Inquiry approaches and methodologies

Production and cost analysis: discuss it and how we use it.

In any business, there are a number of tools firms will use to increase productivity and improve their profit margins. These are designed to provide them with a strategic advantage and objectively tell them how to deal with critical weaknesses. However, in order to receive the long-term benefits they must utilize specific tools to protect market share and reach out to a larger segment of customers. (Trujillo, 2008) (Taylor, 2008) (Jain, 2010)

Two areas that are often utilized during the process are production and cost analysis. To fully understand how they are applied requires carefully examining each one and the way they are used by firms. Together, these elements will offer specific insights as to how organizations are able to remain competitive and adjust with critical challenges they are facing inside the marketplace. (Trujillo, 2008) (Taylor, 2008) (Jain, 2010)

Production is focusing on the total inputs and outputs that are utilized to create the final product. This takes into account the fixed and variable costs for reaching these objectives. The fixed costs are the plants and equipment used during this process. While the variable costs, is concentrating on labor, raw materials, shipping and other factors that will increase in delivering the end merchandise to customers. (Trujillo, 2008) (Taylor, 2008) (Jain, 2010)

Executives will utilize these tools to determine if their costs are rising or falling. During manufacturing, this will help them to create various techniques for lowering the costs of producing the final product. At the same time, there is an emphasis on figuring out strategies to utilize these variables to improve their competitive advantage inside the marketplace. This is when a firm can more effectively compete. As it will have a positive impact on the bottom line results and increase the total return for shareholders. (Trujillo, 2008) (Taylor, 2008) (Jain, 2010)

For instance, one the biggest trends companies are using is outsourcing jobs to locations where their costs are lower. In many cases, they will often shutdown their operations in regions where the variable costs are higher and go to these locations. During the last 20 years, many firms have been utilizing these tools and transferring their manufacturing operations to China. This is because the cost of labor is much cheaper. While raw material costs can be controlled, by having plants in these areas. (Hira, 2008) (Trujillo, 2008) (Taylor, 2008) (Jain, 2010)

The combination of these factors, are helping firms to realize larger profit margins by using this strategy. What assisted managers in creating these tactics was a focus on production and costs inside various regions of the world. After comparing their results with one another, they determined that this approach will allow them to avoid having to pay higher cost of labor. At the same time, they will not have to worry about the challenges associated with unions or paying higher ancillary costs (i.e. benefits) in many developed countries (such as: the U.S.). The net results are that the company can maintain stronger levels of productivity without having to increase their cost structure exponentially. (Hira, 2008) (Trujillo, 2008) (Taylor, 2008) (Jain, 2010)