Optimize Asset and Recourses Utilization
Production is generally the second largest cost element of company’s total expenditures –after procurement costs.
The cost of goods sold for a production company consists of raw materials, packages and production. These three elements joint-together transform into finished products and services – in which the company generates its core revenues from. Cost of goods sold is generally on the range between 35 and 60 percent of net sale revenues. Effective procurement and productions management is therefore one of the foundations for a company to focus on to drive competitive advantages. Production is commonly perceived as a pure cost generator where ongoing targets are set to reduce production cost over and over again – often by fixed percentage target. In contrast with this then for most companies; the largest part of production cost can in general be considered as fixed. This is because the investment in the production line and the workforce dedicated to the line are fixed cost – no matter if the production line is operated or not the cost will occur anyway. In that case the subject matter turns into; how is it possible to utilize the fixed production cost in the most effective manner?
To triumph over the destroying of values every product and product group must be assigned an efficiency standard that is utilized for planning and performance evaluation purposes. The production efficiency standard help to expose the actual production line utilization. To reach best-in-class level then principally proper planning must take place at right time to achieve the highest production efficiencies – else production will not succeed. Furthermore, all raw materials, packages and recourses must be planned at right time in the right quantity and quality prior to production begins. In other words, effective production management is anchored in practicing ideal consistencies, through faultless and error free planning and execution controls.
The type of production methods are rooted in the same basic principles and that is to; eliminate all destroy of values out of the production processes. It does not matter if it is a continuous production where production is carried out through a seamless process using conveyors and other devices to move the single product to the next automatic step in the process. Or Mass production where machines are arranged in line and production is made in a continuous line process. Or Batch production where production jobs are passed through production in batches or lots. Or any other type of production method. The same principles can be applied everywhere and that is; one must put vast focus on eliminating the destroying of values tasks and activities, from the entire production process.
Production management can be quite stressful and the role embraces for example common problem fixing, quality control, resolving production capacity constraints and resolving out of stock issues. Moreover, resolving machine breakdowns, managing spare part needs and maintenance issues, to name few. However, establishing smart and effective production management practices puts a stop to all destroying of values stress factors and prevents them to occur over and over again – basically, they are put under preventive execution controls.
Effective production management can create huge competitive advantages and should be fostered as one of the core components of every company’s growth schemes. Continuous improvement programs focuses on value creation by gradually increasing the production efficiency and effectiveness – to more effectively capture, create and fulfill consumer demands at the lowest possible cost proposition.
Production capacity utilization is founded on several influence factors such as; sufficient sales demand to embrace with the current available production capacities, total number of SKU’s to manage, economical production run sizes, production maintenance and the changeover time, to name few. The quality attribution of the production actual work schedule is optimized by focusing on minimizing the destroying of values in production – through effective planning and continuous improvement programs.