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(v) The process can fail, not all the time the combination is successful: In case it fails, a lot of money is
lost and a lot of confusion.
(vi) Employee uncertainty: employees become unproductive at the time when things are not yet clear
because they do not know whether they will lose their jobs or not. It also results into unemployment

REFERENCE MATERIALS
1. Gomes-Casseres, B. (2015). Remix strategy: The three laws of business combinations. Harvard Business
Press.
2. Modern Business Administration (6th Ed) by Robert C Appleby
3. Business Administration, a fresh approach by Roger Carter
4. Parsons Carl Copeland (2008). Business Administration, Lightning Source Inc. Publishers
5. Business Administration Hand Book by L. Hall
6. Business Administration and Management (4th Ed) by Deverell
7. Business Administration (4th Ed) by Waswa Balunywa
8. Bagire Vincent (2013). A Revision Guide for Business Administration
9. Linda K. Trevino and Katherine A. Nelson (2010).Managing Business Ethics, 5th Edition, Wiley Publishers

Online Video

Business Combinations - General Concepts: https://www.youtube.com/watch?v=MbskJJjBat8&t=102s

TOPIC FIVE

THE PRODUCTION FUNCTION

Production has been defined in various ways, yet certain parts of each definition overlap. In economic words,
production is the process of mixing multiple inputs, both material and intangibles, such as plans or information,
to create output. Furthermore, it can be defined as the process of using multiple inputs, like land, labor, and

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capital, to produce outputs in form of goods or services. It may also be described as the process of creating or
manufacturing items and products from raw materials or components. According to several economic
definitions, production is the process of converting inputs into outputs, such as raw materials and end
commodities or services.

5.1 Sub-functions/sub-units/roles of the Production Function

The production function is split into five sub-functions/units:

(i) Production planning unit: This sets production targets, the required resources, overall schedules, all
the necessary steps involved in production and their dependencies.
(ii) Purchasing department: This is responsible for providing the materials, components and equipment
required to keep the production process running smoothly.
(iii) Stores department: This is responsible for stocking all the necessary tools, spares, raw materials and
equipment required in production.
(iv) Design and technical support department: This is responsible for researching new products or
modifications to existing ones, estimating costs for producing in different quantities and by using different
methods.
(v) Works department: This is concerned with the manufacture of products.

5.2 Factors of Production

(i) Land: Land is a broad term for the surface of the earth; economically, land encompasses everything that
'nature' offers to humanity at no cost. In addition, land can refer to a variety of things, such as resources
that are available on a particular plot of land, commercial real estate, and agricultural land. Everything
that is derived from the land, including natural resources used to produce goods and services, is called
land. Water, oil, copper, natural gas, coal, and forests are some of the most common land or natural
resources. Land resources serve as the basic ingredients for production. These resources could be
nonrenewable, such as oil or natural gas, or renewable, like forests. Natural resources such as gold and
oil can be extracted from the land and refined for human use.
(ii) Labour: The effort that individuals put forth to produce products and services is known as labor. The
work performed by professional or casual labor is included in labor resources. Moreover, labour is the

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personal effort put out by a person to introduce a good or service to the market. Production workers
receive remuneration based on their skill level and training in exchange for their time and labor.
(iii) Capital: These are equipment, instruments, and structures that people use to create goods and services.
Some common examples of capital include delivery trucks, computers, conveyor belts, hammers, and
forklifts. Though money is not considered a capital factor of production because it is not directly involved
in the creation of an item or service, it is sometimes referred to as capital in business. This is because it
facilitates the acquisition of capital goods like capital products.
(iv) Entrepreneurship: Entrepreneurship is the secret ingredient that connects all the other components of
production to produce a good or service for the consumer market. The most successful business people
are innovators, who develop new products and services or find new ways to generate old ones. Many of
the inventions we see today would not exist if entrepreneurs had not devised new ways to mix land, labor,
and capital.

5.2 Types of Production Processes

1. Job Production/Unit production: This is a type of production process where custom or bespoke items
are manufactured individually according to specific customer requirements. This method is typically used
when products are unique or require specialized manufacturing techniques.

Characteristics of job production/unit production

(i) High customization: Products are tailored to meet the unique specifications of each customer.
(ii) Skilled Labour. Requires highly skilled and versatile workers with expertise in various aspects of the
production process.
(iii) Low volume: Typically involves producing one-off items or small batches and production volume is
usually low compared to other production types.
(iv) Flexible production process: Production processes are highly flexible to accommodate different product
designs and requirements.

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(v) High costs: Higher per-unit costs due to the bespoke nature of the products and costs can include
specialized materials, skilled labour, and custom tooling.
(vi) Longer production time: Production times can be longer compared to mass production due to the
detailed and specific nature of the work.
(vii) Quality control: Quality control is critical and is often performed throughout the production process.
Each item is carefully inspected to ensure it meets the required specifications and quality standards.

Advantages of Job Production

(i) Customization and Flexibility: Ability to produce unique and highly customized products and flexibility
to meet specific customer demands and preferences.
(ii) High-quality Products: Emphasis on craftsmanship and attention to detail and often results in high-
quality and premium products.
(iii) Job Satisfaction for Workers: Skilled workers often find job production rewarding as it allows them to
utilize their expertise and creativity. Workers experience variety and engagement through different
projects.
(iv) Adaptability: Easy to make design changes and modifications during the production process and suitable
for prototypes and small-scale projects.

