The business to sustain in the market need to earn profits and thus have to closely examine the production factors as production constitutes an essential component for any business. Production includes all the activities from manufacturing, acquiring till the development of the product.
To enhance and improve the production efficiency, there are three major factors that need to be considered. They are -
The appropriate location of the business firm or the manufacturing firm implies facility location. The major aspects that need to be considered with regard to the location of the manufacturing facility are that the facility should be easily accessible to the customers, workers and the facility should have easy transportation.
Customer satisfaction is the main target for any business organization. On these lines, it is the product and service, that are crucial and with relation to product manufacturing unit plays an important role. Manufacturing unit tend to be successful only by its location, the place where the unit is situated.
While selecting the business location, the following are some of the important factors that have to be considered -
The size of the business is referred as scale. The size of the business can be controlled by the management by offering volume-discounts, making dealings etc.
The process by which all the resources are allocated and optimized in order to obtain the best results in the market is known as operating the business at scale. The efforts are optimized. New customers can be acquired and more market share can be occupied and attained, and costs can be reduced by maintaining the costs under control and increasing the sales volumes.
The cost that is being incurred either to manufacture a product or to deliver a service is termed as cost of production. The main elements that influence the cost of production are raw material and labour. When the total cost of production is divided by the total number of units produced, it will give per unit production cost. In order to determine the price of a product or service, it is very essential to know the cost of production.
Two components – Fixed costs and variable costs constitute the Cost of production.
The choice of whether to manufacture an item internally or buy the item from external sources is known as Make-or-buy decisions. When manufacturing is being outsourced, it is known as outsourcing and is the Buy side of the decision. These decisions play an important role in the situations whether a complete product or a part of the product needs to be modified.
The business conditions that support Make decisions are as follows -
The business conditions that support Buy decisions are as follows −
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