Batch production means producing goods in groups or runs, with a setup stage before each batch, instead of making every unit continuously or fully custom.
The economic logic
Many factories face a setup cost when they switch from one product run to another. That creates a trade-off:
- larger batches spread setup cost over more units,
- smaller batches make it easier to respond to demand changes and product variety.
So firms choose a batch size by balancing efficiency against flexibility.
Cost mechanics
If setup cost is high, firms often prefer longer runs because average cost falls as the fixed setup is spread across more units. But very large batches can raise storage cost, risk unsold inventory, and slow the response to changing orders.
This is why batch production sits between:
- job production, which is highly customized but expensive,
- continuous production, which is efficient but less flexible.
Practical example
A bakery may mix and bake 500 loaves at a time because changing ingredients, cleaning equipment, and reheating ovens all take time. That is batch production: output comes in runs, not one loaf at a time and not an endless identical stream.