Business Production in a nutshell

What is an Operational Plan?

An operational plan is also known as a work plan that describes the physical necessities of your business's operation, such as your business's physical location, facilities, and equipment. Depending on what kind of business you'll be operating, it may also include information about inventory requirements, suppliers, and a description of the manufacturing process.

In other words throughout such a plan, we aim the better prepare our input in such a way that the output generated will meet the existing demand.

What is Operations Management?

Operations management focuses on using your current factors of production which are considered as inputs in order to achieve as much output as possible, at a certain quality level and within a specific time, either under the form of consumers goods, industrial goods, or services.

Our aim as an operations manager should be to create as much added value as possible, in order to be more relaxed about other costs that occur in the process of making a finished good and still by the time it is being sold, encounter a decent profit margin.

What are Economies of Scale?

The advantages encountered by a company from growing are known as economies of scale. Companies can achieve economies of scale by increasing production and lowering costs. This happens because costs are spread over a larger number of goods.

Otherwise said, economies of scale represent a reduction in the average cost of production for a unit as a result of an increase in the production capacity. The size of the business generally matters when it comes to economies of scale. The larger the business the more cost savings are involved.

What are Diseconomies of Scale?

Since a company will constantly seek to grow as a result of the benefits resulting from the economies of scale, it is diseconomies of scale that actually prevent most firms from being able to completely dominate a certain market.

Diseconomies of scale are disadvantages that a company encounters as a result of growth. Diseconomies of scale can be seen as factors that cause the average cost of production to increase, although we are experiencing an increase in the scale of operation.

How do we decide which production method suits our business?

The choice of production method rests on a number of variables that will change over time. The following are some factors that will influence business in its selection of production method:

#1) Effective demand

#2) Nature of our product

#3) Available capital

#4) Size of business/market

#5) Available labor

What is a Multi-Site Location Business?

A business that operates from more than one location is considered to be a multi-site location business. Running a multi-site location business has advantages and disadvantages. Some of the most popular advantages would be:

- closer to customers (proximity)

- economies of scale

- good understanding of the local market & culture

On the other hand, in terms of the disadvantages we might encounter:

- poor coordination between locations

- diseconomies of scale

- cultural and language barriers