Key Production Capability Factors for SME’s

In other to satisfy the global demand for certain goods and services, businesses, companies, and organizations have made it their duty to organize activities of transforming resources into finished products to satisfy the needs of demanding markets. Production can be described as “any activity directed to the satisfaction of peoples wants through exchange.” Production capabilities can be seen as “those capacities to use and operate given forms of technology.” It is possible for firms to move or modify their operations to more develop capabilities and improvements.

When we look at production capabilities and a major factor for exporting capabilities, we can conveniently look at it as the foundation for developing capabilities through investment and innovation to meet other market standards and needs. Without these standards and market needs exporting products and services to certain markets can be impossible.  In this case, market requirements are fundamental for developing and improving production capabilities.

With the constant growth of technology, many companies have now started to compete on an international level. Besides, many local businesses are seen to exhaust their local market share and see the need to grow and expand in new markets in other to become more competitive. Many businesses have discovered the huge potential of exporting their goods or services to the world.

In our existing market environment, export is the main mechanism for business development, because it provides new markets, a broad customer base, and better profitability. Comparing the growth rates between the markets, the international market outpaces domestic markets at a growth rate between 20% – 30% annually. Companies who seize the opportunity to export turn to withstand local competition as they enjoy economies of scale with a lower cost of production and an added advantage both home and abroad.

With all the benefits exporting into a new market may bring, businesses can only enjoy these opportunities if they are ready to export. Ready to export, includes their production capabilities. To be capable to produce for export, businesses must check their production capacity, export quality, and be able to produce in a cost-effective way.

Global markets and their requirements.

When gearing towards exporting, companies must understand different markets may come with different challenges, and producing for a new market needs adequate preparation as international markets are quite difficult to predict. Markets may come with their own requirements specifically for the needs of that market and quite different from producing for a local or domestic market.

However, the characteristics of production which may include the required quantity of products to be produced, the cost of production, the specific time period, and the quality of the product or services are also essential. The production capabilities of companies can be effective and valuable if the above characteristics coupled with the market requirements can be successfully achieved.  

The production capability is also designed according to the export business strategy. In a situation whereby the strategy is poorly designed and with inadequate information, the production capabilities can be limited which may lead to the waste of valuable resources and failure in producing for export. In the subsequent paragraphs, we will be looking at the key components that can lead to an effective production capability;

Production Capacity

Understanding capacity requirements with your export engagement will determine the quantity of products to be produced within a given time. The capacity of a production plant is the main determinant factor in producing the required quantity for the domestic market and for the global market. As businesses take to export their products overseas, capacity will be the main critical factor for a successful export endeavor. Capacity can be defined by the unit of output per unit of time. The number of products produced at a specific time period.

By exporting your products internationally, market size can expand dramatically and if your production facilities can’t meet the increasing demand, the export operation will definitely fail. The first question is, are you ready to export? Going global is one of the best decisions you can take for your business and if you care about growth but is your production capacity up to global demand? Do you have the resources in place to take care of the huge demand that your business may attract when you start exporting to the world?

To enjoy the benefits of exporting to the global market it is important to run at a full capacity. This encompasses how you manage available employees, resources, and time. These are key factors and should be managed in the most efficient way possible in other to meet the market demand. Raw materials should be readily available whenever required and in the right quantity at all times. Human capital and labor should be available and when necessary to meet anticipated production capacities. Equipment is expected to work optimally and fulfill the purpose to reduce time and cost. And lastly, the need for adequate warehousing and storage facilities must be addressed in line with demand and as well as the shelf life of the product.  

Effective Production capacity requirements

Businesses looking to export should be well knowledgeable about their production capacity. Having all the resources can be helpful but limited information about your production capacity can lead to mismanagement. With first-hand knowledge about the production capacity of your business, it is easy to estimate and predict how much you can make available to the global market considering the demand from your local market. With all the information about the production capacity, businesses can easily modify the production process to meet any increase in demand. Also, companies can be able to make informed decisions on production plans, marketing, and financing.

