Production Function
Basics of a Production System
Labor + Material = Goods & Services
Bringing Efficiency to the organization
Maximizing the Profit
Value Creation Model
Key Tasks of Production
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Value creation for profit
Customer Service
Evaluation – quality, quantity, feedback & monitoring
Forecasting
Scheduling
Purchasing
Design
Maintenance
Assembly
Testing
Reporting
• Job/One-Off Production
– Musical Instruments, Aircrafts, Ships etc.
Production Processes
• Batch Production
– Electronic devices, T-shirts of different sizes,
Drugs, Medium sized machineries
Production Processes
• Mass Production
– Production in large quantities by a combination of skills, automation
and standardizations
– Assembly Line – conveyor system, work stations, cycle time etc.
Production Processes
• Continuous Production Process – Steel Industry
– Delivers finished products over a lengthy period of time
Production Processes
• Synthetic Production Systems – Dell
– combines a large number of sophisticated parts
assembled together
Production Function
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Capital is Fixed
Concepts of Production
• Law of variable proportions
– This law examines the production function with one factor variable,
keeping the quantities of other factors fixed.
– It refers to the input-output relation when output is increased by
varying the quantity of one input.
– Thus law of variable proportions is the new name for the famous ”Law
of Diminishing Returns” of classical economics.
• Law of fixed proportions
– Resources can be combined in one unique way to get an output. To
increase/decrease an output, all the inputs must be proportionately
increased/decreased
Concepts of Production
• Returns to Scale
– Economies of scale –
Increasing Scale
– Diseconomy of scale –
Decreasing Scale
Concepts of Production
• Law of diminishing return