Logistics is the name given to coordinating people and resources to get a project done. If the logistics of the business doesn’t make clear sense to the reader they will be confused as to why you opted to select an imperfect system.
Production, whether done in-house, off-shore, or in a contract facility is a critical component of the business plan. It has to be done right and it has to make sense. Production refers to a service business as well as an agriculture firm or manufacturing plant. Often the immense load of starting and running a business leads to convenient solutions rather than optimum sources. Even if the only component of production is labor you still have to consider how to obtain the best sources for the correct price. You can’t take shortcuts in the analysis of the production operation. Each segment of the production process must be considered and the best combination of components and labor must be determined before actual production begins. Leaving even the smallest production decision to a later date can have serious ramifications for the future. You of course, would not indulge the reader with every little nuance of the process, but you must show from your planning that you have considered and worked out even the most minuscule detail.
Managing production is about managing people and control. To keep a consistent product or service management needs to careful monitor all aspects of the production cycle. It’s not enough to just lay out measurements and expect everyone to follow; after a time things get sloppy, shortcuts are taken, and important quality control decisions get skipped. Control has to be about continual quality improvements, increases in efficiency, reducing costs and labor utilization.
The process of planning is a thread that runs through the total operation, but nowhere is it most evident as it is in the production process. Every firm as options as to what it should produce, what clients it goes after, what training is needed, what parts are used and what price should be charged for the end solution. The variations are nearly endless in most firms. Deciding what to produce, where to produce it, what components are included and what price to charge, what services to offer is a key component of strategic planning for any operation. In writing the business plan the entrepreneur is torn between the immediate plans and the long-range goals. Adding too much and the reader will think you lack focus – not including enough and they may contend that you are not scalable.
In the end you have to show that you have a strong strategic plan developed and that you are going to ramp up these future concepts when the time and financial strength is adequate to support the move. Smart management is about knowing when to move and in what direction to go.
Production in a Global Economy
In today’s global economy goods and services can be produced in many locations, moved to storage facilities and shipped from nonadjacent locations to customers in many different parts of the globe. For a startup company you may not have actually worked through all of these details as you build the business plan, figuring that some of the components will be sourced later. Readers scrutinizing your plan are keenly aware that some of the details that you expected to be “no problem” in reality turn out to be major stumbling blocks. This is another one of those situations where often the “devil is in the details”. This is especially true when working with distributors, wholesalers, retailers, manufacturer’s reps, and sales people.