Disadvantages of Job Production

(i) Higher Costs: Higher per-unit production costs due to the lack of economies of scale and expensive
materials and specialized labour contribute to overall costs.
(ii) Long Lead Times: Longer production times can result in extended lead times for customers; planning
and design phases can be time-consuming.
(iii) Complex Scheduling and Planning: Requires meticulous scheduling and planning to ensure timely
completion of jobs, and coordination of different processes and materials can be complex.
(iv) Limited Scalability: Not suitable for large-scale production or high-volume orders, and scaling up
production while maintaining customization and quality can be challenging.

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Examples of Job Production

(i) Custom Furniture: Designing and creating unique furniture pieces tailored to customer specifications,
and involves specialized woodworking techniques and high-quality materials.
(ii) Tailored Clothing: Custom-made clothing designed and sewn to fit an individual’s measurements and
style preferences, and includes bespoke suits, dresses, and wedding gowns.
(iii) Specialized Machinery: Manufacturing machinery and equipment tailored to specific industrial needs,
and often involves engineering and precise fabrication.
(iv) Bespoke Jewellery: Creating custom jewellery pieces based on individual design requests, and involves
detailed craftsmanship and the use of precious metals and gemstones.

Therefore, Job production is an essential production process for industries requiring high levels of
customization and craftsmanship. Despite its higher costs and longer lead times, job production offers
unparalleled flexibility and the ability to produce unique, high-quality products that cater to specific customer
needs. This type of production is particularly valuable in markets where differentiation and personalization are
key competitive advantages.

2. Batch Production: Batch production is a manufacturing process where products are produced in groups
or batches rather than in a continuous stream. This method is particularly useful for producing a limited
quantity of a product or varying products with similar production processes.

Characteristics of batch production

(i) Production in Batches: Products are manufactured in specific quantities, known as batches each batch
goes through the complete production process before starting a new batch.
(ii) Flexibility: Allows production of different products with minimal changes to the production line and
suitable for manufacturers who need to switch between products frequently.
(iii) Economies of Scale: Offers cost savings for medium-sized production runs and benefits from bulk
purchasing of raw materials for each batch.
(iv) Quality Control: Easier to maintain quality as each batch can be inspected and tested before proceeding
and problems can be detected early and adjustments made for subsequent batches.

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(v) Resource Utilization: Efficient use of machinery and labour as the same setup can be used for multiple
batches and reduces downtime between batches compared to job production.

Advantages of Batch Production

(i) Cost Efficiency: Lower costs compared to job production due to standardized processes and economies
of scale, and cost savings on labour and material handling.
(ii) Flexibility and Customization: Ability to produce a variety of products without significant changes in
the production line, and customization is possible for different batches, catering to varying customer
needs.
(iii) Inventory Management: Can produce batches based on demand forecasts, reducing the risk of
overproduction or stockouts, and allows for better inventory control compared to continuous production.
(iv) Improved Scheduling: Production can be scheduled around demand, allowing for better resource
planning, and flexibility to adjust production schedules based on market trends and customer orders.

Disadvantages of Batch Production

(i) Setup Time and Costs: Each batch requires setup time, which can be significant depending on the
complexity of the products, and frequent changeovers between batches can lead to downtime and
increased setup costs.
(ii) Inventory Costs: Holding inventory of raw materials and finished goods can be costly, and risk of holding
obsolete or excess inventory if demand forecasts are inaccurate.
(iii) Quality Variation: Variability in quality can occur between batches if processes are not consistently
controlled, and requires stringent quality control measures to ensure uniformity.
(iv) Production Delays: Delays in one batch can impact the production schedule of subsequent batches,
coordination and planning are essential to avoid bottlenecks.

Examples of Batch Production

(i) Baking: Baking bread, cookies, or cakes in batches. Each batch follows a specific recipe and process.
Adjustments can be made for different Flavors or types of baked goods.

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(ii) Pharmaceuticals: Production of medicines in batches based on specific formulations. Allows for
production runs of different drugs or dosages.
(iii) Clothing Manufacturing: Producing a specific number of garments in a batch. Different styles, sizes,
and colours can be produced in separate batches.
(iv) Chemical Production: Manufacturing chemicals in batches to ensure precise mixing and reactions.
Suitable for producing specialty chemicals or varying formulations

Therefore, batch production is a versatile manufacturing process that balances efficiency with flexibility. It is
particularly advantageous for medium-sized production runs and products that require customization. While it
offers several benefits, such as cost efficiency and improved inventory management, it also comes with
challenges like setup time and potential quality variation. Proper planning, scheduling, and quality control are
essential to maximize the benefits of batch production and minimize its drawbacks.

3. Mass Production
Mass production is a manufacturing process that produces large quantities of standardized products. It involves
the use of assembly lines, automated machinery, and a systematic approach to producing goods efficiently and
at a lower cost per unit. This type of production is ideal for items that are in high demand and require
consistency in quality and performance.