An important resource that is highly required for an effective production capacity is time. Time will always be against you if your production is not well planned. Production capacity can be defined as the “total unit of output produced per unit of time.” The question is how much can you produce in a day compared to the available demand for your product or services. Orders in the global market will always come with an expected time for delivery (ETD). If you experience an increase in demand will you be able to meet the expected time to make the goods available in the market?

Another key requirement for enhancing production capacity is through partnership and joint ventures. This is usually the way out for businesses with limited resources with an opportunity in exporting to foreign markets. Partnerships can be good to mitigate and share the risk, not sidelining the potential of combined resources from a joint venture. This can eventually lead to growth and profitability.

Also, effective resource management can go a long way to enhance production capacity. In efficiently managing resources when exporting, businesses can save money and reduce production costs. Resource management should mainly guarantee that resources are never over-allocated and human capital should be at optimum at all times. Resources may include, time, labor, materials and machines, and transport. Production management can be to change suppliers and engage in bulk buying of materials, be organized, and maintain machines.

Furthermore, businesses can also be required to outsource certain elements of production. Elements of production may include objects of production, agents of production, the methods of production, space, and time. Businesses may find it beneficial to focus on key production activities and outsource other production processes like packing and labeling, warehousing, etc.

More so, modifying the existing production facility and re-engineering the production process can lead to an efficient production process. This can be a feasible plan of action if expanding production facilities might not be an option for the company and especially when you are still at the export development stages. Optimizing the production process can increase output and efficiency. With this, more can be produced within a short period of time. And it is also important not to forget the maintenance and servicing of machines and equipment as they work at full capacity. A stated time must be set aside for periodical servicing and replacement of parts that may have been exhausted and run below capacity.

Meeting the required quality for export.

Businesses that are quick enough to spot the potentials of exporting their products and services should also be quick enough to realize how the quality standards can be different in foreign markets. Quality can be considered as “the degree to which a set of inherent characteristics fulfills requirements.” And requirement may imply the expectation or needs or obligations of the interested parties which is usually the customers, the suppliers, and the society.

It is common to find the quality standards for a domestic market different from the global market. Before your products can be accepted in certain markets, the standard needs to be up to the market requirements. With this in mind, production standards must be set high to meet market requirements.

At the most basic level, manufacturing quality is simply conformance to specifications. In other to produce a quality product, conformance to specification and quality in design provides the fundamental basis for the achievement of such an objective. With varied customer expectations in the global market, production quality is an absolute requirement, regardless of where the products are to be sold, distributed, or even manufactured.

For businesses to be successful, quality should never be compromised at any given time. The end quality of a product will largely be determined by the raw materials used for the production. The wrong materials used for production will always give birth to poor quality products which will eventually be exposed when made available in the market. Coupled with the kind of materials to be used for production, businesses should be able to consider the environmental conditions for production, employ the skills of highly skilled and well-trained employees, and an up to standard packaging and product presentation.

A better understanding of quality for export

Quality can be measured through an exchange between two parties, one responsible for the supply side and one receiving the product or services. Quality in this term may depend on the views of the buyer and the seller, and in a situation whereby the buyer has a different view on quality from the seller; it may lead to misunderstandings and trade disputes. From this viewpoint, quality is considered “the conformance with customers’ requirements or fitness for purpose.”

There are two important things businesses are supposed to understand when considering quality management. First, it is the customer who defines if your product meets the purpose it was created, that is, fit for use or not, and to also understand that clients requirements change over time and with innovation and as their purchasing power increases. A true example can be seen with the mobile phone industry.

Discussing quality management without mentioning “grading” can be lacking. In today’s business settings it is commonplace to see quality being categorized through “grade.” With the desire for businesses to meet every customers’ needs, manufacturers get to categorize their products in grades for every market and customer level. A grade can be best described as the rank or the category specified to different quality requirements for processes, products, and even systems with the same functional use.

