In planning for your production capacity, have you considered every contingency?
Picture this scenario: Your demand and sales have been great. That’s the desired outcome for any business whether you’re a professional service firm, produce chocolate eggs or manufacture aerospace parts.
But if strong sales are the reason you’ve maxed out your factory’s production capacity, you’d have reason for concern. You need to know which direction to go.
After all, it’s not problematic when your productive capacity is limited by equipment maintenance. But it is, if sales is the cause.
You don’t want unhappy customers nor do you want damage to your reputation.
Here are seven tips:
1. Analyze your situation
Consider all your strengths, weaknesses, opportunities and threats. That includes all kinds of issues from staffing to security.
Get input from the perspectives of finance, human resources, marketing, sales and operations.
Do you forecast continuing demand? You need to decide whether you’re having a temporary sales increase or will enjoy robust sales indefinitely.
Your sales forecast and capabilities will determine what steps you need to take.
2. Increase your number of shifts
Decide whether you can merely schedule overtime, find temporary workers, contract with a temporary staffing firm or hire permanent employees. For quality controls, you’ll need to be able to assign key staff to work another shift.
If you’re uncertain in forecasting, like many industries you’ll probably want to hire temporary help. If you can contract with a temporary help firm, you can always arrange to hire away their best workers if sales demand stays strong.
You don’t want unhappy customers nor do you want damage to your reputation.
3. Increase your capacity
This might be the simplest solution assuming there are no obstacles.
Variables include whether or not new equipment will necessitate more workers, or whether you use the same equipment and merely add more workers.
4. Increase your prices
In general, the view on the law of supply and demand is that a low supply leads to a high demand. So, if your sales forecast is bright, it might be time to increase your prices.
5. Outsource the additional work
Consider the feasibility of subcontracting the work. Be certain you can trust the subcontractor will uphold your quality of standards.
6. License your work
It might be plausible for your competitors to produce products for selling to your buyers.
7. Focus on products with better margins
Avoid capital investments on equipment or hiring personnel. Why produce thin-margin products when your other products are more profitable? Focus on them first and consider producing other high-margin items.
From the Coach’s Corner, related information:
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Accounting / Finance – Why and How to Determine Your Break-Even Point — Uncertainty can kill hope in business. Best practices in management mean having the right information to alleviate uncertainty in business. For that you need the right tools. One important tool – know your break-even point (BEP).
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“If the other fellow sells cheaper than you, it is called dumping. ‘Course, if you sell cheaper than him, that’s mass production.”
-Will Rogers
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