A fundamental concept when talking about production is to determine what the company’s production capacity is.
If the objectives mark a certain benefit and therefore certain sales, these imply a certain production that can be measured in units, hours, machines, personnel, etc.
At a certain moment, the production capacity of the company is one in particular.
If the company does not sell enough to run all the capacity it will have an unproductive surplus. If the company sells “too much” it can be difficult to adapt the production capacity in a short interval of time.
Orders and perhaps customers may be lost. In addition, a greater production capacity implies a new financial investment that remains immobilized in the company. What if this demand for production turns out to be temporary?
Therefore, it is advisable to make an effort to determine with the greatest degree of accuracy what production capacity the new company will have and, above all, how it will respond to changes in demand, both upward and downward.
It is necessary to try to make this capacity as flexible as possible to adapt to the variations that occur and reconcile it with the expected growth in sales.
In other words, the marketer must anticipate the demand; and production people must anticipate how to cover that demand.
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Assuming there are no capacity issues, it remains a challenge to plan and manage the various units of production: machines, people, hours, etc. to attend simultaneously to the orders received.
There are various production planning systems and, here, the entrepreneur’s experience in organizing operations plays an important role.
Normally, an Operations Plan includes the different phases and tasks that must be carried out to produce a unit of product or provide a service.
It has even been proposed that every company should imagine that it is a franchise and be able to detail in writing all the operations that must be carried out.
Knowing as much as possible how to provide the service or manufacture the product will also allow progress through what is called the learning curve or experience curve. Initially producing a unit will have a certain cost for the company.
Theoretically, it is assumed that as more units are produced or a certain service is provided more times, learning occurs that should imply a lower operating cost.
Over time, the company becomes an “expert” on that product and can produce it at a lower cost.
Nowadays almost no company can be conceived without a certain technological component.
Although technology is something that can affect all areas of the company and affect its profitability in different ways, in the production area, knowledge and mastery of a certain technology can be the difference between being in the market and being left out. of the.
This is elementary if that technology is key to the manufacture of the product.
In addition, the use of technology can be decisive in differentiating the product through the improvement of either the quality of the product or modifications in the expanded product.
The correct management of technology both in production and in the product itself can be decisive for the success of a product in the market.
It seems logical that a company maintains stocks in the warehouse of raw materials and other products that are needed for the preparation of the finished product.
However, maintaining an inventory to facilitate production implies maintaining a certain immobilized financial investment and, therefore, being separated from other uses in the company.
As with production capacity, “storage capacity” also requires management that is as adequate as possible, trying to minimize investment in inventories without endangering the rate of production due to a possible lack of material.
There are also different inventory management systems that try to match stocks to demand.
Stocks are something to take into account when creating the company, as they can represent a good part of the initial investment to launch the company and load the financial flexibility of the project from the outset.
Another function to consider in relation to production is all the movement of materials and people that can be produced in the daily activity of the company.
From the collection and storage of raw materials to the storage and delivery of finished products, going through the internal transit of semi-finished products in production, it is convenient to analyze all these aspects to achieve as agile manufacturing as possible and without incurring “hidden” costs. » that reduce the profitability of the project.
In short, the production of the company, whether it is a pure manufacturing process or the provision of services (which has been called seduction) is a factor that, not known by the entrepreneur, must be disregarded. into account when planning the new project.
More than one new business project has failed by not being able to adapt production to the growth in demand experienced or by not having allowed the high initial investment in productive capacity to adapt to unexpected changes in the external environment.