PRODUCTION PROCESS

The production process is a component appearing under the operating plan of the overall business plan.  The production process is the process a product or service takes in order for it to become ready for customers to buy.  Production will certainly depend on the type and nature of your proposed business. Generally, a manufacturer will have a more sophisticated production process compared to a retailer or service provider. This is not to say that retail and service based businesses are simple, but rather, these types of businesses usually require fewer "processes".

The production process of a manufacturer, in its simplest form, may consist of the following steps.

• 1.   Fabrication (where individual parts are made into raw materials)
  2.   Assembling the raw materials into finished products
  3.   Quality Control (inspections)
  4.   Testing of finished products
  5.   Packaging the finished products
  6.   Shipping the finished products to retailers, wholesalers, etc.

The above items are major events that occur when manufacturing a typical product. But many other, smaller events may occur during the production process and can be briefly described in the Operating Plan. For example, welding, machinery setup, heating, molding, cooling, wiring, sodering, melting, bending, scratching, drying and cutting, just to name a few. When writing the production process section of the operating plan, a manufacturer must carefully explain each step of the process so that the business plan reader fully understands how the product will be produced.  When explaining the production process in the operating plan, try to avoid technical jargon or terms only people within the industry would know. In addition, try to be concise and to the point - you do not want to bore the reader.

As mentioned earlier, the production process is usually less demanding for retailers and service providers. For example, a clothing retailer would simply purchase their products from a supplier, unpack the products as they are shipped, place the products in storage, place the products on the shelves as they are needed, and finally sell the products. This process is so obvious that many retailers write a one sentence description in the operating plan to describe their production process. In addition, such retailers would also discuss one or two major aspects of the process, such as inventory control and ordering.

In conclusion, if you are planning on establishing a retail business or a service business, simply provide in your operating plan a one sentence description of the production process and discuss your planned inventory practices and ordering policies.  Also, if you are proposing a unique production process or a structure different from your competitors, be sure to fully explain it.

For additional information relating to the Components of the Operating Plan, please refer to section named Operating Plan.