VI. Production Plan
The production plan presents or describes activities related to the production of goods. The production plan is the result of the industry analysis, particularly the study of supply and demand and consumer behavior.
The production plan usually includes the following:
1. Production schedule
2. Production process
3. Processing plant and equipment
4. Sources of materials
5. Production cost
Production Schedule
The production schedule presents the total number of goods to be produced and the expected time to produce them. The total number of units to produce, however, is usually affected by the following factors:
1. Demand for the product
2. Availability of resources
3. Capacity of the plant
The primary factor that influences the number of goods to be produced is market demand. The entrepreneur must produce goods based on the total demand of the consumers. The second consideration is timing. Producing the goods exactly at the time when the consumers need them is an excellent production practice.
Production Process
The different processes or stages involved in the production of goods must be clearly spelled out in this section, as well as the description of the following:
1. Exact processing procedure
2. Materials, parts, or ingredients required
3. Expected time to process the product
A schematic diagram showing the procedural steps in making the product will help clarify this section.
There are instances when the waste disposal system or procedure must be discussed in this section. This will also reflect the kind of social responsibility that the business is adopting.
Processing Plant and Equipment
This section of the production plan describes the manufacturing plant, the machinery and equipment, and the various tools to be used in the production of goods, including their respective estimated cost. It also talks about the location of the processing plant and the reason for the selection of the site. In most instances, the layout of the processing plant and the factory building is illustrated. The general perspective presents the general view of the manufacturing plant.
In the selection of the machinery and other equipment, the entrepreneur must consider the following factors:
1. Capacity of the plant and machinery
2. Model of the machinery or equipment
3. Availability of spare parts
4. Cost and terms of payment
Sources of Materials
The possible sources of raw material and manufacturing supplies must be described in terms of the following:
1. Proximity of the source to the processing plant
2. Payment terms and conditions
3. Discounts and damages
4. Terms of shipment
The quality of raw materials plays a very significant role in the production of quality products. That is why most businesses get their materials from reliable and reputable suppliers. Some businesses assign certain personnel to check and assure the quality of deliveries. Such practice poses as an additional expense to the business. It is nevertheless, a safety measure especially when the supplies are relatively new or less known by the entrepreneur.
The terms of shipment, including the freight, discounts, and mode of payment, have a direct bearing on the cash position of the business. The entrepreneur must find trustworthy suppliers and maintain good relationship with them.
Production Cost
This section of the plan must show the estimated cost of production. The three elements of cost, namely labor, direct materials, and factory overhead must be properly described and accounted for. In the event that the final product involves the use of several direct or indirect materials, all the materials used in the production of goods must be properly listed and provided with the cost. The total cost of the proposed product may serve as the basis in setting its selling price, which must not be lower than its production cost.
The production plan usually includes the following:
1. Production schedule
2. Production process
3. Processing plant and equipment
4. Sources of materials
5. Production cost
Production Schedule
The production schedule presents the total number of goods to be produced and the expected time to produce them. The total number of units to produce, however, is usually affected by the following factors:
1. Demand for the product
2. Availability of resources
3. Capacity of the plant
The primary factor that influences the number of goods to be produced is market demand. The entrepreneur must produce goods based on the total demand of the consumers. The second consideration is timing. Producing the goods exactly at the time when the consumers need them is an excellent production practice.
Production Process
The different processes or stages involved in the production of goods must be clearly spelled out in this section, as well as the description of the following:
1. Exact processing procedure
2. Materials, parts, or ingredients required
3. Expected time to process the product
A schematic diagram showing the procedural steps in making the product will help clarify this section.
There are instances when the waste disposal system or procedure must be discussed in this section. This will also reflect the kind of social responsibility that the business is adopting.
Processing Plant and Equipment
This section of the production plan describes the manufacturing plant, the machinery and equipment, and the various tools to be used in the production of goods, including their respective estimated cost. It also talks about the location of the processing plant and the reason for the selection of the site. In most instances, the layout of the processing plant and the factory building is illustrated. The general perspective presents the general view of the manufacturing plant.
In the selection of the machinery and other equipment, the entrepreneur must consider the following factors:
1. Capacity of the plant and machinery
2. Model of the machinery or equipment
3. Availability of spare parts
4. Cost and terms of payment
Sources of Materials
The possible sources of raw material and manufacturing supplies must be described in terms of the following:
1. Proximity of the source to the processing plant
2. Payment terms and conditions
3. Discounts and damages
4. Terms of shipment
The quality of raw materials plays a very significant role in the production of quality products. That is why most businesses get their materials from reliable and reputable suppliers. Some businesses assign certain personnel to check and assure the quality of deliveries. Such practice poses as an additional expense to the business. It is nevertheless, a safety measure especially when the supplies are relatively new or less known by the entrepreneur.
The terms of shipment, including the freight, discounts, and mode of payment, have a direct bearing on the cash position of the business. The entrepreneur must find trustworthy suppliers and maintain good relationship with them.
Production Cost
This section of the plan must show the estimated cost of production. The three elements of cost, namely labor, direct materials, and factory overhead must be properly described and accounted for. In the event that the final product involves the use of several direct or indirect materials, all the materials used in the production of goods must be properly listed and provided with the cost. The total cost of the proposed product may serve as the basis in setting its selling price, which must not be lower than its production cost.
PRODUCTION PLAN Production Schedule Production Process Equipment Required Sources of Materials Estimated Production Cost |