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PRODUCTION
? Outlines day to day procedures
that describe how the value sold to customers is created
? It is easy to ‘over describe’ in this section
However, the policies and procedures necessary to produce the product or service should be in sufficient detail to allow employees and supervisors to know what will be expected of them.
? It includes: how many service representatives per customer are required
? Production Volumes.
? Contribution Margins.
Production plan
The sales program (based on the sales forecast, once the marketing strategy is defined) is the starting point for the production plan. Once you have information as to the quantities that are to be sold, you will have to foresee the quantities that will be produced and the level of stocks of raw materials and finished products. Broadly, the production plan describes how the company is going to produce its products or services and all critical decisions required by the process. Here you also predict production costs as well as the costs by each sold unit.
Basically, the production plan may be translated into the following chart:
The production plan identifies the production costs and allows you to know which the areas of possible cost reduction are.
To list all production costs is essential in this plan because it will allow you to define the stocks policies, the installed capacity (what should be produced at internal level and what should be contracted) and the price of each product.
The production plan should also identify the capacity threshold, that is, as from what quantities it is required to increase the capacity, ...