Notes on Nature of production (MOB) (CAPE)

1. Nature
Production
~Jiali Davis
-Understanding The Basics

2. Table of
Contents
01
02
03
04
Nature Production
Input Decisions
Conversion Decisions
Output Decisions

3. Nature Production
01

4. The production process is defined as the
process in which the factors of
production, i.e., inputs of resources, are
turned into products or services.

5. 03
02
Major decisions involved in the production
process are:
01
Input Decisions
Conversion Decisions
Output Decisions

6. Input Decisions
Labour
This refers to the effort and
skills of people who work to
produce goods and
services.
Land
This refers to all natural
resources, such as
minerals, forests, and
water.
Entrepreneurship
Entrepreneurs combine land,
labour and capital to identify
opportunities, organize
resources, and introduce
innovative products or
services, to generate profit.
Capital
This refers to the tools,
machinery and other
physical assets used to
produce goods and services
Inputs are converted or transformed into outputs. This includes the following:
Factors of production: This refers to resources that are used to create
output of goods and services. This includes:

7. Location of production
Fixed Costs
of different sites,
such as purchase or
rent of land, can vary
greatly
Revenue
earned by the
business, especially if
in a service industry,
will be influenced by
location proximity
to the market.
Variable Costs
such as labour wage
rates and transport
costs of raw
materials, will
depend greatly on
location.
Choosing an ideal business location is critical for success, involving operations
decisions about land, labor supply, and enhancing productive efficiency.
Location decisions will have an impact on all aspects of the profit equation

8. A production plan contains details of how many units
are planned to be produced to meet demand. This is
the required prediction or forecast of the future
demand to be made. There are six main methods of
sales forecasting which are sales cycle length
forecasting, intuitive forecasting, historical forecasting,
opportunity stage forecasting, pipeline forecasting and
multivariable forecasting.
Forecasting

9. Quality Assuarance
Continued customer
satisfaction will depend on
the quality of contact with
consumers after purchase.
Customer service
including after sales
service
Product Design
will the product meet the
expectations of
consumers?
Quality of input
customers need goods
and services delivered at
times convenient to
them.
Delivery Sysytems
Production Quality
This can be assured by
total quality
management (TQM)
quality must not
be let down by
bought-in
components.
The aim of quality assurance is to produce goods without defects. Checks are made both
during and after the production process to eliminate faults where they arise. Standards
are set, maintained, and monitored for consumer satisfaction.

10. Conversion Decison
02

11. Capacity planning
This process helps
operations managers
determine the capacity of
their resources and plan
for future growth to
produce enough to meet
demand.
Productivity decision
Making decisions requires
having a list of all the
choices, weigh the possible
outcomes.
Quality Control
Production layout
Production methods
refers to the arrangement of the
physical facilities such as
machinery, equipment, furniture
etc. according to the sequence of
operations of the product
are the way to manage how the
business or suppliers’ products are
produced e.g., job (one-off
production), batch and flow.
This is a process through which a
business seeks to ensure that product
quality is maintained or improved
Conversion Decision
This is where inputs are converted or transformed into output. These decisions include the following:
Quality Assurance
Quality assurance ensures
products meet agreed
performance, design, reliability,
and maintainability standards,
ensuring customer satisfaction
in both manufacturing and
service industries.

12. Output Decisions
03

13. Quality
Control
Inventory
Management
Output Decisions
Distribution
and logistics

14. Quality Control
Quality control detects and removes
components or products that fall
below-set standards. The process
takes place after these products
have been produced. Most
commonly, quality control
inspectors carry out the check by
examining and testing the product.
The main benefit of quality control
is that it prevents defective or
substandard parts and products
from being released at the end of
the production pipeline. The
disadvantage is that quality control
involves a layer of cost at the end of
the production process, as this is
the point when defective products
are identified and scrapped.

15. Inventory Management
In manufacturing, a production-inventory system is concerned with the effective
management of the total flow of goods, from the acquisition of raw materials to the
delivery of finished products to the final consumer. This can be done through inventory
control which is managing the amount of stock held in a business. This includes having a
minimum stock level (minimum acceptable level of stock), maximum stock level (maximum
acceptable level of stock to be held and applying reorder level which deals with the
replenish of stock from minimum to maximum stock level. This can be done through the
economic order quantity. The economic order quantity is the number of units that a
company should add to stock with each order to minimize the total costs of inventory.
Too high a stock level can result in stock loss through wastage, deterioration or pilfering as
well as stock items becoming obsolete, cash can become tied up in stock which can be
more profitably for other purposes. Too low a stock level can mean an inability to satisfy
customer demand and loss of business.

16. Distribution and logistics
The role of distribution in an organization is to get the right product, to the
right consumer, at the right time, in a way which is most convenient. This can be done
through the intensive channel : many intermediaries; selective: small number of
intermediaries; exclusive: one intermediary) and will take these factors into
consideration

17. Distribution and logistics
04
Company
large companies may have
the resources to distribute
their products themselves
Control
If the producer wants to
have control over the
quality of the product,
then a short channel
will be used
02 Market
if the demand for
the product is
urgent
is it perishable; does
it have a high unit
cost; is it expensive
to handle
Product
01
03

18. Distribution and logistics
Logistics is concerned with the movement and storage of goods. (transportation).
Its objective is to place the right goods, at the right place, at the right time, at the right
cost and in the right condition to the final consumer.

19. End of
Presentation
~Jiali Davis