Question

What are the various production process? What impact to product variety and volume have on process selection? What is the relationship between volume, economies of scale, and costs?

Answer 1

There are different types of production process used by the firms, depending upon the nature of variety, size of production and associated cost. The first type of production process is project method of production. It is one of a kind of product that is being produced by the firm. It is one product, specific to one customer. For example, a software application being developed for a client, is based upon the project based production method. The second type of production process is job shop method. It has low inventory, high cost and lower economy of scale process. There is a higher variety in products being produced. For example, a carpenter shop produces furniture’s. These furniture are different in designs, colour and aesthetic look. It is the case of job shop production process. The third type of production process is batch production. It has a relatively higher level of inventory, and relatively higher standardization from the job shop. Here, in one batch, a big volume of product is produced that are standardized in nature. For example, a sweets shop making sweets in batches, is the case of batch production process. The fourth type of production process is a mass production process. It is used when huge volume of standardized products is produced that can be stored in inventory. Here, the economy of scale is applied. Hence, cost per unit can be decreased with increased level of production. The fifth type of production process of continuous process. It is run for longer period of time and produce standardized product. It has the highest level of economy of scale, lower cost per unit of output and higher volume of products being produced. For example, production of packaged milk in dairy plants, is the example of continuous production.
Sometimes, mass production and continuous production process are interchangeably used, because these two methods produce standard products and wok on the principle of economy of scale. It is used to reduce the cost of production with higher level of output being produced.