Characteristics of mass production

(i) High Volume: Mass production is designed to produce a large number of identical products. This high
output allows companies to meet significant market demands.
(ii) Standardization: Products are made to a standard specification with little to no variation.
Standardization ensures uniformity and quality control across all units produced.
(iii) Economies of Scale: The high volume of production leads to reduced costs per unit due to economies of
scale. Bulk purchasing of materials and optimized use of machinery contribute to cost efficiency.
(iv) Assembly Line: Production often takes place on an assembly line where each worker or machine performs
a specific task. This method speeds up the production process and minimizes the time taken to complete
each unit.

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(v) Specialization: Workers and machines specialize in specific tasks, which increases efficiency and skill.
Specialization allows for the rapid and repetitive execution of tasks, improving productivity.
(vi) Automation: Mass production heavily relies on automated systems and machinery. Automation reduces
labour costs, increases precision, and ensures consistent quality.
(vii) Reduced Labor Skill Requirements: Due to the repetitive nature of tasks on the assembly line, workers
do not need high levels of skill. Training for specific tasks is straightforward and quick.
(viii) High Initial Investment: Setting up mass production facilities requires significant capital investment in
machinery, technology, and infrastructure. However, the high initial costs are offset by the long-term
efficiency and lower production costs.

Advantages of Mass Production

(i) Cost Efficiency: Lower cost per unit due to economies of scale. Reduced material costs through bulk
purchasing.
(ii) Speed and Efficiency: High output rates ensure products are produced quickly. Efficient use of time
and resources leads to faster production cycles.
(iii) Consistent Quality: Standardization and automation ensure uniformity in product quality. Less
variability reduces defects and increases customer satisfaction.
(iv) Market Penetration: Ability to produce large quantities allows companies to meet high market demands
and expand their reach. Competitive pricing due to low production costs can increase market share.

Disadvantages of Mass Production

(i) Lack of Flexibility: Mass production is not suited for custom or specialized products. Changes in design
or production process can be costly and time-consuming.
(ii) High Initial Costs: Significant capital investment is required to set up mass production facilities.
Maintenance and upgrading of machinery add to ongoing costs.
(iii) Risk of Overproduction: Producing large quantities without accurate demand forecasting can lead to
overproduction. Excess inventory can result in storage costs and potential wastage.
(iv) Monotonous Work: Repetitive tasks can lead to worker boredom and decreased motivation. High
turnover rates may result from job dissatisfaction.

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Examples of Mass Production

(i) Automobiles: Car manufacturing is a classic example of mass production. Assembly lines produce
thousands of identical vehicles with standardized parts.
(ii) Electronics: Smartphones, televisions, and other consumer electronics are produced in large quantities.
Consistent quality and features are ensured through mass production techniques.
(iii) Packaged Foods: Products like canned goods, snacks, and beverages are mass-produced to meet high
consumer demand. Standard recipes and automated processes ensure uniformity.

Therefore, Mass production revolutionized manufacturing by enabling the efficient and cost-effective production
of large quantities of standardized products. While it offers significant advantages in terms of cost savings,
speed, and quality consistency, it also comes with challenges such as high initial investment and lack of
flexibility. Understanding these characteristics and considerations helps businesses determine when and how
to implement mass production to optimize their manufacturing processes.

4. Continuous Production

Continuous production is a type of manufacturing process characterized by the uninterrupted flow of materials
and constant production of goods. This method is typically used for products that are in high demand and
require a consistent, ongoing output. Here are the detailed aspects of continuous production.

Characteristics of continuous production

(i) High Volume Production: Continuous production is designed for large-scale manufacturing where
products are needed in vast quantities. The process is set up to run 24/7, maximizing output and
efficiency.
(ii) Standardization: Products made through continuous production are highly standardized. There is little
to no variation in the final products, ensuring consistency and uniformity.
(iii) Automation: The production process is highly automated, involving advanced machinery and technology.
Human intervention is minimal, primarily focused on monitoring and maintaining the systems.

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(iv) Efficiency and Speed: Continuous production systems are optimized for speed, allowing for the rapid
creation of products. The seamless flow of materials and operations reduces downtime and enhances
efficiency.
(v) Economies of Scale: The high-volume nature of continuous production leads to significant economies of
scale. Per-unit costs decrease as the volume of production increases, making this method cost-effective
for large outputs.
(vi) Investment and Maintenance: Initial setup costs are high due to the need for specialized machinery
and infrastructure. Regular maintenance is crucial to ensure the smooth functioning of the continuous
production lines.

Examples of Continuous Production

(i) Oil Refining: Crude oil is continuously processed to produce fuels, lubricants, and other petrochemical
products. The process involves multiple stages like distillation, cracking, and reforming, all running
continuously.
(ii) Chemical Production: Chemicals such as ammonia, sulfuric acid, and ethylene are produced in large
quantities through continuous processes. This involves constant mixing, heating, and reaction stages.
(iii) Energy Generation: Power plants, particularly those based on fossil fuels or nuclear energy, operate
continuously to meet the constant demand for electricity. The process includes the continuous
combustion of fuels, heat generation, and electricity production.
(iv) Steel Manufacturing: Continuous casting and rolling processes are used to produce steel in large
volumes. Molten steel is continuously cast into slabs, billets, or blooms, which are then rolled into
finished products.

