Production of Goods and Services

📦 4.1.1: The Meaning of Production

🔧 What is Production?

Production is the process of using resources (like raw materials, labour, and machines) to make goods (physical products like phones or shoes) or provide services (like teaching or haircuts).

⚙️ Managing Resources Effectively

A business must use its resources wisely and efficiently to:

• Reduce waste
• Lower costs
• Increase profits
• Satisfy customers

📊 Production vs Productivity

Term	Meaning
Production	The total number of goods/services made by a business.
Productivity	How much output each worker or machine can produce.

Example:
A car factory makes 100 cars a day (production). If each worker makes 5 cars a day, that’s the productivity.

✅ Benefits of Increasing Efficiency

Efficiency means producing more with fewer resources.

Why it's good:

• Lower costs
• Higher profits
• Faster production
• Better quality

🔼 How to Increase Productivity

1. Automation and Technology

   • Use machines and robots to speed up work.
   • Example: Computer-controlled machines in factories.

2. Improved Labour Skills

   • Train workers to be faster and better at their jobs.
   • Example: Workers learning how to use new machines.

📦 Why Businesses Hold Inventories

Inventory (or stock) refers to:

• Raw materials
• Work-in-progress (unfinished goods)
• Finished goods

Reasons to hold inventory:

• Avoid running out of stock
• Continue production even if suppliers delay
• Meet unexpected customer demand

🧹 Lean Production

Lean production means cutting out waste while still producing quality goods.

💡 How to Achieve Lean Production:

1. Just-in-Time (JIT)

   • Only order or make things when needed.
   • Saves storage costs.
   • Risk: Production stops if stock doesn’t arrive on time.

2. Kaizen (Continuous Improvement)

   • Workers give small, regular ideas to improve efficiency.
   • Builds teamwork and quality.

🟢 Benefits of Lean Production:

• Less waste
• Lower costs
• Higher productivity
• Better quality

🏭 4.1.2: Main Methods of Production

🧵 1. Job Production

One product made at a time, usually custom-made.

Advantages:

• High quality
• Customised for customer
• Workers feel motivated

Disadvantages:

• Time-consuming
• Expensive
• Skilled labour needed

Example: Handmade furniture, wedding cakes

🍪 2. Batch Production

Goods made in groups (batches), then switch to a new product.

Advantages:

• Lower cost than job production
• Can make variety
• Some automation possible

Disadvantages:

• Delay between batches
• Machines must be cleaned/reset
• Storage needed for batches

Example: Bread, clothes in different sizes

🚗 3. Flow Production (Mass Production)

Continuous production of the same product on an assembly line.

Advantages:

• Very efficient
• Low cost per item
• High output

Disadvantages:

• Expensive machines
• Less variety
• Workers may get bored

Example: Cars, phones, bottled drinks

🤔 Choosing a Method of Production

Businesses choose the method based on:

• Type of product
• Quantity needed
• Skill of workers
• Cost

Example: A custom luxury car → Job production
A mobile phone factory → Flow production

💻 4.1.3: How Technology Is Changing Production

🖥️ Examples of Technology in Production:

1. CAD (Computer-Aided Design)

   • Use computers to design products
   • Faster and more accurate

2. CAM (Computer-Aided Manufacturing)

   • Machines controlled by computers
   • Makes identical products with speed and precision

3. Robotics and Automation

   • Robots do repetitive tasks
   • Useful in flow production

🟢 Benefits of Technology in Production:

• Faster and more accurate
• Lower labour costs
• Better quality control
• Safer working conditions

🔴 Limitations:

• High cost to buy and maintain
• Workers may lose jobs
• Need for training