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What is
is Production
Production
What

Production is an outcome of an
economic activity.
Prof. J.R.Hicks defines
Production as "any activity
directed towards the satisfaction
of other peoples wants through
exchange."

What
What is
is Factors
Factors of
of
Production
Production
1) Anything that assist production is
termed as factor of production.
2) But mere existence is not necessarily
a factor of production.
3) It become a factor of production
only when it actually assist or
contributes to production.

Basic Factors of Production


1) LAND
2) LABOUR
3) CAPITAL
4)ENTREPRENUER

Land
1) Land is the original and primary factor of
production.

2) Without land the production process


cannot exceed further.
3) In Economics all the natural resources
that are available
a) on the surface of the earth
b) below the surface of the earth
c) above the surface of the earth
and which are used in the production
process is called LAND.

Features of Land
1) Land is a free gift of
nature.
2) Land has no cost of
production.
3) The supply of land
perfectly inelastic.
4) Land is subject to Law of
Diminishing Return.

LABOUR
1) Labour is a human factor of production.
2) In economics labour is defined asEconomic activity of man with HEAD and
HAND.
3) LABOUR is human factor of any kind,
manual or mental,skilled or unskilled,
scientific or artistic undertaken with a
view of creating or adding utility.

Features of Labour
1) Labour is a human factor.
2) Active factor.
3) Labour cannot be stored.
4) No two labours are identical.

Capital
1) Capital is a man-made resource of
production used to produce further
wealth.
2) It refers to the stock of capital assets
such as factories,machines, tools &
equipments, raw material, transport
vehicles etc
3) Therefore capital is defined as Produced
means of production

Features of
1) Capital
is
man-made
factor
Capital
of production.
2) Supply of capital is elastic.
3) Capital has mobility.
4) All capital is wealth but all
wealth is not capital.

Entrepre
nuer

1) Entreprenuer is a person who brings in land,


labour & capital in one place & uses it for the
production process.
2) He is the person who decidesa) What to produce?
b) How to produce?
c) Where to produce?
3) The person who takes these decisions along
with the risk associated with them is known as
Entreprenuer.

Features of
Entreprenuer
1) He must be a good
administrator.
2) He must possess
complete knowledge.
3) He must be a person

Production Methods

Job production: Producing a one-off item


specially designed for the customer.
Batch production: Producing a limited
number of identical products - each item in the
batch passes through one stage of production
before passing onto the next stage.
.

Production Methods

Flow production: Producing items in a


continually moving process - also known as
line production.
Cell production: Splitting flow production
into self-contained groups that are responsible
for whole work units

JOB PRODUCTION
Job production is normally used for the
production of single one-off products. The
products may be small or large and are
often unique. In order to be called job
production, each individual product has
to be completed before the next
product is started. At any one time,
there is only one product being made.

Job production enables specialised


products to be produced and tends to be
motivating for workers because they
produce the whole product and take pride
in it.
However, this production method tends to
result in high unit costs, often takes a long
time to complete, and is usually labour
intensive. The labour force also needs to
be highly skilled and this is not always
easy to achieve.

Example of Job Production


Aston Martin is an example of a very
expensive car that is individually produced
for the needs of each customer. Each
engine is hand built and carries a plate
with the engineers name on it.

Batch Production
Batch production makes products
in separate groups and the products in
each batch go through the whole process
together. The production process involves
a number of distinct stages and the
defining feature of batch production is
that every unit in the batch must go
through an individual production stage
before the batch as a whole moves on
to the next stage.

Batch Production
Batch production allows firms to use
division of labour in the production
process and it enables economies of scale
if the batch is large enough. It is usually
employed in industries where demand is
for batches of identical products (hot dogs,
bread, buns, doughnuts).

Batch
It also allows each individual batch to be
specifically matched to the demand, and
the design and composition of batches
can easily be altered ( chocolate,
bubblegums, doughnuts).

The drawbacks are that batch production


tends to have high levels of work-inprogress stocks at each stage of the
production process The work may well be
boring and demotivating for workers. If
batches are small, then unit costs are
likely to remain high. There is often a need
to clean and adjust machinery after each
batch has passed through.

Flow/Mass Production
This method is used when individual
products move from stage to stage of
the production process as soon as they
are ready, without having to wait for
any other products. Flow production
systems are capable of producing large
quantities of output in a relatively short
time and so it suits industries where
demand for a product is high and
consistent

Flow Production
It also suits the production of large
numbers of a standardised item that only
requires minimal alterations. This is often
why it is often referred to as mass
production. Flow production usually takes
place on a production line - hence the use
of the term production line.

Flow production
Labour costs tend to be relatively low,
because much of the process is
mechanised and there is little physical
handling of products. The constant output
should make the planning of inputs
relatively simple and this can lead to the
minimisation of input stocks through the
use of just-in-time (JIT) stock control

Flow Production
Quality tends to be consistent and high
and it is easy to check the quality of
products at various points throughout the
process. The main disadvantage is the
high initial set-up cost. By definition,
capital intensive, high technology
production lines are going to cost a great
deal of money. In addition, the work
involved tends to be boring, demotivating
and repetitive.

Cell Production
Cell production is a form of flow
production, but instead of each worker
performing a single task, the production
line is split into several self-contained,
mini-production units - known as cells.
Each individual cell produces a complete
unit of work, such as a complete washing
machine motor and not just a small part of
it.

Cell Production
Each cell has a team leader and below
that a single level of hierarchy made up of
multi-skilled workers. The performance of
each cell is measured against pre-set
targets (output levels, quality and lead
times, etc).
Cells are responsible for the quality of
their own complete units of work (total
quality management -

Cell Production
The cell production method has led to:
increased worker commitment and
motivation
job rotation within the cell
increased productivity

CHOOSING
H
MARKET
APPROPRIATE
DEMAND
SIZE OFL
FOR
THE
PRODUCTION
PRODUCT
MARKET
S
FACTORS
ADAPTEDMETHODS
TO

CUSTOME
R
REQUIRE
MENTS

INFLUEN
CING
CHOICE

AVAILABILI
TY OF
OTHER
RESOURCE
S

AMOUNT
OF CAPITAL
AVAILABLE

Quantitative Factors

Qualitative Factors

Site Costs

Infrastructure
transport

communication links

Regional incentives
short term grants

rent free accommodation

Environmental 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 market

Management preferences
to set up in an area with good quality of life

e.g. schools, shopping areas

Labour costs
quality & productivity of labour needs to be considered

Clustering
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