Advantages of Continuous Production

(i) Consistent Quality: The standardized nature of continuous production ensures high and consistent
product quality. Automated systems reduce the risk of human error, leading to fewer defects.
(ii) High Efficiency: Continuous operation minimizes downtime and maximizes production efficiency. The
process is designed to optimize resource utilization, reducing waste.

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(iii) Cost-Effectiveness: Economies of scale significantly lower the cost per unit of production. Automation
and high output volumes contribute to overall cost savings.
(iv) Reliable Supply: Continuous production provides a steady and reliable supply of products. This is crucial
for industries where constant availability of products is essential, such as energy and chemicals.

Challenges of Continuous Production

(i) High Initial Investment: Setting up a continuous production system requires significant capital
investment in machinery, technology, and infrastructure. The costs can be prohibitive for smaller
companies or those with limited financial resources.
(ii) Flexibility: Continuous production is less flexible compared to batch or job production. Changes in
product design or variations are difficult to implement without disrupting the entire production process.
(iii) Maintenance and Downtime: Although the systems are designed for continuous operation, they require
regular maintenance to prevent breakdowns. Unplanned downtime can be costly and disrupt the
continuous flow of production.
(iv) Environmental Concerns: Continuous production, especially in industries like chemical manufacturing
and energy generation, can have significant environmental impacts. Proper waste management and
environmental controls are essential to mitigate these effects.

5.3 Key Production Decisions

1. Product design:
This is a decision required to produce a suitable product for the market. An effective and efficient product design
decisions influence what raw materials are required, how skilled the Labour force needs to be, what type of
machinery must be used, which manufacturing processes are best, how inventory is stored, and ultimately how
product is distributed to customers. Product design gives businesses a stronger competitive advantage, which
boosts their performance in the market. Furthermore, that tendency will be followed by strong brand
identification for your company in the sector

Factors that determine Product design

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Product design is a multifaceted process influenced by numerous factors that determine the final outcome. Key
considerations in product design include the following:

(i) User Needs and Preferences: Understanding the target audience is paramount. Designers must consider
the specific needs, preferences, and behaviours of the end-users to create products that provide value
and enhance user experience.
(ii) Functionality: A product must perform its intended function effectively. This involves defining the core
features and capabilities of the product. Designers need to ensure that the product meets the practical
needs of the user and solves a particular problem efficiently.
(iii) Aesthetics: The visual appeal of a product can significantly impact its success. Design elements such as
shape, colour, texture, and overall appearance play a crucial role in attracting users and creating a
positive perception of the product.
(iv) Materials and Technology The choice of materials and the technology used in manufacturing affect the
product's durability, functionality, and cost. Designers must select appropriate materials that meet the
product's requirements while considering sustainability and environmental impact.
(v) Cost and Budget: Economic constraints often shape product design. Designers need to balance
functionality and quality with cost-effectiveness. This includes considering manufacturing processes,
materials, and the overall budget allocated for product development.
(vi) Market Trends and Competition: Staying informed about current market trends and competitors'
products is essential. Designers must ensure that their product stands out in the market, offering unique
features or improved performance over existing solutions.
(vii) Regulations and Standards: Compliance with industry standards, safety regulations, and legal
requirements is critical. Designers must ensure that the product adheres to all relevant guidelines to
avoid legal issues and ensure user safety.
(viii) Sustainability and Environmental Impact: With increasing awareness of environmental issues,
sustainable design practices are becoming more important. Designers must consider the product's
lifecycle, including materials, manufacturing processes, and end-of-life disposal or recycling.

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(ix) Innovation and creativity: Innovation drives product differentiation and competitive advantage. Creative
thinking can lead to unique solutions and novel features that set a product apart from others in the
market.
(x) Cultural and social factors: Cultural and social contexts can influence product design. Designers must
consider cultural sensitivities, social norms, and local preferences to ensure the product resonates with
its intended audience.
(xi) Brand identity: A product should align with the brand's identity and values. Consistency in design
elements helps reinforce brand recognition and loyalty among consumers.
(xii) Technical constraints: Technical limitations, such as manufacturing capabilities and technological
feasibility, can impact design decisions. Designers need to work within these constraints to create viable
products.
(xiii) Feedback and Iteration: Continuous feedback from users and stakeholders is crucial for refining the
product design. Iterative design processes allow for improvements and adjustments based on real-world
usage and feedback.

2. Plant Location

Plant location refers to the process of determining the most appropriate site for establishing a manufacturing
or production facility. The choice of plant location is critical as it can significantly influence operational
efficiency, production costs, supply chain logistics, and overall business success. Several key factors are
considered when selecting a plant location.

Considerations for a Plant Location

(i) Proximity to raw Materials: Ensures a steady supply of essential inputs. This reduces transportation
costs and time for raw materials.
(ii) Access to Markets: Minimizes distribution costs and this enhances customer service with quicker
delivery times.

