By Raúl Gorrín.
Now it is important for your final product, the goods that you produce, your ‘output
of work’ to be of high quality. A poor quality product may make more
money and be more efficient in the short run, but in the end you have to answer
to your customers and if they are happy, then you will get repeat business. If
the product is substandard, your company may find itself doing recalls, which
can be expensive and hurt the company’s reputation. So……..
Rule 1: put
out a high quality product.
The product must
be produced within a defined time. The more efficient you are with time
management of producing a product the more productive the product will be. So…
Rule 2: Watch
the time it takes to produce a product.
So to see if we
can be profitable on this product, we need to see if we can put out a high
quality product within a given determined period of time.
Now rule one and
two determine our output of work.
The input of
resources that go into producing this product are plant and equipment cost,
labor cost, cost of goodwill, cost of supplies and materials, government
regulations, the list goes on and on.
So how do we use
this ratio of output / input ?
If we are
considering whether to upgrade our facility and some equipment, we use this
ratio to make that determination.
If the cost
to upgrade our technology will cost us one million dollars per month.
But with the new technology we will put outfour extra million of dollars in
goods because it takes less time to now produce this product. The new
technology will put out a better quality product. This better
quality product will be among the best , if not the best quality of any of your
competition.
Output (4
million) / Input (1 million).
That’s a
4:1ratio in favor of increases the technology.
We did not
take into account the increase in goodwill from the superior product, which
will result in more sales and more referral sales.
Of course there
will be times where the ratio for more investment of capitol is not in your
favor.
So whether you
are considering investing in employee training, research and development or if
you should open your sales to international markets, you need to consider the
productivity ratio and use your best predictions to make an accurate
determination.
Productivity
if the numbers add up and the ratios are in your favor will increase and will
become a process to create wealth. ( By Raúl Gorrín)
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