Determining the Type and Quality of Products or Services

Posted by Imam Larh on Wednesday, 28 March 2018

1. Understanding Production, Products, and Services

Production can be interpreted narrowly or broadly. In a narrow sense, production is a human enterprise that processes or transforms economic resources (ingredients) into new products. Whereas in a broad sense, production is any activity aimed at creating or adding value to a (benefit) a

goods/services that can be used to meet the needs.

Thus, the essence of production activity is to increase or create the value or benefit of a good/service. The benefits (utility) created to consist of the benefits of the form, the benefit of the place and the benefits

time. For more details see the following example:

a) The benefits of the form (form utility)

An entrepreneur opens a plastic waste processing business into various plastic flower pots, processing household waste into animal feed, processing cassava into chips, and so forth.

b) Place utility

An entrepreneur opens an effort to sell stones in urban areas, taken from rivers/times in a village or a farmer brings his coconut crops for sale to a city market.

c) Time benefit (time utility)

An entrepreneur does some parts of his harvest to be sold or exploited during the famine season, someone who opens a raincoat making business for sale near or during the rainy season.

Each production activity produces output/product in the form of goods or services. Thus, the product is the result obtained from the production activity. However, the notion of the product as a result of production is often interpreted

as goods, or often goods that are products of production activities are called products. Therefore in order not to doubt, then the meaning of "product" in this material is goods, as well as services that are the result of production activities.

Products/goods are the results of production activities that have physical and chemical properties, and there is a period between when produced with when the product is consumed or used. Meanwhile, services are the result of production activities that have no physical or chemical properties and there is no time difference between when produced with when consumed. 

From the understanding of these products and services, of course, you can clearly distinguish between products and services. In addition, there are other terms that are always associated with production activities, namely productivity, and producers.

Productivity is the value of output in relation to a particular input entity and is generally expressed as a counterweight to the average work result in relation to the average person's hours of labor given in the process. Whereas the intended Manufacturer is a person, agency or institution

produce a product or that organizes the production process. The production process shows how / method or technique how to create or use goods/services by using economic sources (factors of production).

2. Product Planning and Production Planning

Before an entrepreneur engages in an activity or production process, one must first make the product plan and production plan, in relation to the fundamental issue to be answered, which is "What" or what goods will be produced and how or how to produce it and how many will generate.

Product planning is broader than production planning, since product planning shows long-term and general company policies, while production planning is tactical and short-term.

3. Product Planning Aspects

Aspects of product and production planning are related to two basic questions, namely "what" and "how". Therefore, there are three aspects of product planning:

1. What product aspect will be made (what).

This aspect requires a company or an entrepreneur to be able to choose one of two ways:
a) Market-pull, which produces and sells products on the grounds of "making what can be sold". The type of product to be produced is determined based on market demand. In other words, this way is based on philosophy to "meet the needs of society".

Company A conducts market research to find out which products are currently and at some future time much requested by the community. Product X is much requested by consumers and no company can meet all market demand, therefore company A decided to produce the X product, although the company was forced to adjust owned and mastered with X products that will produce it.

b) Technology-push, which produces and sells products on the basis of

consideration of "selling what can be made". The type of product to be produced is determined based on technology owned and controlled by the company. In other words, this way is based on philosophy to "create the needs of society".

Company X with its resources mastered the production technology of plastic waste processing into various plastic flower pots. Therefore, this company will produce various plastic flower pots, regardless of how the market demand for the product.

2. Aspects of product volume (How)

This aspect is an aspect relating to the amount of product to be produced/produced. Commonly known two ways or techniques to determine the number of products to be produced, namely:

a) Nonstatistical techniques or techniques of consideration.

That is the determination of the volume or number of products to be made and sold based on the opinion/consideration of a person or group of people, both from company management and from outside the company. Techniques that are widely used include:

1) Consideration of salespeople.

Salespeople are the ones who know best about market conditions and consumer demand. Therefore, salespeople can be one of the right sources of information in determining the volume of production. 

