Operate a Manufacturing
Optimizing Daily Operations in Business
This section details the daily operational requirements of the business, including location, equipment, staffing, processes, and environmental factors. The entrepreneur must identify the following key elements:
- Step-by-step product manufacturing process.
- Daily and annual operating hours.
- Production time per unit.
- Factory and necessary machinery/equipment to commence production.
- Utilities and other requirements (e.g., ventilation, drainage).
- Sourcing of raw materials and supplier terms.
- Inventory control.
- Product and price testing.
- Quality control.
Inventory Control
Inventory control is the process of monitoring and documenting stock levels at any given time, as well as tracking the movement of that stock. It encompasses all stages of operation, including purchasing, delivery, usage, and reordering.
Effective inventory management ensures timely production, safeguards against supply chain disruptions, and enables efficient control of working capital, as stock value is an integral part of accounting.
5 Main Types Of Stock
- Finished Products: Items ready for sale.
- Raw Materials & Components: Ready-to-use elements in production.
- Work in Progress: Items currently undergoing the production process.
- Buffer Stock: Reserve supply of raw materials and components.
- Consumable Stock: Items used in production, such as fuel and packaging.
How much stock should be kept on hand?
Maintain stock levels based on your business size, customer demand, and sales plan. Excessive stock can negatively impact profits and storage costs.
Inventory Management System
Here’s a rundown of some simple inventory management approaches to help you figure out what to order, when to order it, and how much you need:
- Batch Ordering: Order based on what you’re producing in each batch.
- Minimum Stock: When your stock hits a low point, it’s time to reorder.
- Regular Stock Checks: Keep your stock at a set level by ordering regularly.
- Just-in-Time: Only order what you need right now.
| FIFO | LIFO |
| The first in, first out (FIFO) method assumes that the first unit making its way into inventory–the oldest inventory–is sold first. | The last-in, first-out (LIFO) method assumes that the last unit making its way into inventory–the newest inventory–is sold first. |
| FIFO | LIFO |
| The first in, first out (FIFO) method assumes that the first unit making its way into inventory–the oldest inventory–is sold first. | The last-in, first-out (LIFO) method assumes that the last unit making its way into inventory–the newest inventory–is sold first. |
Manual Inventory Control and Tracking System
Certainly, two established methods exist for inventory management: the Stock Book and the Stock Card. The Stock Book facilitates a simple record of stock receipts and disbursements, aiding in the determination of reorder points. Conversely, the Stock Card entails maintaining an individual record for each inventory item, replete with comprehensive details pertaining to that specific stock.
Distribution and Supply Channels
A supply and distribution channel consists of a series of businesses or intermediaries that move a product or service from the producer to the final consumer. This may include wholesalers, retailers, distributors, and online platforms.
Channels are classified as direct or indirect. A direct channel allows the consumer to purchase directly from the producer, while an indirect channel involves intermediaries such as wholesalers or retailers.
Other parties like agents, brokers, resellers, franchisors, franchisees, affiliates, and drop shippers in online marketing can also act as intermediaries. However, this usually results in higher consumer prices due to added commissions. Therefore, a shorter distribution channel with fewer intermediaries is often more cost-effective.
Understanding Procurement in Business
A supply and distribution channel consists of a series of businesses or intermediaries that move a product or service from the producer to the final consumer. This may include wholesalers, retailers, distributors, and online platforms.
Channels are classified as direct or indirect. A direct channel allows the consumer to purchase directly from the producer, while an indirect channel involves intermediaries such as wholesalers or retailers.
Other parties like agents, brokers, resellers, franchisors, franchisees, affiliates, and drop shippers in online marketing can also act as intermediaries. However, this usually results in higher consumer prices due to added commissions. Therefore, a shorter distribution channel with fewer intermediaries is often more cost-effective.
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