To maintain a steady flow of production, the firm or the company must
have an exact knowledge of the resources it commands and it needs for
production. Estimating the resources inevitably involves having all the
necessary materials, men and money to continue production. Leaving aside the tangible components like
materials, men and money, the company must have a good market sense as the production
is linked to sale forecasts. A good effective formula is production and sale
forecast go together. Sale forecast is dependent on market scenario and sale
forecast includes the intricate fact of sale potential. If the company does not
take into account the potential sale forecast, it may have to face the risk of
shortage of products when needed. Actual sale and potential sale make the
market scenario. A good business sensibility must work when trying to assess
the market potential. Let us see some of the important aspects of the ability
to assess the market potentials.
First, you must know the size of the market. Analysing market is an
intricate but very interesting act but we need not go into it deeply for the
present. You must be able to know approximately whether the market you are
involved in will grow or there is no opportunity for growth. This point is
essential because it helps you decided the quantity of the products you are to
produce. Here, you must be aware of your market share. Suppose, 100 readymade
garments are sold every day in the market, for example, how many buy your
products decide the market share; let us say, about 20 people buy your product;
then, your market share is 20%. This knowledge helps you know your competitors
who command a bigger market share and what is their strength in the market to
sustain them. The knowledge of the strength of your competitors gives you the
fact of your strength. Based on your
strength, you can almost make a very near right assessment that you will not
lose your market share. You must have a clear idea of your target market which
is what they say your segment which you must focus. You will have to decide
whether you want to or you can extend market to another segment also by
producing some newer products. This means you should have planned much in
advance since it involves capital and venturing into another segment where
there are already players who have established themselves. Can you face the
stiff competition from the leading players of that segment you propose to enter
now? Finally, what do you think about your profit margin? Can you increase it
with confidence that you will not suffer in the market or you deem it right now
to decrease it to manageable level so that your competitors might feel vexed
since you stand a better chance of taking away their customers? All these
questions are there to be addressed while assessing market trends.
Remember we began with Production Planning and after discussing
Effective Utilization of Resources, Steady flow of production, we are now almost
completing the next aspect: Estimate Resources. By this time you could have
felt that all these aspects of Production Planning are interconnected and they
are too close with each other to clearly demarcate where one ends and the other
begins. One more thing: when you real all these lines, you may feel that it is
very difficult to continue in business successfully. Actually, this is not so.
When you invest your money in business, all these points of consideration come
to you naturally. You know Risk is there if you are not careful and certainly
you will be careful because you have put in your money and losing it means
losing a very big part of life. Therefore, you become automatically cautious
with every step you take in business. You can see that there are millions and
millions of business people, big and small across the world. And the world is
business.
We will look into the next component of Production Planning in our
next session: Ensuring optimum
Inventory.