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(iii) Transportation and Infrastructure: Availability of efficient transportation networks (roads, railways,
ports, airports). Reliable infrastructure such as utilities (electricity, water, gas) and communication
systems.
(iv) Labour availability and costs: Access to a skilled and affordable labour force. Consideration of local
labour market conditions, wage rates, and labour laws.
(v) Economic and political stability: Stable local economy and political environment to ensure
uninterrupted operations. Reduced risks of disruptions due to political unrest or economic downturns.
(vi) Government Policies and incentives: Favourable government regulations, tax policies, and available
incentives or subsidies in addition to legal and compliance requirements.
(vii) Environmental and Community Impact: Compliance with environmental regulations. Efforts to
minimize negative impacts on the local community and environment.
(viii) Cost of Land and facilities: Cost of acquiring land and constructing facilities. Balancing benefits with
real estate and development costs.
(ix) Quality of Life: Impact of local living conditions on employee satisfaction and retention and availability
of housing, education, healthcare, and recreational facilities.
(x) Scalability and future Expansion: Availability of additional land or facilities to accommodate future
growth in consideration of long-term strategic plans.
(xi) Industrial Inertia: The presence of other industries also attracts more industries.
(xii) Soil and climate especially for agro-based industries

3. Plant layout

The term "plant layout" describes how physical facilities, such as furniture, machinery, and other items, are
arranged within a factory building to maximize material flow at the lowest possible cost and with the least
amount of handling required during the product's processing from the time raw materials are received until the
finished product is shipped. The main goal of plant planning is to create a physical configuration that most
economically produces the needed output, both in terms of number and quality. Optimizing plant layout should
ideally comprise allocating space and setting up equipment to minimize total operating expenses.

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A smooth production flow should be ensured by the layout of the plant. The layout of a plant takes into account
all areas associated to production, the machinery and equipment in the production area, and frequently the
areas occupied by staff. Decisions about plant layout can be influenced by a variety of factors, including location
of the plant, management policies, product type, production volume, floor space availability, manufacturing
method, and machine and equipment repairs and maintenance. The layout of a plant's numerous machines,
production spaces, and staff comforts all affect how efficiently things are produced. The seamless and quick
transfer of materials from the raw material stage to the finished product stage can only be ensured by a well-
designed plant. Plant layout includes both new layouts and upgrades to the current layouts.

Types of plant layout

1. Process Layout Also known as a functional layout, this type group’s similar machines and processes
together. It is commonly used in job shops and batch production environments.

Advantages of process lay out

(i) Flexibility in handling a variety of products or processes.
(ii) Specialization of equipment and labour can lead to increased efficiency.
(iii) Easier to supervise and manage.

Disadvantages of process lay out

(i) High material handling costs due to the long travel distances.
(ii) Complex scheduling and workflow management.
(iii) More space is required compared to other layouts.

Example: A machine shop where lathes, milling machines, and drill presses are grouped together.

2. Product Layout/Line layout: This type arranges equipment in a sequence that matches the steps of the
production process. It is ideal for mass production of standardized products.

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Advantages of product lay out

(i) High efficiency and productivity for high-volume production.
(ii) Reduced material handling costs.
(iii) Simple and straightforward workflow.

Disadvantages of product lay out

(i) Inflexible; not suitable for products with variations.
(ii) High initial setup costs.
(iii) Disruptions in one part of the line can halt the entire production process.
Example: An automobile assembly line where each workstation performs a specific task in sequence.

4. Fixed Position Layout:

In this layout, the product remains stationary, and workers, materials, and equipment are brought to the site.
It is suitable for large, heavy, or immovable products.

Advantages of fixed position lay out

(i) Reduces the movement of heavy or bulky products.
(ii) High flexibility in accommodating product changes.
(iii) Centralizes materials and equipment around the work area.

Disadvantages of fixed position lay out

(i) High material handling costs for transporting materials and tools to the site.
(ii) Increased complexity in managing multiple activities and workers at the same location.
(iii) Limited space can lead to congestion and inefficiency.
Example: Construction of ships, aircraft, and large machinery.

5. Combination layout/Mixed layout:

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This type is used when a single layout type is not sufficient to meet the requirements of a complex
manufacturing process. It combines various layout types within the same facility.

Advantages of mixed lay out

(i) Flexibility to accommodate diverse production processes.
(ii) Improved efficiency by integrating the strengths of different layout types.
(iii) Can be customized to specific production needs.

Disadvantages of mixed lay out

(i) More complex to design and manage.
(ii) Requires careful planning and coordination.
(iii) May involve higher costs for setup and maintenance.
Example: A manufacturing plant that combines process layouts for machining areas, product layouts for
assembly lines, and fixed position layouts for large-scale construction projects.

Selecting the appropriate plant layout depends on various factors, including the type of product, production
volume, workflow requirements, and available space. An effective layout can significantly enhance operational
efficiency, reduce costs, and improve overall productivity

Qualities of a good Plant Layout

A good plant layout is crucial for optimizing manufacturing processes, improving efficiency, and minimizing
costs. The following qualities characterize an effective plant layout:
(i) Efficient workflow: Streamlined Processes: The layout should ensure a smooth and logical flow of
materials, work-in-progress, and finished goods through the production process, minimizing
backtracking and unnecessary movement. There is also mminimum handling: Reducing the number of
handling steps decreases the risk of damage, loss, and inefficiencies.

