Production organization, or the organization of production, is at the heart of businesses involving the manufacturing process of goods. According to the American economist pioneer Richard Ely in his book, "Elementary Principles of Economics," the concept of production organization is applicable in modern economics in a number of ways. As the term suggests, production organization is simply the manner in which you organize the process of production of goods or services in your business. It is through production organization that you are able to effectively coordinate the factors of production, which include raw materials, labor and capital. Consequently, you will derive significant benefits from the organization of the production process.

Basic Production Organization

Household economy is the simplest form of production organization consisting of land, labor and capital, that is in ownership and control by the same person. You can engage in this level of production organization, for example, by organizing your family to provide labor and technical advice to produce agricultural products to provide food for the household. Production of goods and provision of services at community level leads to the elevation of production organization by creation of other concepts such as division of labor and specialization.

Labor and Technology

At the core of production organization is division of labor and specialization of both labor and equipment. Division and specialization of labor is the process in which your workers concentrate on the production tasks they are well-skilled at. Specialization of equipment entails using technology and equipment that is efficient enough to save time, raw materials and to increase the rate of production. Production organization ensures that the right workers are undertaking the right tasks using the most efficient equipment.

Lean Production

Lean production is a term closely associated with production organization. Another term for lean production is the Toyota Production system, as it is the Toyota Corp. that developed the lean production principles. Lean production entails production techniques such as producing in small quantities to maximize time, labor and technology. The end goal is to produce high quality products for customer satisfaction. A business requires steadfast commitment from management and all personnel to successfully implement lean production principles.


The advancement of production organization as an economic concept has led to various improvements in factors of production such as labor and capital as a result of globalization. The global demand for labor has, for example, brought about mass employment, leading to the creation of industries such human resource management. This has been useful to production firms because the department enables employees to understand the needs of the company and facilitate improvements in production by motivation through better pay packages and providing better working conditions.


The single most important benefit of production organization to your business is efficiency. Production organization is essentially planning every step of the production process to maximize on the available resources, to lower production costs and to minimize loss. When you organize the production process, you are able to keep track of the inventory so it is neither too low nor too high. Production organization also helps you to identify which production processes such as labor or technology need adjustments to enhance efficiency.


Production organization is capable of affecting your company’s production process in numerous ways owing to factors such as specialization. For example, a decline on the number of research farms offering high quality seed materials can affect farmers’ ability to produce sufficient food and cash crops. This can affect a community’s ability to access food at affordable prices and result in an increase in wage bill thus, affecting production costs.