Production Processes

Organizations strive to make a profit by producing goods and services for its consumers. Therefore, business models can be looked at as various proposals for all stakeholders for which an organization develops techniques to create products in a certain field, to be delivered to their desired target market. This determines the functioning of a business, where products are classified for a certain section of customers, ensuring the reliability of its goals to deliver their services. In the 21st Century where businesses are highly competitive, managers tend to use innovative ideas to increase their sales and profit such as improving productive flow and product quality, which have more positive impacts on a business than negative.

As an increasing profit is a major goal for any organization, it requires them to make right decisions to obtain it. Short-run profits can be achieved by reducing costs, investments and avoiding maintenance. Moreover, increasing overall profits could be attained with very high prices. Therefore cost structure and its elasticity is relevant to profit.

The price of a product sold to a customer drives the gross margin of the product cost. Therefore, the cheaper the production cost, the cheaper the price of the product along with a constant gross margin. The law of demand states that as the price of a product decreases demand increases; hence increasing sales and profit. However, it is often argued that a decrease in production cost is a result of a decrease in labour costs, which could affect product quality. The principle of improving product quality is quite simple; an organization has to determine the difference between desired and actual performance, which can then be improved by the production flow that permits minimal waste.

Selecting a manufacturing system for the production depends on the categorization of a firm. Some manufacturing systems have a specific purpose, such as companies that produce only one product in large...