1.5.3 Production

For each product, your Production Department:

• Schedules the number of units to manufacture based on Marketing’s sales forecasts, while also considering unsold units from the previous year (inventory);
• Changes capacity and automation on existing assembly lines.

Production also adds assembly lines to manufacture new products.

Every assembly line has a first shift capacity. First shift capacity is the number of units that can be produced each year with a daily eight hour shift. If your production schedule exceeds the amount that can be built on first shift, work is scheduled on a second shift. Second shift labor costs are 50% higher than the first shift, but adding a second shift saves the expense of adding capacity and increases the asset utilization of the assembly line.

Every assembly line has an automation rating. A line with low automation has more workers and therefore higher labor costs. A line with high automation has fewer workers and lower labor costs, but increasing automation is expensive. Also, R&D revisions for products with higher automation take longer to complete because more machines have to be retooled.

Purchases of capacity and automation for new and existing products take a full year to implement. Sale of capacity is immediate. Selling all of a product’s capacity discontinues the product– it is no longer available for sale.