Any method a business uses to turn resources or raw materials into salable goods is a production system. A contractor's methods for building a residential home, a craftsman's studio for creating a work of art and an assembly line for turning out thousands of cheap goods are all production systems. Businesses can keep profits up and costs down by keeping their production systems as efficient as possible.
TL;DR (Too Long; Didn't Read)
There are three different types of production systems: an assembly line or continuous production system, a batch system and a project or one-shot system.
Know Your Production Systems
There are three different types of production systems. An assembly line is a continuous production system: workers take the component of a car engine or electric oven and put them together, engine-after-engine in a steady stream. A batch system, sometimes called a job shop production process, produces a batch of product, then stops. It's typically used for specialty chemicals, tools or other items that don't need an assembly-line level of productivity.
If the production system produces one individual product, it's a project or one-shot system. For an example of production systems of this sort, consider a house, an oil painting or a yacht. Even if a builder erects dozens of houses a year, each house is an individual project.
Production Systems Make Changes
One characteristic all production systems have in common is that they take raw materials or components and transform them into a finished product. In economic theory, the labor of people in the production system and the money that keeps it all going count as part of what's transformed.
Production systems also involve flows of raw materials, equipment and even information, as there's usually paperwork involved. The limits on a production system include its capacity and the quality of the finished product.
Making Production Efficient
A small company or one-person shop may not need a formalized production system. A glassblower who works solo knows their system and doesn't have to explain it to anyone else. As a business grows and adds to its staff, analyzing and streamlining the production system becomes more important. Efficient production systems have several properties:
- Everyone knows and supports the business strategy behind the production system.
- The production system is well-documented, making it easier to train new hires and coordinate between different departments. The system is process-dependent, not person-dependent.
- Everyone is accountable for the system's output, and everyone involved is capable of contributing to it.
- Management handles changes to the production system effectively.
- The company has a process in place for identifying best practices and duplicating them.
Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com