Chain of Production:

            Primary, secondary and tertiary industries are the stages in the chain of production, which is the process by which raw materials reach the consumer as finished goods or services. Each stage of production, value is increased. For example, consider a chain of production for a wooden table. In the primary stage trees are cut down and sawn into planks. In this stage planks (raw materials) are very cheap. In the secondary stage the wood is shaped into a table. In the production process of wooden table, manufacturer uses labours, machines, raw materials and other materials needed to finish the product. Overhead costs such as rent, fuel and power, insurance, telephone charges etc. are also incurred in the production process.  Therefore at the end of the secondary stage, the value of the table will be much higher compared to the primary stage.  When selling the tables to the wholesalers, manufacturer also adds a profit margin. In the tertiary stage , the wholesalers and retailers will add profit margin when selling the tables. Therefore, value increases at each stage of production until it reaches the final consumers.

The chain of production for a wooden table would be as follows:

Primary- a tree is cut down and sawn into planks.

Secondary- the wood is shaped into a table.

 

Tertiary- the table is transported and sold by a retailer.

Another way of classifying production is as follows:

• Direct Production: This is producing goods and services for the producer’s own use. For example, when a man grows food crops for his own use or a man builds his own house or makes his own furniture, it is called direct production.
• Indirect Production: This involves specialization in a particular type of work. For example, a man specializes in ensuring that the quality of a product is standardized. There is division of labour, which leads to specialization.