Small Business

‘Capacity’ in this chapter is defined broadly as the major capital or fixed assets of a business — the buildings, land, plant and equipment. Decisions to commit relatively large proportions of plant and the limited resources of a small business in buying capacity need to be treated with great care. Small business ventures are extremely vulnerable; they are rarely able to hedge their judgements in the area of investment decisions. This is, however, an area where very often decisions are taken intuitively — often almost as an act of faith. There can be a feeling that investment in capacity is essential to support growth, to increase competitiveness, and consequently to increase market share. It can be assumed that this is the way to make your cash work for the business. Through more conservative eyes, the picture looks very different. Investment in capacity has an inevitable timescale, implies specific commitments, reduces options, and ties up cash. It makes a fundamental impact on what can and what cannot be done in terms of organising the production/operations processes.

The five chapters which comprise Part III are concerned with providing an outline of the methodologies of analysis, planning and control of production/operations tasks. The aim of the business is to sell, profitably, its goods and services into its market. Success depends firstly on understanding how orders are won in that market, and secondly on evaluating how effectively the business can satisfy the order-winning criteria — generally this will be some combination of, for example, design, performance, quality, price and delivery speed. Achieving the necessary ‘balance’ between these performance criteria is heavily dependent on how well the business plans and controls its production/operations functions.

As explained in Chapter I, the POM task is to convert inputs into the required outputs of products/services to be sold in the market place. The prosperity (and even the survival) of a small business is largely determined by how well this is accomplished. Two of the most important features of the task concern the effectiveness of this conversion process and the achievement of the quality specification of the product or service. A key measure of effectiveness is productivity, the ratio between outputs from and inputs into the process. The achievement and improvement of productivity and the control of quality are important POM tasks, critical to the viability of the business as a whole.