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(ii) Flexibility/Adaptability: The layout should be flexible enough to accommodate changes in production
processes, product designs, and volumes without requiring extensive modifications. Scalability: The
ability to scale operations up or down easily to meet changing demand.
(iii) Space utilization/Optimal Use of Space: Efficiently using available space to ensure that equipment,
workstations, and storage areas are properly arranged without overcrowding or underutilization. Storage
Solutions: Adequate provision for raw materials, work-in-progress, and finished goods storage that
facilitates easy access and inventory management.
(iv) Safety of employees: Safe Working Environment: Ensuring that the layout promotes a safe working
environment by reducing hazards, providing clear pathways, and complying with safety regulations.
Emergency Provisions: Incorporating safety features such as fire exits, first aid stations, and emergency
evacuation routes.
(v) Employee Comfort and Productivity: Ergonomics: Designing workstations and equipment placement
to minimize physical strain and enhance worker comfort. Break Areas: Providing adequate break areas,
restrooms, and other facilities to support employee well-being.
(vi) Ease of Supervision and Management/Visibility: The layout should allow for easy supervision and
management of the production process, enabling quick identification and resolution of issues.
(vii) Accessibility: Ensuring that supervisors and managers can easily access all areas of the plant for effective
oversight.
(viii) Cost Efficiency/Reduction of Waste: Minimizing waste through efficient use of materials, energy, and
labor. Lower Operating Costs: Designing the layout to reduce operating costs, including those related to
material handling, maintenance, and utilities.
(ix) Integration with Supply Chai/Supply Chain Coordination: The layout should facilitate smooth
integration with the supply chain, including efficient receipt of raw materials and distribution of finished
goods. This also includes loading and unloading: Provisions for efficient loading and unloading areas to
support timely delivery and shipment.
(x) Quality Control: This is done in inspection points: Incorporating checkpoints for quality control
throughout the production process to ensure product standards are maintained. It also includes
contamination control: In industries where contamination is a concern, the layout should minimize the
risk of cross-contamination.

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(xi) Environmental Considerations/Sustainability: Incorporating sustainable practices in the layout

design, such as energy-efficient lighting, waste reduction systems, and environmentally friendly
materials. It also involves compliance that is ensuring the layout meets environmental regulations and
standards.
(xii) Communication and Information Flow/Efficient Communication: Facilitating effective
communication among workers and between different departments to ensure coordination and timely
information sharing. It also involves having in place information systems: Integration of information
systems to support production planning, monitoring, and control.
(xiii) Maintenance and Upkeep: This involves accessibility for maintenance that is ensuring that equipment
and machinery are easily accessible for regular maintenance and repairs to minimize downtime. It also
involves cleanliness that is designing the layout to promote cleanliness and ease of maintenance.
(xiv) Technological Integration: This involves automation that is incorporating advanced technologies and
automation where appropriate to enhance productivity and efficiency, and upgradability that is ensuring
that the layout can accommodate future technological advancements and upgrades.

By focusing on these qualities, a plant layout can significantly enhance operational efficiency, safety, and overall
productivity, leading to a more successful and sustainable manufacturing operation.

Factors that determine plant layout

Designing an effective plant layout involves considering a multitude of factors to ensure the optimal
arrangement of equipment, machinery, and workflows. Here are the key factors that determine plant layout:

(i) Nature of the Product: This includes product type that is the complexity, size, and characteristics of the
product influence the layout. For example, heavy or bulky products may require a fixed position layout,
while standardized, high-volume products may benefit from a product layout, and product variety that is
facilities producing a wide range of products might need a more flexible layout, like a process or cellular
layout.

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(ii) Production Process. Process Type: The nature of the manufacturing process (e.g., batch production,
mass production, continuous production) determines the layout. For instance, continuous production
processes typically use product layouts. Sequence of Operations: The order of operations required for
production affects the flow and placement of machinery and equipment.
(iii) Volume of Production. Production Scale: High-volume production usually necessitates a product layout
for efficiency, while low-volume or custom production might be better suited to a process layout. Future
Scalability: The layout should consider future expansion and increased production volumes.
(iv) Space Availability. Facility Size and Shape: The physical dimensions and shape of the plant building
influence the layout design. Efficient use of available space is crucial. Space Constraints: Constraints like
columns, walls, and other structural elements must be considered.
(v) Material Handling. Material Flow: Efficient movement of raw materials, work-in-progress, and finished
goods through the plant is essential. Layout should minimize material handling distances and costs.
Handling Equipment: The type and capabilities of material handling equipment (e.g., conveyors, forklifts)
impact layout decisions.
(vi) Labor and Workforce. Labor Availability and Skills: The local labour market and the availability of skilled
workers influence the layout. Ergonomic considerations are also important to ensure worker comfort and
efficiency. Labor Laws and Regulations: Compliance with labour laws, including safety and working
conditions, must be factored in.
(vii) Safety of employees. Workplace Safety: Ensuring a safe working environment by minimizing hazards
and providing clear pathways is critical.
(viii) Utilities and Services. Utility Requirements: Availability and placement of utilities such as electricity,
water, gas, and compressed air affect the layout. Support Services: Provisions for maintenance, storage,
restrooms, and break areas are necessary.
(ix) Regulatory and Environmental Compliance. Regulations: Compliance with industry standards, safety
regulations, and environmental laws is mandatory. Environmental Impact: Considerations for waste
management, emissions control, and sustainable practices are important.
(x) Technology and Automation. Technological Integration: The need for advanced machinery, automation,
and information systems affects the layout. Future Upgrades: Layout should accommodate future
technological advancements and upgrades.

