Factors affecting Process Design - Nature of Product

The operations management has to design the production systems to produce products/ service of the kind that customers want when they want them and at a cost that follow the firm to be profitable.

Production process must have adequate capacity to produce the volume of products. Service that customer wants. The  demand  forecast  (seasonality of demand, growth  trends and  other patterns of demand)  for the   products/ Service can be  the  basis for  determining type production capacity needed in the future period  or the time horizon of the demand forecast.

The volume of demand is related to the price of the product Service. The price volume relationship can be illustrated by means of price volume curve.

It can  be seen  from figure aside that  when  price is set a high level consumers tend to  buy  lower  volumes of products services and vice versa.  Concepts implicit in price volume curves having important implications for designing production processes are:

1. Every price  along  the price  volume  curve assumes a combination of elements of marketing  efforts such as  adverting sales force customer services  provided credit terms provided a particular product/Service  design, inventory  and shipping  policies and quality requirements.
2. At different  price  levels, different  approaches to production  must  be adopted so that the  customers services provided, product/ Service design offered ( custom built design vs. standard design)  inventory and shipping policies product quality level and production cost  requirements can be met.