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What Is Indirect Production?

Indirect production refers to the processes that support the creation of goods without being directly involved in their manufacture. It encompasses tasks like maintenance, transportation, and administration, which are essential for a seamless production flow. These behind-the-scenes activities ensure that direct production lines keep running efficiently. How does indirect production impact overall business efficiency? Join us as we examine its pivotal role.
Esther Ejim
Esther Ejim

Indirect production is an economic term that refers to the process of producing something in an indirect manner. This may be achieved through the use of another item for the production of the final good, or it may be achieved through the production of something to be used as a means to obtaining another item. In either case, the item that is produced is merely used as a means for the production or procurement of the final item.

An example of indirect production can be seen in the production of an item expressly for the purpose of producing other items. Usually, the indirect product is a form of machinery or equipment that is used to produce other objects. For example, a company that makes prefabricated houses might construct a patented equipment that serves as a mold for the construction of a portion of the exterior for the prefabricated homes. In this case, the machinery is merely the means that is used for the production of the final product and is consequently a form of indirect production.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

Indirect production is not only limited to machinery or equipment as it may also be applied to services as well. A particular product may serve as a form of indirect production if its ultimate aim is to serve as a means to enable the final production of a service. For instance, this would apply to a telephone that was specifically manufactured by a company for use by its customer service representatives. In this case, the telephone is just a means for the final product, which is the customer service.

Another example of indirect production can be seen in the case of the production of an item for exchange or sale. In such a situation, the item that is produced for sale is an indirect means to obtaining other desired items. Such a scenario can be seen in the case of a rice farmer who produces more than enough rice to meet his needs and sells the extra rice to other people in exchange for money that serves as a medium for obtaining other necessary items. Where the rice farmer is successful in selling some of the rice, the money from that sale can be used as a means for obtaining other items like clothes, shoes and fuel. In this case, the production of the rice serves as a form of indirect production.

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