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(xi) Flexibility and Adaptability. Layout Flexibility: Ability to adapt to changes in product design, production
processes, and market demand is essential.
(xii) Logistics and Supply Chain Integration. Inbound and outbound logistics: Efficient layout design for
receiving raw materials and shipping finished products is crucial.
(xiii) Economic Considerations. Cost Efficiency: Balancing the cost of layout design, equipment placement,
and operational efficiency is vital. Budget Constraints: Working within budget limitations while optimizing
layout performance.
(xiv) Brand Considerations. Brand Image: The layout can reflect the company’s brand and values,
contributing to a positive image. Employee Morale: A well-designed, aesthetically pleasing workspace can
improve employee morale and productivity.
(xv) Maintenance and Upkeep. Accessibility for maintenance: Equipment and machinery should be easily
accessible for regular maintenance and repairs. Cleanliness and orderliness: Design the layout to
facilitate cleaning and maintenance, promoting an orderly work environment.
(xvi) Environmental Conditions. Climate and Weather: In certain industries, climate control (temperature,
humidity) can be critical and impact layout decisions. Natural Disasters: Consideration for disaster-
proofing the facility based on local risks (e.g., earthquakes, floods).

Considering these factors comprehensively ensures the plant layout is optimized for efficiency, safety,
productivity, and adaptability, contributing to the overall success of the manufacturing operation.

5.4 Production Planning and Control

(i) Production planning

Production planning is defined as determining the future levels of manufacturing operations within an
organisation. It involves setting plant and equipment capacities, setting possible production targets,
deciding on the size of labour force and setting the desired levels of inventory.
(ii) Production control
Production control involves comparing actual production levels with planned production levels and taking
corrective action in case of any deviations.

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Production control and planning oversees and plans the distribution of labor, supplies, workspaces,
equipment, and manufacturing procedures. It determines the most cost-effective method of producing
final items with the lead times required to satisfy demand for manufacturing.

By effectively allocating internal resources to fulfill orders or demands from customers, production
planning enables manufacturers to operate more intelligently. It provides answers for what, when, and
how much to make. It determines the number of raw materials, bill of materials, or alternative bill of
materials that are required to meet demand in addition to establishing production capacity. It then creates
a feasible production schedule.

Production control provide visibility and reporting while keeping an eye on output and measuring
performance. Production control is the first to know when corrective action is needed. It uses a variety of
control strategies to reach the highest possible production performance levels.

Production planning and control can help in sourcing materials more effectively, expediting production,
cutting costs, minimizing resource waste, and streamlining the production process. Maximizing the
resources employed in the manufacturing process, such as labor, materials, and productivity time, is the
primary objective of production planning and control. Production managers' main goal in using this
strategy is to make sure that the output meets the predetermined standards for quality, quantity, and
timeliness.

Production planning and control can be accomplished by following a set of procedures. In order to make
sure that every person participating in the production contributes to the operation's success, production
managers should also stress the significance of adhering to the defined process from beginning to end.
Planning, routing, scheduling, loading, dispatching, expediting, inspecting, and correcting are some of
the actions involved in this process. In general production control and planning guarantee that the
necessary resources are available when needed. To maximize output, workers, materials, and equipment
must be available as needed. It is the focal point of a company engaged in manufacturing. The more a
business grows, the more crucial production planning and control is to its seamless operation.

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Types of Production Plans

(i) Short Term Production Plans (Operational Plans): These usually last for a period of one year, but they
can extend to utmost 18 months. They assist the production manager to carry out the day today activities
in the production department in line with the overall organisational objectives. Examples of short-term
production plans include activities like routing, scheduling etc.
(ii) Medium Term Production Plans (Technical Plans): These usually last for a period of 2-5 years. They
help the production managers to plan for the future and also form the basis for long term planning.
(iii) Long Term Production Plans (Strategic Plans): These usually last for a period of 5 years onwards.
They help the production manager to look into the future and to take on long-term profitable
opportunities. This helps the organisation to achieve its long-term goals. Examples of long-term
production plans include replacement of machines, factory expansion etc.

Activities involved in Production Planning and Control

(i) Routing: Is an aspect of planning by which the route or path over which work will flow is determined. It
involves determining where and by whom work shall be done and the necessary sequence of operations.
The objective of routing is to ensure that work goes to the best man in the system and the cheapest but
efficient and systematic sequence of operations is adopted.

(ii) Loading: This is an aspect of production planning that deals with the effective utilization of machines.
The available workload to be performed and the available capacity of the machines should be considered.
The largest workload should go to the best machine in the system. While loading, the situations should
be avoided namely under loading and overloading of machines. Under loading may result from poor
planning or lack of demand. This may lead to machined redundancy. Overloading results from too much
work. This may lead to overworking of machines, which may increase wear and tear, and hence gradual
breakdown of machines. Too much work may also call for overtime, which may lead to poor health of the
workers.

