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4.1. Production of goods and services

Syllabus
0264–2027–2028
Topic
4.1
Level
—

Learning objectives

4.1.1Production processes• calculate labour productivity• why efficiency is important for a business• how to increase efficiency, e.g. increasing automation and technology, improving labour skills• concept of lean production and how to achieve it: just-in-time (JIT) inventory control and Kaizen• advantages and disadvantages of lean production methods• why businesses hold inventory• factors affecting how much inventory businesses hold4.1.2The main methods of production• job, batch and flow production• advantages and disadvantages of job, batch and flow production• recommend and justify an appropriate production method for a given situation

Improve productivity with lean production

labour productivity=output producednumber of employeeslabour\ productivity=\frac{output\ produced}{number\ of\ employees}

If 24 employees produce 3,600 units in a week, labour productivity is 3,600/24=1503,600/24=150 units per employee per week. Use matching time periods and state the unit.

Higher efficiency can lower unit cost, improve competitiveness, capacity, profit and reliability. It may rise through suitable automation, better technology, training, layout, maintenance and reduced waste—but capital cost, disruption and workforce effects must be judged.

Lean method How it reduces waste Main risk
just-in-time (JIT) inputs arrive close to use, reducing inventory and storage disruption can stop production
Kaizen employees make continuous small improvements needs participation, time and sustained culture

Businesses hold inventory to meet uncertain demand, avoid supply interruption, gain bulk discounts and keep production flowing. The amount depends on demand predictability, lead time, reliability, perishability, storage cost, cash availability and the cost of running out.

Productivity is output per input, not total output alone. Zero inventory is not automatically efficient when delays or shortages would cost more than storage.

Match production method to demand

Method Pattern Advantages Disadvantages
job one customised item at a time flexibility, customer fit, skilled work high unit cost, slow, hard to automate
batch a group of identical items, then changeover variety with some scale inventory and changeover time
flow continuous standardised high-volume output low unit cost, speed, consistent automation high setup cost, inflexible, breakdown affects line

Recommend using demand volume and variety, customisation, capital, labour skills, required speed, flexibility and reliability. One-off specialist demand favours job; repeated varieties may favour batch; stable mass demand can justify flow.

Flow is not automatically best because its unit cost is low. Without enough stable demand, high fixed cost and inflexibility can outweigh scale benefits.