Transformation: the conversion of inputs (resources) into outputs (goods or services), both physical (goods) and intellectual (intangible).
Value can be added through:
- Physical altering of the physical inputs
- Changes to a service
- Transportation of goods or services
- Giving customers a better understanding of the good or service
Volume: quantity (how much to make). Typically, the higher the volume means the lower the costs as economies of scale allows goods to be produced more cheaply.
Lead times: the time it takes for an order to be fulfilled from the moment it is made.
Variety: the range of products to be produced. An iIncrease in variety can lead to increased costs.
Variation in demand:
- Can the production process respond to changes in demand?
- Accurate prediction of demand is important and taking influences like seasonal demand into account.
- Increased demand may be hard to meet if suppliers cannot supply quickly, labour is not flexible, skilled or available and adopted machinery cannot adjust to increased capacity quickly.
Visibility: how much customer contact should there be? For example, service businesses will require a higher level of customer interaction.
Extract from Business Studies Stage 6 Syllabus. © 2010 Board of Studies NSW.