What is Production? , 4 types of production, Factors of production, production function

The primary purpose of the economic activity is to produce utilities for individuals, we count as production during a time period all activity that either creates utility during the period or which increases the ability of the society to create utility in the future. So, it is very important to know what is production in details.

What is Production?

What is Production?

Production is a process of value addition, which is developed to transform a set of input elements like man, raw material, capital, energy, information into finished products and services in proper quality and quantity.

In other words, Production is a process of combining various inputs (man, machine, material, money) in order to make something for consumption (product or services).

Significance of value addition in production can be transform row material into goods, assemble many small parts, or design a service. Production can be seen every day in factories, offices, hospitals, etc. Production can be agricultural, manufacturing, or service.

What is production

Factors of production

Nature

Nature is a very important factor for any production. It is impossible to carry out production without land, water, and other resources. Suitable land and the availability of water make production easier.

Natural resources, such as oil and coal, can be extracted from the land and refined for production purpose consumption. Cultivation of crops on land by farmers increases its value and utility. Area, the shape of the production site, cost, drainage, and other facilities, the probability of floods, chance of earthquakes, etc. influence the selection of plant location.

Water is used for processing, drinking and sanitary purpose within a production site. Depending upon the nature of the plant water should be available in adequate quantity and proper quality.

In the production of leather, textile, etc. climate is an influencing factor. For such industries extreme humid or dry conditions are not suitable for production.

Labour

Human effort is a necessary factor for production. Skilled labour can make a significant difference in any production. Another important factor that influences plant location decisions is the availability of labour near the factory. The combination of an adequate number of labour with suitable skills and reasonable labour wages can highly benefit the production firm.

Labour by an uneducated and untrained worker is generally paid at low wages. Skilled and trained workers are referred to as human capital and they get paid at higher wages because they bring more than their physical capacity to the workplace. Hire skilled labour for their specific work increase the productivity of a production unit.

Capital

capital generally refers to money. But money is not a factor of production, because money is not directly involved with the production of product or services. Money used as a resource to buy capital goods like machine, equipment, raw materials etc.

It is important to distinguish between private capital and personal capital. Buying a car for personal use and family transport is not considers capital. But buying a vehicle for commercial uses considers as capital.

 During a financial crisis or when they suffer losses, companies cut back on the capital expenditure to ensure profits. And, during periods of economic expansion, they invest in capital to purchase machinery and equipment to bring new products to market.

Enterprise

Enterprise is the activity that combines all the other factors of production into a product or service for the consumer market. Enterprise as a function involves in organizes other factors like applying government rules and regulation, working discipline within the production site, etc. into an operating unit. A good management team is greatly benefited in every business enterprise.

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Types of Production

There are four main types of production that are generally employed. Which type is suitable is decided by the nature of the product being produced, demand of the product on the market and supply of raw materials.

Four types of production are-

  1. Unit or Job type Production,
  2. Batch Production,
  3. Mass Production,
  4. Continuous Production or process production.

Let’s discuss each type separately,

1. Unit or Job type Production

Unit or Job type Production is most commonly observed when you need to produce one single unit of a product at a time. A typical example of Job production is tailored outfits that are made just for you according to your size or a cake that is made just like you want it.

This type of production depends a lot on the skill of the worker. Dependency is more on manual work than mechanical work because every product is different from others. Customer service plays an important role in Unit or Job production.

2. Batch Production

Batch production most commonly used in consumer durables, FMCG or other such industries where there are a large variety of products being manufactured with variable demands. Batch production takes place in batches. The manufacturer needs to know the number of units he has to manufacture, and they are manufactured in one batch.

Examples of batch production are FMCG like Biscuits, confectionaries, packaged food items etc. It is also used in Medicines, Hardware, Consumer durables and many such industries.

Batch Production is done in batches, so once a batch production starts, stopping the process midway may cost a huge amount to the company. Demand and supply play a major role in batch production. For example – the production of the seasonality of products heavily depends on the demand.

3. Mass Production

Mass production is also known as flow production or assembly line production. This is one of the most common types of production system used in the automobile industry and is also used in industries where continuous production is required. For example- the manufacturing process adopted by ford company.

An Assembly line or mass-production plant typically made for specialised product manufacturing. There are multiple workstations installed and the assembly line goes through all the workstations one by one. The work is done in such a manner each workstation is responsible for one single type of work. As a result, these workstations are very efficient and production due to which the whole assembly line becomes productive and efficient.

Market demand does not play a major role in Mass production. However, the production capacity of the company determines the success of mass production. Mass production requires huge initial investment and working capital.

4. Continuous Production or process production

There is a lot of similarity between mass production and continuous production. It can be differentiated by the amount of mechanical work involved. In Mass production, both machines and humans work together. But, in continuous production, most of the work is done by machines rather than humans. In continuous production, the production is continuous,24×7 hours, in a year.

An example of Continuous production is brewing. In brewing, the production goes on 24 hours a day and 365 days a year. This is because brewing takes a lot of time and attention as well.

Once production started you cannot stop, otherwise, it will lead to a huge loss. so, a controlled environment is required for continuous production.

Production Function

  • The production function is the expression of the number of variables like raw materials, their quantity, number of machinery, the number of finished products, etc.
  • A production function thus involves a wide range of activities from the plant location to the packing of products to be distributed by the marketing division of the organization. More experienced marketing division demand will more, thus production will be increased.
  • The modern evolution of the production function started with the industrial revolution in western countries and North America. New machinery was developed which helps in starting new and big industries. 
  • various factors like labour charges, lack of skilled labour, etc led to automation. The first stage of evolution of automation is Detroit Automation, the second stage is feedback control, and the third stage is Computer technology.
  • The selection of plant location and plant layout is always difficult. The location of the plant should be in such a place where resources are easily available and low distribution costs. A good plant layout permits the material to move little and at minimum cost.
  • Production, planning, and control consider the determination and regulation of the production processes and functions like routing, scheduling, dispatching, etc.
  • Another important function is Research and Development. Research means a critical investigation to acquire new knowledge and applied it to explore facts and information for the practical problem. The development comes after applied research. Development involves the design and fabrication of new or modification of products and then testing them.

What is Production process?

The business plant is basically a product making unit. In other words, it is a technical unit in which inputs are converted into output for sale to consumers, other firms and various government departments.

Production is a process in which resources or inputs (com­posed of natural resources like land, labour and cap­ital equipment) are combined by entrepreneurs to create goods and services (also referred to as outputs or products). Inputs are the beginning of the production process and outputs are the end of the process.

The production system can be visible as consisting of 3 factors – inputs, manufacturing process and outputs. In fact, the outputs are the start­ing factor of the operation inasmuch as they must be considered in the mild of the market possibili­ties.

Related terms

Product Planning

Product planning is the evaluation of the range, specification, and pricing of new and existing products according to the present and future market requirements and competition. Planning of the product is to satisfy the company objectives and to specify the required research, design, and development support.  

In the planning activity, both existing and new products must be included and it follows the activity itself should deal with the proper balance between old and new products. Read more >>

Product Design

Before starting to manufacture a new product or improve a product, it is essential to design the product first.  When a new idea has been conceived and developed to the point at which it shows itself to be both technically and commercially stable, it considers how the product should be made, Factors affecting product design, etc. Read more >>

Production Planning and Control

Production planning and control is a process that plans, manages, and controls the allocation of human resources, raw materials, and machinery to achieve maximum efficiency. 

Production is the transformation of raw material into finished goods. planning looks ahead and anticipates possible problems then decides in advance as to how the production carried out in the best way. Control makes sure that the programmed production is constantly maintained. Read more >>

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