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

Structure of production 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.

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.