Production Basics

Continuing the story of your production – the previous post begins the story, you may want to read it first if you haven’t already.

Your business is producing what the market wants to buy, you have great connections with your suppliers and customers. But of course the rate at which the market buys isn’t always the same as the rate at which you produce. So you need storage.

The question is: how much storage? You could have a month or two of supplies so that your factory never runs out, and the same month or two of finished product so you can always immediately serve your customers. That would be expensive to have that much space, and it would require a substantial profit margin to over the storage costs when you sell, so maybe that’s not the best way.

You can reduce your storage needs by buying on a Just In Time basis. That requires you to communicate the relevant parts of your production schedule to your suppliers so they can deliver just before you need what they provide. That can be via a comprehensive system that plots your production and sends requests to every supplier, taking into account their lead time, every time you need additional material.

Or you could just have a public version of your production schedule that your suppliers have access to, and allow them to decide what to produce and deliver, and when. Won’t work? This is what Walmart does. It is up to each supplier to ensure that each store has their product on Walmart shelves. If Walmart ever run out they simply look for a new supplier who will deliver on time.

Or if you don’t want or need to manufacture then maybe you can arrange to drop ship someone else’s product. You won’t need any storage at all, though you need to trust that your supplier will deliver in a timely manner to your customers.

Depending upon the business model you choose you will need different software to support it – you might need a warehousing system that tracks every item and another to control your manufacturing, or you may only need a good communication system to you can order and have the product shipped directly to your customer.

The point is: what do you need your software to do? Establish your required functionality, then look for a program that does what you want. Once you have that, buy the hardware that the program runs on.

If you can’t find a program to do exactly what you want then either slightly adjust your requirements (if you can do so without compromising anything important) or find a developer who will create a bespoke system for you.

The next post will complete the production posts for now.

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