For example, the A is the salesperson of a company's products informing that at this time and for some time to come the consumer demand for the product will still be much and even will increase, this is because there is no competitor company able to meet market demand. Therefore, on the basis of this information, the company will produce at least equal to the amount of past production or may increase the amount of production.

2) Executive considerations

The executive, in this case, is the management company. The executive is a broad-minded entrepreneur, including about market conditions or public demand. 

Therefore, management's consideration in determining the volume of production deserves to be considered. This is not much different from the salesperson's consideration, with the insight that the executive has made an estimate of the amount of product to be produced.

3) Consideration expert
Ekspert is a party who does have the task of predicting sales volume so that the results expert can be determined how the right volume of production. Experts are parties who are entrusted with the task of making a forecast of the number of products to be produced. 

Therefore the expert will do various things that have something to do with predicting the production, for example, to conduct a survey of the consumer or market, record sales fluctuations and so forth. The data obtained then analyzed and then used as a guide to determine the amount of production.

b) Statistical techniques or quantitative analysis techniques.

That is the determination of production volume based on quantitative analysis of past data and future projection by using certain statistical formulas. This technique usually requires quantitative data on previous production and sales to be able to determine or forecast for future production and sales.

3. Aspects of product combinations.

Is an aspect related to the problem of the number of types of products to be produced, ie the company will produce and sell more than one type of product (eg products X and Y) Because the resources of the company are limited, it must be determined the right combination of production, how much X is produced and how many Y will be produced. To answer the right combination it usually uses linear programming technique.

4. Production Planning Process.

a. Factors to be considered in production planning

Before determining the steps of production planning, each company, in this case, the production manager should consider the matters relating to production planning, which are:
  1. Total production requirement per product during a certain period.
  2. Inventory policy on the amount of raw/auxiliary supplies, semi-finished materials, and finished goods.
  3. The policy of machine capacity or production capacity.
  4. Availability of production facilities, in case of addition or reduction of production capacity.
  5. Availability of raw materials and auxiliary materials and labor.
  6. Total production or lot of production is economical
  7. Production schedule within a certain budget period.
  8. Production scale and production process characteristics.
  9. etc., including the impact of the length of the production process.
b. Steps of production planning.

Each entrepreneur or production manager of a company undertakes the following production planning steps:

1. Product Research and Development
For the company/entrepreneur of product, research conducted differentiated on the research of production process and on the resulted product.

a) Research the production process
The production process research is intended to improve the ongoing production process of both ongoing products and for the creation of certain new products.

Against the production process of dodol products, it is intended that the resulting dodol meets the predefined product standard or can create other products besides dodol using materials similar to dodol.

b) Product Research.
Product research is intended for changes/improvements to existing products tailored to the tastes of consumers.

Research on dodol products that already exist. For example in terms of flavor dodol will be varied with certain fruits (eg dodol flavor strawberry, jackfruit flavor and so on), resize, packaging, and so on according to taste or consumer demand.

2. Seek ideas and product selection.
From research done both to the production process and to the product, then the next step is the implementation of research and development, that is with the stages:

  • Looking for ideas, the stages of finding ideas-again in order to develop products. This idea can come from the market/consumer, existing or used technology and from third parties or usually experts.
  • Product selection, which is the stage to select the ideas that come in or the best related to product development, so the idea used is ideas that will not result in the company suffered losses. There are three tools used to test whether an idea can be developed, namely:
1) Financial feasibility.
Through a tool called "Project Value Index", it can be seen whether an idea meets financial service or not. The Project Value Index uses the Return on Investment formulation.

2) Compatibility of operations.
Especially for companies that have been in production, an idea that has financial feasibility does not mean can be directly developed. If the operation of the product to be developed is different from the existing product, it will impact on other aspects, for example, will change the layout, increase the cost and so on. Therefore, the development of an idea is determined not only by financial feasibility but also by the suitability of operations.

3) Market potential.
The development of an idea about the product must be determined also by the market potential of the product. Because if the market potential is unclear then the product development needs to be reconsidered until the market potential is clear or beneficial to the company.

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