Constraints on production

There are a number of limiting factors that determine the quantity and nature of output that a producer is able to make within a given time period. These are the constraints on production. The main external constraint is the extent of the market. The larger the market, the greater the opportunity to produce on a large scale and to benefit from the resultant unit cost reductions. Goods that are popular such as chocolate bars, and razors have a high demand, thus encouraging companies like Cadbury-Schweppes (confectionery), and Gillette and Bic (razors) to supply the market.

Another external constraint is the ability of a producer to gain access to appropriate resources such as the finance to purchase and run a modern production facility.

Internal constraints include:

1. The existing scale and capacity of buildings and machinery used in the production process. For example, the ability to meet new orders depends on having appropriate spare capacity.

2. The [linbk /theory/theory--recruitment-training--369.php">skills and training of the labour force. Modern specialist products often require extensive training before the human resource is able to produce new goods effectively.

3. The availability and flexibility of the labour force.

4. Access to an abundant supply of parts and raw materials. A business that is able to supply appropriate quantities of goods and services to customers 'just in time' also needs to have access to supplies and materials 'just in time'. This is why it is so important for modern companies such as Nissan to build excellent relationships with suppliers.

5. Time. Time is one of the most important constraints in any form of production activity. Careful planning therefore needs to be carried out to make sure that time is given priority in planning resource utilization.

6. Finance. Financial resources are always important. Healthy cash flow is essential if business is to respond to changing demands and requirements in production activity.

Spare capacity refers to the availability of additional resources and equipment to meet an increased demand for a product or service.