Grading portrays quality in many different dimensions like performance, features, reliability, durability, conformance, aesthetics, serviceability, and the perceived quality from the client. With grading businesses can attend to different markets, the purchasing power of the customers and even customers perceived quality.

For businesses to capture production quality, they must be willing to incorporate quality management, quality control, and quality design and engineering into their production process.

Quality Control

For quality control, the main purpose is to enforce the use of specific processes and materials during production. Quality control also ensures quality standards are met through the qualification of operators and equipment which can only guarantee quality standard productions and to achieve and maintain conformance.

A full description of quality control is a deliberate and planned activity for the determination of the quality of a product with a view to accepting it in case it satisfies stipulated requirements, or to take necessary measures to appropriately correct the quality shortcomings if it does not satisfy the stipulated requirements.

The appropriate time to ensure quality control is during the production process of goods, actually from the raw materials used for production, the various production stages, and not living out packing, storage, and even transportation. The complete process must be carried out without compromising the quality of the product by the time it is presented to the consumer.

With exporting a product to the world, and based on the main theme of quality control and to ascertain and ensure that the level of quality meets the expected requirements, pre-shipment inspections are carried out. These pre-shipment inspections are also a requirement to determine whether the product satisfies the condition for shipment, which may lay emphasis on quality, packing, weight, and contraband characteristics.

The quality management or requirements that set aside a product as being high in quality, low or medium are put in place by authorities (like the FDA and USDA in the US) to meet the human needs of using such products and for health purposes. Required specifications can be put in place, but what is most important is the quality should meet the requirements of the buyer.

Generally, the importance of quality control can be seen from the manufacturer’s side as quality control measures can go a long way to guarantee higher quality conformance which is key to brand recognition. Manufacturing can experience lower cost as higher quality conformance eliminates waste which may lead to added value and higher profit margins.

From the side of the consumer, the best quality products are being provided which enhances the standard of living. Customer satisfaction can be achieved as customers can get the value they bargained for and being able to solve the problem they intend to solve from using the product or service.

Technical requirements and quality control

Export quality control has a lot to do with technical requirements which are better considered as standards. Standards are documents that demonstrate the characteristics of a product or a service which may include the specification, performance, size, environmental requirements, production process, and even service delivery.

Before standards are put in place, the desires of all stakeholders involved are considered and put first. What this implies is they are considered with consensus principles in mind. Standards may require the same demands on all suppliers and consumers in consideration with other external factors such as environmental and health safety factors. For businesses to meet these standards, they must apply for the inspections to be carried out and validated.

Standards can be implemented by public or private international associations which are globally recognized and accepted.  Standards can also be published by the public or private national organization. A good example can be the International Organization for Standardization (ISO), the International Electrotechnical Commission (IEC). For National standards, the American National Standards Institute (ANSI), the Australian Standards (AS), British Standards (BS), and the South African National Standards (SANS).

With these standards in place, exporters can work in accordance with standards of specific countries and their industries which explains why it is important for businesses to pay close attention to these standards in the markets they work in and because they are constantly updated. Moreover, these standards will conform to the official requirements put in place by the respected regulatory bodies of the industries and countries.

In addition, exporters need to understand specific standards for different industries. Most importantly, technical regulations and standards vary from country to country and sector to sector. For example, the food industry’s FDA, HACCP, ISO 22000, and the textile industry’s TC 38, ASTM.

Apart from the prescribed standards, exporters must also adhere to technical regulations. The difference between standards and technical regulations is that technical regulations are mandatory, while for standards, suppliers can choose whether to implement them.

The product may be insufficient, endangering the safety and health of consumers, have a negative impact on the environment, or be provided in a highly deceived manner. In order to solve these problems, the government can come in and set up official controls, and suppliers must comply with these controls. A good example is SPS (Sanitary and Phytosanitary).

