Key Concepts - What are Production responsible for?
number of units of a specific product to be produced
time intervals over which production will occur
availability of equipment, materials and work force
cost effective inventory and resource management.
Production as a Goal:
resources are planned and used in the production process regardless of actual demand
often based on economies of scale, where lower cost per item is presumed to generate product demand.
Production as a Means:
resources are planned and used in the production process only because of product demand often based on economies of scope, where product demand has greater influence over production unit costs.
Economies of Scope vs.. Scale
Economies of scope production assumptions:
responsive to demand
flexible production plans
variable cost per item
smaller production runs
increased total set up and change over costs
lower product/inventory obsolescence
minimised inventory carrying costs
material is pulled through the production process as needed.