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(iii) Scheduling: This involves drawing up a timetable for completion of production activities. This facilitates
keeping track of materials, equipment, and labour. The timetable for production ensures that work goes
uninterrupted throughout the production process. This increases production efficiency. Scheduling
involves determining when to start production activities, how long they will take to be completed and the
date/time of completion. Scheduling is done using techniques such as Charts and Graphics Critical Path
Method (CPM) Programmes Evaluation and Review Techniques (PERT).
(iv) Materials Handling: This the way in which materials used in the production process are handled during
movements from one place to another i.e. from stores to machines for usage in production processes and
from the transporters to the stores. This is an important area of concern for the production managers
because material’s handling costs amount to about one fifth of the total costs of production. Today,
however, robots are widely used to minimise breakages and other kinds of damages.

Basic Rules for materials handling

i. Minimise handling: It is preferable to move workers rather than materials.
ii. Plan Handling: Keep the distance between operations as short as possible.
iii. Select correct handling equipment: Use simple, standard equipment for handling materials.
iv. Make the most effective use of handling equipment: Avoid machine overload and under load.

a) Quality control. This is a process through which a business seeks to ensure that product quality is
maintained or improved. Quality control requires the company to create an environment where
management and employees strive to attain total quality management in the production process right
from first stages of production up to the final stages of production.
b) Dispatching. This involves releasing the materials, machines, and workers to different production areas
based on the production schedule. It ensures that the materials and equipment are delivered to different
production sections on time and that the workers are assigned to their designated tasks. It also involves
the release of orders and their instructions and it follows the routing and scheduling directions. This step
ensures all items are in place for the employees to do their jobs.

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c) Plant Maintenance This is the task of keeping the factory building and equipment in a satisfactory
condition according to plant operations requirements and standards set by management.

Objectives/aims of Maintenance

(i) To enable product quality and customer satisfaction to be achieved through correctly adjusted serviced
and operated equipment.
(ii) To maximise the useful life of the equipment.
(iii) To keep equipment safe and prevent the development of safety hazards.
(iv) To minimise the total production costs directly attributable to equipment service and repair.
(v) To minimise the frequency and severity of interruptions to operating processes.
(vi) To maximise production capacity from the given equipment resources.

Functions of the Maintenance (Works) sub-department

(i) Plant instalment and mechanical maintenance.
(ii) Electrical installation and regular maintenance.
(iii) Building addition and maintenance of existing structures.
(iv) Plant overhaul/changing worn-out parts.
(v) Equipment spares and store keeping.
(vi) Plant record keeping.
(vii) Factory cleaning and ensuring of hygiene e.g. lawn mooring, mopping, sweeping etc.

Maintenance is very important especially in a continuous flow of production where breakdown in one
machine may lead to a stoppage in the whole production system.
In a modern maintenance firm, maintenance may be done by outside firms on a contract basis.

Methods of Plant Maintenance

(i) Breakdown Maintenance

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Under this method the plant will be repaired when there has been actual breakdown. This method leads
to great losses in the organisation because of interruption of work schedules and jobs are not completed
on time. It may also lead to loss of customer orders. The cost of replacement of an item as an individual
(individual replacement) is usually greater than that of replacing items as a group (group replacement).

(ii) Preventive Maintenance

Here, equipment is prevented from breaking down to avoid losses associated with stoppages in
production. It involves preplanning of maintenance so that there is routine inspection of machines,
replacement of worn-out parts and regular oiling. The production manager has to be able to trade-off
between preventive maintenance and breakdown maintenance in order to minimise the costs of the
operating system. Advances in technology have enabled the development of systems, which reduce the
cost of maintenance while improving operational performance. These are usually computer-based devices,
which enabled the detection of faults before severe difficulties, and even damages occur.

REFERENCE MATERIAL

a) Modern Business Administration (6th Ed) by Robert C Appleby

b) Business Administration, a fresh approach by Roger Carter
c) Parsons Carl Copeland (2008). Business Administration, Lightning Source Inc. Publishers
d) Business Administration Hand Book by L. Hall
e) Business Administration and Management (4th Ed) by Deverell
f) Business Administration (4th Ed) by Waswa Balunywa
g) Bagire Vincent (2013). A Revision Guide for Business Administration
h) Linda K. Trevino and Katherine A. Nelson (2010).Managing Business Ethics, 5th Edition, Wiley Publishers
i) Published articles: Rao, Y. S. (2023). Production and operations management. Academic Guru Publishing
House.15 (20), 15140.

TUTORIAL VIDEOS
Video on production click on the link below:

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a) Introduction to production functions – https://www.youtube.com/watch?v=4kFLOoA5l4s

b) Types of Plant Layout, Explanation with Advantages and Dis-advantages:
https://www.youtube.com/watch?v=DrO5sS51Yk8
c) Facility Layout in Operations Management - Product vs Process Oriented Layout & Fixed:
https://www.youtube.com/watch?v=qKca93vGPho
d) https://youtu.be/TWXAzr-Bhfc?si=WED1x0NzdVk-7PmW
e) https://youtu.be/lZTH53eSsFY?si=GHpL10jMcNTblo0O

Department of Business Administration (DoBA) 2024 Faculty of Business Administration MUBS