Few people ask the question "what is production", considering this concept to be elementary. However, in reality this is a rather complicated process, without which the functioning of the economy would be impossible.
What is production
Production can be characterized as a process or purposeful activity, during which material and raw materials through labor are converted into finished products. This is the foundation of any state.
Without production, the existence of an economy is impossible. By investing in the manufacture of certain goods, investors receive a profit after their implementation. Taxes and other deductions are made from this amount, due to which state institutions function.
Market and non-market production
Answering the question "what is production", it is worth noting an important feature, which is expressed in its division into market and non-market. The first involves the manufacture of goods for their further sale at objectively prevailing market prices. In this case, the entire production process will be aimed at obtaining the maximum possible profit.
In some cases, items may be distributed free of charge or at reduced prices. Then the production will already be considered non-market. Most often, state funds or various non-profit organizations have relations with him. Also, in some cases, profitable enterprises may resort to big discounts or sales in order to sell goods that are not in demand in the market.
What activities relate to production
When answering the question of what production is, it is important to determine the main activities that fall under the influence of this concept, namely:
- manufacturing activities permitted by law;
- illegal types of production activities;
- shadow production (hidden from the tax authorities);
- movement of raw materials, materials and semi-finished products between structural divisions of the enterprise or its branches;
- work in progress (meaning materials that have already been put into processing, but have not yet been converted into a finished product);
- goods and services produced by households for subsequent sale;
- paid work of staff;
- construction and repair work;
- the use of buildings to create wealth or the provision of services.
What does not apply to production
There are some activities that cannot answer the question: “What is production?”. These include:
- household chores and services that are carried out independently to meet their own needs;
- by-products (waste, etc.) that arise in the process of main production, and are not its ultimate goal.
Thus, if you, for example, cook food or clean the room exclusively for the good of your and your family, then this activity cannot be called production. But if you provide such services in accordance with the contract of employment and for the purpose of making a profit, then this completely falls into the above category.
Varieties of production
The essence of production can be reflected in its main types. So, the first of these is material. It implies the direct production of products that have a real material form. This can be food, household appliances, buildings, and clothes.
Speaking about intangible production, it is worth noting that here we are talking about the provision of services in various fields: health care, education and so on. Despite the lack of material form, they still have a specific value and bring a certain result.
Production activities
Organization of production may be carried out in accordance with the following varieties of relevant activities:
- Custom production is the manufacture of a product in accordance with a specific request. It is worth noting that such activity is the most effective, since the plant for the production of a product protects itself from the risk of a lack of demand.
- Mass production (flexible) - involves the release of products on a large scale. At the same time, it may have several modifications or undergo changes in connection with the characteristics of demand.
- Mass production (inflexible) - differs from the previous category in that the products are exclusively standardized (most often here we can talk about the production of equipment, tools and other goods that require precision). It is worth noting that this option will be appropriate only if the scale is large.
- Stream production - is carried out in the form of a continuous cycle. Materials are constantly used, and goods are produced. Often, in order to achieve maximum efficiency, such a production process is carried out continuously (by organizing shift work).
Production factors
The production process will be impossible without the following factors:
- Natural resources are an objective necessity for any enterprise, no matter whether it is industrial or any other. These include not only water, solar energy, soil, and so on - we are also talking about climatic conditions, which largely determine the suitability of a particular area for a particular type of production.
- Investment resources are one of the main factors without which activity would be impossible. Here we are talking about financial support for production, thanks to which it is possible to acquire the resources necessary for the production process. After a certain time, the investment pays off, and investors receive a certain percentage of net profit.
- Labor resources are people with a specific level of education and qualifications, thanks to which it becomes possible to work in production. This includes management personnel, and workshop workers, as well as people who serve the process of manufacturing goods or providing services.
- Entrepreneurial abilities are the individual qualities of the person who heads the plant for the production of certain tangible or intangible goods. This is one of the main factors of successful activity, because it depends only on the manager how well the time is chosen to start work, how modern the technology will be and how correctly the sales will be organized.
Types of production efficiency
The organization of production is aimed at eventually obtaining a specific result, reflected in the planning documents. Most often they mention precisely economic efficiency. It represents the ratio of profit and costs that had to be incurred to obtain it. Thus, we can say that each company seeks to maximize the return on a unit invested in production.
But not only in obtaining monetary rewards is efficiency. And what else? In addition to economic, they also distinguish technological efficiency. Here we are talking about how many units of products were manufactured using a specific method, equipment and other factors.You can talk about technological efficiency when the real volume of production has approached the maximum possible based on the invested resources and the applied methodology. Also important is the point that there should not be a more profitable option that will allow us to produce more goods at the same cost.
How to decide on production technology
Work in production begins with the need to choose the technology in accordance with which goods will be produced or services rendered. This decision is made based on a number of factors:
- first you need to decide what kind of production resources and equipment a company can afford financially;
- Of all the technology options that are available to the organization, you should choose the most modern and effective
- through economic calculations, the final option is selected.
Production is a complex process aimed at creating tangible and intangible goods. This is the basis of the functioning of the economy both in a single state and on a global scale.
