Production structure optimization

Production structure optimization
See also
Value chain model Operational management Types of logistics costs Product cost Production - forms of organization Production Added value chain Factor of production Make-or-buy analysis

Production structure optimization involves making production decisions based on the developed activity programs. Any decision on the assortment structure and volume of production is reflected in the costs incurred and achieved revenues and, consequently realized profits.

Goals

The goals of production structure optimization can include:

• Increasing productivity: Improving the efficiency of the production process in order to increase the output of goods or services.
• Reducing costs: Identifying and eliminating inefficiencies in the production process in order to reduce costs.
• Improving quality: Improving the quality of the goods or services produced by identifying and eliminating defects and variations in the production process.
• Enhancing flexibility: Increasing the ability of the production system to adapt to changing demand, product mix, and other factors.
• Minimizing waste: Identifying and reducing waste in the production process in order to improve the overall efficiency of the system.
• Optimizing the use of resources: Ensuring that the production system is making the best use of resources, such as equipment, materials, and labor, in order to improve efficiency and reduce costs.
• Enhancing safety: Improving safety in the production process by identifying and eliminating hazards, and implementing safety procedures and protocols.
• Improving sustainability: Enhancing the sustainability of the production process by reducing environmental impact and promoting sustainable practices.

Overall, the goal of production structure optimization is to improve the efficiency, effectiveness, and competitiveness of the production system. This can be achieved by identifying and eliminating inefficiencies, improving quality, and making the best use of resources, all of which can lead to cost savings, increased productivity, and improved customer satisfaction.

Applications

Manufacturing companies tend to produce such range of products that the profit made from their sale is a maximum.

Specifying the assortment structure and volume of manufacturing companies must take into account various considerations of business activity:

• Internal (dependent on activities of management) - includes: means of production, resources, machinery and equipment, raw materials, personnel, etc.
• External (independent) - mainly market demand on manufactured goods.

Methods

In terms of optimization of product structure, the most frequently used methods are:

• Linear programming
• Analysis of the portfolio of products
• BCG growth-share matrix
• McKinsey matrix
• Production logistics subsystem
• Production capacity curve
• Production reserve
• Production process
• Group technology
• Operational controlling
• Factors affecting demand

References

• Day, G. S. (1977). Diagnosing the product portfolio. The Journal of Marketing, 29-38.