Page 532 - Business Principles and Management

Chapter 19 • Product Planning and Production Management

19.2 Planning a Manufacturing Business

Goals Terms
• Discuss the important considera- • inventory management • computer-aided
tions in locating a manufacturing • human resource design (CAD)
business. planning • computer-
• Describe the factors that influence • production scheduling integrated
the organizing and production • quality management manufacturing
process.

stablishing a manufacturing business requires a number of important decisions. Technology tip
The company must be able to get the materials it needs to build products. It
E must have buildings designed and built. The company must purchase special-
ized machinery and equipment and arrange it in the buildings so that it can pro- Just-in-time inventory (JIT)
duce quality products rapidly and at a low cost. The company must hire people systems use computer com-
with the skills to perform the many activities needed to produce the products. munication to connect man-
If it cannot find people with the needed skills, it must train others. Finally, after ufacturers’ inventory levels
manufacturing the products, the company must store them until it can sell and to suppliers. Suppliers are
distribute them to customers. notified to deliver inventory
just in time for its use in
manufacturing. This reduces
Locating the Business the cost to manufacuturers
because they don’t need to
One of the first decisions a manufacturing company must make is where to carry large amounts of
locate the business. Although it might seem that a business could locate anywhere inventory.
it wants to, finding the best location is a very complicated procedure. Several
factors influence the decision of where to locate a manufacturing business.

AVAILABILITY OF RAW MATERIALS
If a manufacturer must process raw materials as part of the production process, it
must have a reliable supply of those materials. Also, the cost of the raw materials
must be as low as possible. The manufacturer may therefore choose to locate close
to the source of the raw materials to keep the cost of transporting them as low
as possible. Furniture and textile manufacturers, steel mills, and food-processing
companies are examples of industries that locate close to the source of needed raw
materials. Consider what the most important raw materials are for each of these
manufacturers and where the manufacturers are likely to locate because of the
need for these materials.

TRANSPORTATION METHODS

The company must decide how to obtain the materials needed to manufacture
the products and how it will ship the products to customers. The choice of
transportation method can determine whether the company will receive mate-
rials and deliver products on time. The major transportation methods include

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