To ensure quality control, and to meet international standards, businesses strive to meet these standards and technical control to show strong brand recognition and to show the public, quality is a priority.

Quality Management

Quality management involves the control, planning, direction, and organization of quality assurance during the production process. Even though the existence of quality control departments or bodies have historically provided technical support for manufacturing quality, manufacturers themselves have come to realize that it is vital for quality to be integrated throughout the enterprise and all stages of production.

In other to integrate quality in production, Quality management systems are put in place. Quality management systems are a collection of processes designed to check the consistency of meeting customer requirements and to constantly improve or enhance their satisfaction. For quality management systems to be effective, it needs to be aligned with the purpose and strategic direction of the business.

Looking at recent developments, the quality management systems put in place are geared towards sustainability and transparency as such initiatives coupled with the fact that perceived quality customer and investor satisfaction heavily rely on transparency and sustainability in today’s business world.

To better measure quality management systems the ISO 9000 family of standards is designed to put in place a global consensus on good quality management practices. It is a combination of guidelines, principles, and standards related to maintaining quality management systems and supporting standards.

The ISO 9000 is actually not a product standard on its own but it is a management system standard that goes to demonstrate a company’s commitment to consistently manufacture goods or provide services that meet customers’ and regulatory requirements. It is mostly considered as a symbol that reflects quality for all sectors and in every industry. With the ISO certificates, manufacturers can easily gain market share in the global market. Customer loyalty can be increased as customers’ expectations and needs are met

Quality Engineering

The principal task of quality engineering is to integrate quality into the designing of the products and the production process itself. Engineering is highly used to predict potential quality issues that may arise prior to the manufacturing and delivery of the product.

The manufacturing processes for a product should provide the basis for engineering quality at every step of the manufacturing process. With such practices in place, manufacturers can easily error-proof the manufacturing process to make sure every step of the production process is executed correctly and with the best resources, making it easy to generate full and complete traceable data for referencing.

Quality engineering should be seen as a discipline for every manufacturer as they strive to ensure quality assurance and control. The main focus here is optimizing product quality by using engineering that implements and create strategies for quality assurance for product development and production.

Quality engineering covers aspects of the quality system, product and process design, design verification, reliability, maintainability, durability, corrective action and preventive action, continuous improvement techniques of a product and its production process.

The objective of quality engineering is to provide a product or service above customer expectation. Products that stand to meet the immediate needs of the customer by providing a durable and well-designed product for performance, reliability delivered securely and safely. When quality engineering is properly implemented the customers’ voice is heard and quality is designed and built in the production process and to the product and waste is eliminated. A huge impact is realized on the product cost as waste is identified and eliminated, quality is enhanced and the company’s goals realized.

The cost of Production

Poor manufacturing quality comes with a very high cost which can severely hamper the success of a product or a company as a whole. Poor quality is associated with rework, product failures, scrap, and recalls which can pose serious problems through inefficiencies, direct costs, customer complaints, delays, and loss of confidence in the product and the company. Also, resources and time are being wasted which is very necessary to maintain a competitive standing in the international marketplace.

It is also important to note that production capability is highly determined by the cost of production factored in accordance with the market price. With extra cost which may arise due to poor manufacturing quality, the price of the finished good may be affected and limit the ability to export the products and to remain competitive in the global market.

Before production, it is important to understand the exact production cost and how quality engineering can be used to increase the value of the product for a better profit margin. By using quality design and engineering to improve the quality of the product, it provides the opportunity to stand out in the global market and to stay competitive.

EndNote

The success of a business in the global marketplace hinges on the company’s production capabilities which encompasses their production capacity, their ability to meet the quality for export, minimizing the cost of production through innovation, and never-ending research and development endeavors.

Managing your production capacity, establishing an in-house quality infrastructure by gathering information regarding different country standards and implement them in your production process, focus on innovation and development will give the products an edge in the global market.