Production decisions involve the processes by which raw materials are converted into the finished products through manufacturing. These decisions play a very important role in the product quality, cash flow, control etc.
To help make your production decisions you can consider the following:
Will goods be manufactured or purchased? One may tend to think that complete ‘in house manufacturing’ of a product will reduce your costs. This may not be true in the case of most entrepreneurs.
The technical experience, quality and dependability that other manufacturers have may be far greater than yours if you are just starting up your business. Also the manufacturing process will have fixed costs as well as initial costs that shall eat into profits.
Instead of manufacturing the products you could consider first purchasing from suppliers and later think about going into production yourself. You could also consider purchasing major component parts from others and doing only the final assembly.
How many items would you like to produce? This decision will impact your decision of how much physical space is required and how many people you need to hire.
What raw materials, equipment and supplies will be needed for manufacturing? Are these readily available? Can these be leased or purchased?
What operations are required in the production process? What is the sequence of operations and how much time will be requited for each operation to be performed? Could the operations be combined or sub-contacted? This consideration will help you plan and layout, the space needed, the number of employees, the skills needed etc.
How much space will be needed? In addition to the basic production operation, space for storage of raw materials, supplies, tools, component parts, finished goods, restrooms, employee/visitor parking, employee lunch areas, an office and possible future expansion should be considered.
What level of quality is desired? How will the quality be measured? How will consistent quality be maintained? Who will be responsible for delivering quality? Quality control is an important factor if you are an entrepreneur. If you are an entrepreneur and plan to sell your products at a lower price and less quality, then this shall work against you.
Unhappy customers may return defective merchandise for expensive repair or replacement. They will tell their friends and family not to buy your products. They may even complain to your retailer who may stop ordering from you in the future. Therefore your quality control planning should be strong.
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