Production Process: Classification of Production Processes

We have learnt that Production is one of the major economic activities that employs land, labour, capital, and entrepreneurship as its factors of production.

Now, what is the production process? Let us understand how production takes place and what processes are involved in production activity.

Production Process Definition and Meaning

The production process can be defined as any activity involved in transforming inputs into outputs. It is the act of manufacturing or producing outputs of economic value to meet the demands and needs of customers and consumers, employing the various processes or techniques available. It involves employing two types of resources.

• The first type involves the employment of tools known as transforming resources. Land, building, labour or manpower, machinery, and managerial skills- all these are examples of transforming resources. They transform the inputs into end products.
• Similarly, production involves employing another kind of resource known as ingredients or inputs in achieving the desired level and quality of production. These ingredients are known as transformed resources. For example, in a cement production process, the ingredients used are limestone, gypsum, and ash, which get transformed into cement.

Classification of Production Processes

Now, coming to different types or classifications of production processes, each process can be identified and classified based on many different sets of features.

I am providing two major types of classification in this article. One classification is based on the volume and the type of market. The other classification is based on the nature of activities involved.

Classification Based on Volume of Production | Type of Market

This classification identifies the following types of production processes to target specific customers and volumes.

1) Mass Production Process/Flow Production Process:

 
In this process, production is carried out on a large scale, employing extensive machinery and automated processes.

Production quantities are not limited to any particular demands or orders but are decided by management through estimates. 

You are able to produce a wide range of output varieties and qualities on a large scale, as most of the work is automated and there is a continuous supply of inputs to achieve the output.

There will be different sections or departments of production staff overseeing and streamlining the activities from one stage of production to another, until the output is complete in all respects and put into the market for sale.

2) Job Production Process: 

Job production involves taking orders from customers and producing the goods according to those orders. 

It may include taking orders from different customers for different items or only for a specific item of production. 

But the quantity produced is equal to the orders placed by the buyer or customer. 

Examples: Hundred Cupcakes for a wedding ceremony; or four kinds of Sweet Dishes, 50 pieces each, for a birthday party.

3) Batch Production Process: 

In this process, goods are produced in batches in sequence according to your own set goals. 

If your target is to produce 4 types of items, each numbering 100 units, then you will produce them one by one. First, you will produce 100 units of item no. 1, then 100 units of item no. 2, and so on. 

Your attention will be concentrated on each item till it is produced completely. So, your machines and workforce are fully employed on each item of good till it is completed.

4) Just-in-Time Production Process: 

Just-in-time process involves producing goods or services as and when they are actually required. It may be similar to the job production process. But not exactly the same. 

Job production is directly linked with your customers, whereas just-in-time is related to demands or orders placed by your agents and retailers.

Production Processes Based on Nature of Functions

Production processes can be classified according to the nature of function or activity involved in the process. So this classification identifies the production process either as a manufacturing process, an administrative process, a selling and distribution process, or a marketing process.

This classification is useful for Cost Accountants. It helps in bifurcating the cost of production stage-wise.

Let us look at these processes:

1) Manufacturing Process

All activities directly related to the production of output are identified as the manufacturing process.

For example, if you are producing bread, the cost of the flour and the activities of making sponge with wheat flour, then fermenting it and mixing the flour to make dough, and baking the bread in an oven to make the final product- all these functions are known as the manufacturing process of the bread. It determines the basic cost of bread.

2) Administrative process

The administrative process involves the administrative expenses involved in the procurement of raw materials and tools for preparing the bread, the planning of resources including finances for running the business and management functions, etc.

3) Selling and Distribution Process

The actual selling functions, including storage in godowns or selling outlets, including the distribution of finished products to selling points and other related selling activities, are all to be cited as features of the selling process.

4) Marketing Process

The marketing process involves locating the market for goods by identifying more profitable markets through surveys and analysis reports; promoting sales through advertising and publicity; promoting the brand image of the product and the company; and promoting the company's shares, etc.