The Production Process

Inputs:

These are the factors that are fed into a business’ process to enable it to produce output. There are 6 basic types of inputs:

• Material Input: raw materials from suppliers consumed or converted by transformation process (COGS)

• Capital equipment: plant (premises), machinery required to perform operations.

• Labour: human effort required within the operations function (skills, specialisation)

• Information: On customer preference, on material availability, on technology operations, on cost performance, on quality feedback…

• Time: is a constant requirement for operations processes; maximising efficiency is key. Service operations cannot stock output; the passing of time is critical (airlines overbook).

• Money: Required to be converted into any aspect mentioned above; financed through debt / equity.

Transformation:

The creation, maintenance and improvement of the process of converting inputs into output.

Aspects of the transformational process will depend upon:

• Output: produce a good or service?

• Volume: how much to produce?

• Variety: what level of customisation?

• Technology used: automated / flexible?

• Jobs: skilled, unskilled?

• Layout: where things are placed in process

The continual aim is to improve the efficiency of the process (more with less). This reduces the costs of firm, lifting profitability.

Outputs:

The end result of business activity. Can be a finished product to end user, an intermediate component to be sold to another business for further value-adding, or the provision of a service (resulting in a change for the customer).

The features / aspects of a firm’s output must be responsive to the requirements and preferences of the customer.

Intangible output is included as an output:

• After-sales service

• Technical support

• Warranties

• Upgrades

These intangibles help overcome barriers to purchasing the product.