Steps in the Production Process and How They Work

This article is an excerpt from the Shortform book guide to "High Output Management" by Andrew S. Grove. Shortform has the world's best summaries and analyses of books you should be reading.

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What are the steps in the production process? How do they work?

There are three important steps in the production process. You’ll need to learn to increase output in all steps of production.

Read more about the steps in the production process and why they’re important.

Three Steps in the Production Process

There are three steps in the production process in a factory. Thinking about these steps can help you both maximize production output, and think of other business workings as factory productions.

Step #1: Process and Step #2: Assembly

The first two steps in the production process go together. To determine the fastest, most cost-effective way to produce products in a factory, manufacturers first determine throughput times (how long it takes to prepare individual product parts) and then offset them (start them at staggered times so they’ll all be completed at the same time and ready for assembly). To do this:

1. Determine the limiting stage, which is making the component that’s most time-consuming, valuable, or sensitive. You’ll organize your workflow around this stage.

Manufacturing example: If you’re working as a cook at a restaurant that makes breakfast consisting of toast, boiled eggs, and coffee, the limiting step is boiling the egg, which takes the longest at three minutes.
Business example: In the Intel workflow for hiring new graduates, the limiting step is inviting them to visit an Intel plant because it’s the most expensive step—Intel pays for the students’ travel and managers spend a lot of paid time showing the students around.

2. Determine how long the next-longest stage will take. You’ll time starting this stage so the component is ready at the same time as the limiting stage.

Manufacturing example: This is toasting the bread, at one minute. You’ll start toasting the bread two minutes before the egg will be ready.
Business example: Another step involved in hiring a new graduate is on-campus interviews, which needs to be done far enough in advance to make travel arrangements for the students who are then invited to tour the plant.

3. Repeat step #2 for all stages.

Manufacturing example: The final stage in the breakfast example is pouring the coffee, which takes only seconds. You’ll start this stage seconds before the toast will be ready.
Business example: An earlier step in hiring new graduates is to do phone screenings to determine who should be interviewed. This needs to be done early enough to make travel arrangements for on-campus interviews.

4. Calculate the assembly time and add the assembly time to the time required for the limiting stage to get the total throughput time.

Manufacturing example: This is how long it will take you to get the toast out of the toaster, the egg out of the pot, the coffee out of the maker, and arrange all these components on a tray.
(Shortform business example: The total throughput time for hiring a new graduate is the time between preparing a job posting and a students’ graduation, after which they start work.)

Complications

Three things might complicate these steps in the production process:

1. Limited equipment availability. If you don’t have constant access to equipment, you need to factor waiting time into your throughput time. Waiting time could make a different component’s production the limiting step.

Manufacturing example: If there are multiple cooks making breakfast at the same time, you may have to wait for the toaster. If you have to wait five minutes for the toaster, you’ll have to get the toast started (find the bread) before you boil the egg.
(Shortform business example: If you run a photo printing shop, all of your employees will need to use the photo printer at some point. If it takes ten minutes to print photos and the line for the printer is always three employees long, that adds half an hour to the printing step.)

2. Offsetting conflicts. If you’re in the middle of one task at the moment you’re supposed to start another, you’ll throw off the timing because you can’t do both things at once. You could ask someone else to help you, but this isn’t dependable. There are three better ways to handle this:

Option #1: Specialization. Assign everyone involved in the process to a single task, and then combine everyone’s work at the end to create multiple final products (instead of everyone individually making their own product). The downside is that specialization is expensive because you need more staff.

Manufacturing example: Imagine you’ve been promoted from server to manager at the breakfast cafe. Hire one person to make the toast, one to cook the egg, one to pour the coffee, and one to organize everyone.
(Shortform business example: In the photo printing shop, you might hire just one employee to operate the photo printer, one employee to package the printed photos, and one employee to operate the cash register and deal with customers.)

Option #2: Purchase more capital equipment. Buy more of whatever tools are needed to complete the limiting step. The downside is the expense of doing this.

Manufacturing example: If the limiting step is making the toast because you don’t have enough toasters to toast all of the required bread, buy another toaster.
(Shortform business example: In the photo printing shop, you may buy another printer.)

Option #3: Increase inventory. Make as many products as you can, so that you’ll have constant access to products so you can supply them as soon as orders come in. The downside is that you’ll have to throw away the extra, which can be expensive.

Manufacturing example: If the kitchen constantly churns out breakfasts, there will always be one available when a customer arrives, but you’ll have to throw out a lot of food as it cools and spoils and is no longer servable.
(Shortform business example: If you run a toy shop that sells Christmas-themed decorations, order extra wreaths and reorder every time someone buys something. You’ll never run out of stock, but you will have wreaths left over after Christmas when no one will want to buy them, and you’ll have to throw them out.)

Steps in the Production Process and How They Work