Entrepreneurs need to decide which production method is best for them. Good customer service is valuable and can lead to increased sales.
Production is about creating goods and services. Managers have to decide on the most efficient way of organising production for their particular product.
There are three main types of production to choose from:
The best method of production depends on the type of product being made and the size of the market. Small firms operating in the service sector, such as plumbers, use job production because each customer has individual needs. Niche manufacturers of items such as made-to-measure suits would also use job production because each item they make is different.
Batch production is used to meet group orders. For example, a set of machines could be set up to make 500 size 12 dresses and then adjusted to make 600 size 12 dresses. Two batches have been made.
Flow production is used to mass produce everyday standardised (all the same) items such as soap powder and canned drinks. Economies of scale lead to lower unit costs and prices. Not many small manufacturers can afford the investment needed to mass produce goods. They instead opt for either batch or job production.
There is usually a trade off between unit costs and meeting specific customer needs. Flow production offers economies of scale and low costs for a one-size-fits-all product.
Customer service is the experience a customer gets when using products made by the business. Satisfied customers make repeat purchases and recommend the product to friends, leading to additional word-of-mouth sales.
Customers want to buy goods and services that meet their needs at a price they can afford. For example a café thrives when friendly staff serve tasty, well made meals, in generous portions, at competitive prices.
Successful businesses define the quality or standard of service needed to meet customer needs. For instance, a café can aim to take no more than 5 minutes to serve any customer once they have ordered their meal.
Ensuring that quality standards are met requires:
Customers compare price with customer service. Few customers expect high quality service when buying low priced items. For instance, travellers using a budget airline accept that they must pay for extras such as an in-flight meal. First class customers expect luxury seats and free champagne. The challenge facing all businesses is to remain competitive. They must keep prices competitive while offering a better service than rivals.