use those two interchangeably, as synonyms.
Some of the examples of mass-produced products are Coke, mass-market cars (for example, Great Wall Motors or Toyota) and all sorts of fast-moving consumer goods (FMCGs): toothpaste, toothbrush, toilet paper, etc. What unites all the examples is very high quantity of output and non-stop “flowing” production line that almost never stops.
Referring to product perception map (PPM), we may say that mass-produced goods are usually in the bargain or economy categories. It does not have to be this way, but it is most likely to be so.
On the one hand, mass/flow production method is the most efficient of all. That is because, compared to other production methods, there is no need to hire qualified workforce: the tasks that employees perform on the mass production line are very simple and monotonous: packing, sorting, wrapping, etc. The production process is highly automated. Additionally, average costs are significantly minimised due to the economies of scale.
However, this production method is the least customisable of all: the production line is usually set up once for a specific kind of product and it would take a lot of time and money to reset the production line for a different type of product. All the items produced are identical and there is no room for customisation at all (with an exception of mass customisation — see the next part of class). Additionally, mass/flow production only works on a large scale. If an organisation does not have to produce massive quantities of output, then there is no need for mass production at all. It only works if high quantities of output are required. And lastly, from the employees’ perspective, mass/flow production is demotivating because the tasks are monotonous and dull (by the way, this drawback could be overcome with the help of job rotation).
Since we’re talking about mass production here, it’s impossible not to mention Henry Ford. I’ll just briefly say that he is the developer of the assembly line technique of mass production that totally changed the business world. If you’re interested in learning more and finding out why "any customer can have a car painted any colour that he wants as long as it is black”, then please start your investigation here.
Mass customisation
Mass customisation is a type of mass/flow production that is flexible and allows for customisation of the final output. It is a relatively new thing and there is no one way to explain how to customise mass-produced goods but what we might say for sure is that it heavily relies on design and technology. Very often, the way mass customisation works is either by manufacturing the base products and then customising the final output or manufacturing the base parts and then combining them in different ways in order to produce different options of the same thing.
For example, Volkswagen group owns several car and motorbike brands: VW, Seat, Audi, Lamborghini, Ducati, etc. Many of Volkswagen group cars use the same engines, chassis and other parts regardless of the car brand. This way, they use economies of scale by mass-producing car parts and then combining them in different ways in cars of different appearances and sizes in order to customise and satisfy customers’ wants. Another example could be Mini that put customisation to the centre of their marketing strategy and use it as a unique selling point.
It is hard to generalise and suggest the most likely product perception map (PPM) category for mass-customised goods. Mass customisation is a relatively new and nuanced concept and mass-customised products have equal chances to fall under any PPM category: bargain, economy, premium or cowboy products.
On the one hand, benefits of mass customisation are the same as those of mass production. But there is one huge special advantage: customisation and flexibility. So, with mass customisation, organisations are still able to produce high volumes of output non-stop, but there is also a chance to customise the output.
On the other hand, there is high reliance on technology in mass customisation, which means that customisable production process and technology are hard to design and require significant investment. Thus, mass customisation is time-consuming and costly to design and implement.
One last thing to learn about all operations methods is that the more “mass” the method is (i.e. the higher the volumes of output in a method are), the more capital-intensive it is. And vice versa, the lower the volumes of output, the more labour-intensive the method is. The same logic applies to efficiency, costs per unit, production times and set-up costs. The summary of this idea is demonstrated in the picture below.
Remember the table in Figure 1 at the start of this class? I’m sure completing this table is a piece of cake for you now.
Now let’s look back at class objective. Do you feel you can do this?
Make sure you can define all of these: