In this article we will discuss about Small Scale Production. After reading this article you will learn about: 1. Advantages of Small Scale Production 2. Disadvantages of Small Scale Production.

Advantages of Small Scale Production:

The following are the merits of small scale production:

1. Close Supervision:

The small producer can himself supervise the minutest details of the business. Nobody is allowed to spoil machinery or waste materials. The master’s eye is everywhere. There can be no fraud or idleness. He will exercise utmost economy to achieve the aim of maximum profits.


2. Nature of Demand:

The small producer has an advantage over the large producer, when the demand is either small or is constantly changing. He has thus a sphere of his own where he has an advantage over the large scale producer.

3. More Employment:

In the face of large scale unemployment existing in the country, the development of cottage and small scale industries is of great help to create more employment opportunities. Small scale production is more labour-intensive i.e., there is more use of labour than machinery. Thus, many unemployed persons are employed in the newly developed small scale industries.


4. Need of small Capital:

The small scale production can be started with small capital. Where there is shortage of capital, the small scale industries are of great advantage for the development of industries.

5. Direct Relation between the Workers and the Employers:

In small scale production fewer workers are employed. Therefore, a close relationship exists between the employer and the workers. Because Of this close relationship, the employer can look after the well-being of his employees and employees, too, consider their work as their own and the work goes on smoothly without any disputes between the two parties.


6. Direct Relation between the Customers and the Producers:

The small scale producers generally cater to the local demand. Hence, they remain in touch with their customers. A small producer personally knows his customers. Therefore, he can produce goods according to the taste and fashion of each individual customer.

7. Easy Management:

The management of small business is easy and economical. Simple accounts and a few persons can manage the job well.

8. Freedom of Work:

There is complete freedom of work in a small business organisation. Workers are more or less self-sufficient. They are not dependent on the capitalists and carry on their jobs freely.

9. External Economies:

The small scale production secures all kinds of external economies, which are available to large units also. These economies are: better transport, electricity, and communication facilities ;) banking and insurance services; technical workers, etc.

10. No Evils of Large Scale Production:


The small scale production cannot fall victim to the evils of the large scale production i.e., evils of the factory system, overcrowding, etc.

11. Other Advantages In the small scale production, there are some important advantages over the large scale production:

(i) Whenever demand changes, the supply can be adjusted accordingly.

(ii) There are fewer possibilities of strike and lockouts and no moral degradation of the workers is feared.


(Hi) There are no dangers of monopolistic institutions.

Disadvantages of Small Scale Production:

The following are the demerits of small scale production:

1. High Cost of Production:

The cost of production per unit increases because there is a high cost of labour, a very little scope for division of labour and lesser use of machinery.


2. Wastage of By-products:

In the small scale production, it is not possible to make economic use of the by-products, as in the large scale production. By-products of the small producers generally go waste.

3. Less Use of Machines:

In the small scale production, there is less scope for the use of machines. As a result, these firms cannot take advantages of the use of the machinery.

4. Lack of Division of Labour:

In the small scale industries, the size of production is small, and there is lack of division of labour and less profits to the entrepreneurs.


5. Difficulty in Getting Loans:

It cannot enjoy the financial economies. Funds are either not available and if available, they have to pay higher rate of interest.

6. Difficult to Face Economic Crisis:

Because of the limited resources and financial weakness, the small scale producers cannot face economic crisis. The producers do not have the capacity to bear losses for long. In fact, under a small economic crisis, many small factories are closed down.

7. Costly Raw Materials:

In the small scale production, raw materials are purchased in small quantities which are available to the small producer at higher prices.


8. Lack of Standardised Goods:

The quality of goods is not standardised or up to the mark in the small scale production. It is difficult to sell goods because of their low standard and inferior quality.

9. Old Techniques:

In the small scale industries, the production is undertaken with the help of old techniques or old and obsolete machines. It is not within their capacity to bear the risk of installing new machinery.

10. Lack of Research:

The small scale industries have limited means at their disposal. They cannot spend much on research in the field of science and technology. In this way, the small scale industries are a hurdle in the way of technical research and, industrial development.


11. Difficult to Face Competition with Large Scale Producers:

If some large scale producers enter the market, the small producers find it difficult to compete with them. The small producers perish at the hands of the large scale producers.