A change in production method can be caused by numerous reasons.
Internal and external factors can push a company to change production methods, specifically business growth, market changes, attempts to achieve greater efficiency, the use of Just-in-Time production, mergers and takeovers, management preferences, etc.
These changes, whatever the reasons, have a direct impact on the entire business organizations including all four functional areas of the firm.
Specification of each production method
Job production is market oriented because it is the client who decides what exactly the special one-off product should be.
Batch production creates a group of identical products which can be customized, or at least some aspects of them.
Mass production (flow production) creates a high volume of identical standardized products with a constant flow of materials in the production process.
Mass customization customizes standardized products to fit into individual requirements of customers.
Cell production is a form of manufacturing in which teams of workers are responsible for certain parts of the production process.
Factors to consider before changing production method
Before changing between any of the production methods, the following factors should be considered by an Operations Manager:
- Staff demotivation as less emphasis placed on an individual’s craft skills when the firm is not using job production any longer.
- Cost of equipment needed to handle large numbers in each batch when the firm is changing from job production to batch production.
- Additional Working Capital needed to finance more stocks and work in progress when the firm is changing from batch production to mass production (flow production).
- Cost of capital equipment needed for changing into mass production (flow production).
- Staff training to be flexible and multi-skilled when the business is starting to use cell production. Otherwise, when this approach is not adopted the workers may end up on one boring repetitive task which could be demotivating for them.
- Accurate estimates of future demand for products to ensure that output matches demand when the business is about to use mass production (flow production).
Benefits of changing production method
Changing a production method can be a complex and disruptive process, but it can also have a number of benefits such as:
- Increased efficiency.
- Reduced costs.
- Improved quality.
- Increased flexibility.
- Enhanced competitiveness.
Steps in changing production method
Changing a production method entails a number of steps, including:
1. Identifying the need for change. This could be due to a number of factors, such as:
– A change in customer demand.
– A new competitor entering the market with a more efficient production method.
– Advances in technology.
– A need to reduce costs.
– A need to improve quality.
2. Evaluating different production methods. Once the need for change has been identified, the next step is to evaluate different production methods to determine which one is the best fit for the business. This will involve considering factors such as cost, efficiency, quality and flexibility.
3. Planning the change. Once a new production method has been selected, the next step is to develop a plan for implementing the change. This will involve identifying the resources that will be needed, developing a timeline and communicating the plan to stakeholders.
4. Implementing the change. Once the plan is in place, the next step is to implement the change. This may involve purchasing new equipment, training employees and making changes to the production process.
5. Monitoring and evaluating the change. Once the change has been implemented, it is important to monitor its performance and make adjustments as needed. This will help to ensure that the business is reaping the benefits of the change.
Ways to change production method
Production decisions typically involve deciding methods for new production runs and the analysis of existing methods.
Here are some examples of specific changes that may be involved in changing a production method:
- Changing of production method itself.
- Substituting machinery for labor, or switching from manual to automated production.
- Financing a new machine or retooling the current machine.
- Using of new technology such as adopting new technologies, such as 3D printing or additive manufacturing.
- Changing organization of the production layout such as changing the layout of the production floor.
- Implementing new quality control measures.
- Changing the supplier base.
- Retraining employees or redeploying human resources.
The specific changes that are required will vary depending on the business and the specific production method that is being adopted.
Consequences of changing production method
Changing production method would have implications for all the business functions when it happens.
1. Human Resources (HR) impacts include skilled workers vs. unskilled workers and motivation. Additional implications for Human Resources (HR) include:
- Redeployment, retrained or even letting workers go.
- Refining roles of workers and middle managers.
2. Marketing impacts include quality and flexibility. Additional implications for marketing include:
- Availability of product affects the image from the consumer perspective.
- Distribution channels may be affected causing longer response times.
- Changes in costs of production are passed down to consumers which equals higher prices.
3. Finance impacts include capital costs and operational costs. Additional implications for finance include:
- Changing a production method has an effect on stock control which affects costs.
- Changes can take time and could interrupt production causing delays in the Working Capital cycle.
- Changes need financing whether it is short-term or long-term. Where does the business get sources of finance from?
Combining different production methods
Very often when a business has a particular production method already in place, it is not easy to change it. High opportunity cost involved can make it very difficult to change between production methods. That is why the most effective method will sometimes be using a combination of different production methods.
In reality, businesses are very likely to combine different methods of production at the same time.
Combining different production methods may result in integrating the advantages of each different model making the business more productively efficient. It simply allows a business to gain from the benefits of each method used.
Example 1: Burger King mainly uses batch production to sell hamburgers in its fast-food restaurants. However, it also uses job production when customers would like to order a customized hamburger with many different layers of beef. Burger King’s corporate slogan of ‘Have it your way’ means that customers can customize their burgers as long as the ingredients are available in the restaurant.
All of the abovementioned factors will need to be considered when making the final decision regarding changing production method. Changing production method typically turns out to be quite difficult and costly. In the worst-case scenario, when changing production method turns out to be unsuccessful, company re-engineers itself and changes completely.
