Production is an activity that converts materials into useful forms. The materials may be raw materials, semiprocessed or semifinished goods, or even finished products. Machinery, equipment, methods, and processes are the basic elements of production.
Using the formal definition of production, there are four types of manufacturing processes:
The breaking down of raw materials, such as crude petroleum, into their components.
The removal of substances from other materials, as in the extraction of copper from ore.
Changing the form of materials in some way such by pressing, weaving, or cutting. Examples include the manufacture of clothing, shoes, and metal bolts.
Combining materials to form new products, as in the manufacture of glassware, metal products, or synthetic fibers.
Another type of synthesis is assembly, whereby various fabricated parts are place together to form a new product (as in the manufacture of automobiles).
Small businesses usually use fabrication or synthesis for their manufacturing. While you may not consider your business as manufacturing, if it produces a product that is precisely what you are doing. For instance, a small printer is practicing synthesis in its production of the printed products it produces.
The reason that this is an important concept to small businesses is that the organizational concepts that are used for production on a large scale are equally pertinent on a small scale. In order to produce your product efficiently and economically, you need to consider purchasing, receiving, shipping, quality control, research and development, maintenance, and stockkeeping.
Purchasing refers to the obtaining the raw materials, components, machinery, equipment, supplies and necessary services needed in the production process. Some of the items that need to be considered in setting up a purchasing operation are:
- Ascertaining what needs to be ordered
- Sources of supply
- Quotations, prices and terms for supplies
- Contracting for the supplies or services
- Verifying that what has been ordered has been delivered on time
Receiving the supplies needs to be coordinated with purchasing. If the items are delivered to the precise area that they are needed, someone needs to verify that what was received is what was ordered, and that it is undamaged. A good recordkeeping system is critical to this process so that you don't add costs to production by receiving the wrong or inappropriate materials and equipment.