STUDENTS' CORNER -59
To maintain a steady flow of production, the firm or the company must have an exact knowledge of the resources it commands and it needs for production. Estimating the resources inevitably involves having all the necessary materials, men and money to continue production. Leaving aside the tangible components like materials, men and money, the company must have a good market sense as the production is linked to sale forecasts. A good effective formula is production and sale forecast go together. Sale forecast is dependent on market scenario and sale forecast includes the intricate fact of sale potential. If the company does not take into account the potential sale forecast, it may have to face the risk of shortage of products when needed. Actual sale and potential sale make the market scenario. A good business sensibility must work when trying to assess the market potential. Let us see some of the important aspects of the ability to assess the market potentials.
First, you must know the size of the market. Analysing market is an intricate but very interesting act but we need not go into it deeply for the present. You must be able to know approximately whether the market you are involved in will grow or there is no opportunity for growth. This point is essential because it helps you decided the quantity of the products you are to produce. Here, you must be aware of your market share. Suppose, 100 readymade garments are sold every day in the market, for example, how many buy your products decide the market share; let us say, about 20 people buy your product; then, your market share is 20%. This knowledge helps you know your competitors who command a bigger market share and what is their strength in the market to sustain them. The knowledge of the strength of your competitors gives you the fact of your strength. Based on your strength, you can almost make a very near right assessment that you will not lose your market share. You must have a clear idea of your target market which is what they say your segment which you must focus. You will have to decide whether you want to or you can extend market to another segment also by producing some newer products. This means you should have planned much in advance since it involves capital and venturing into another segment where there are already players who have established themselves. Can you face the stiff competition from the leading players of that segment you propose to enter now? Finally, what do you think about your profit margin? Can you increase it with confidence that you will not suffer in the market or you deem it right now to decrease it to manageable level so that your competitors might feel vexed since you stand a better chance of taking away their customers? All these questions are there to be addressed while assessing market trends.
Remember we began with Production Planning and after discussing Effective Utilization of Resources, Steady flow of production, we are now almost completing the next aspect: Estimate Resources. By this time you could have felt that all these aspects of Production Planning are interconnected and they are too close with each other to clearly demarcate where one ends and the other begins. One more thing: when you real all these lines, you may feel that it is very difficult to continue in business successfully. Actually, this is not so. When you invest your money in business, all these points of consideration come to you naturally. You know Risk is there if you are not careful and certainly you will be careful because you have put in your money and losing it means losing a very big part of life. Therefore, you become automatically cautious with every step you take in business. You can see that there are millions and millions of business people, big and small across the world. And the world is business.
We will look into the next component of Production Planning in our next session: Ensuring optimum Inventory.