In this issue, the most effective decision for the company is quite clear. The retooling and reorganization of production machinery and other equipment/processes is also a consideration that makes a shift to level production appear beneficial; different production lines could be run with fewer changes in between, however materials and cash would be made less efficient as manufacturing would occur based on annual sales projections rather than on-demand on terms closer to the actual sales times. Storage and handling processes and costs must also be considered, but client and supplier issues really are not going to be significantly impacted by a change to level production.
Potential Savings
The potential for savings in the move from seasonal production to level production would involve...
Other savings will be generated in direct labor costs by reduced costs in training, hiring, and other issues involved with changing the size and makeup of the labor pool. In addition to savings in this area, there could potentially be savings in the purchasing of raw materials, as purchases could be made in greater quantity in some cases, and orders will be more regular and consistent which could lead to supplier discounts. There will of course be certain costs associated with the transition that would limit the actual savings generated, but these costs pale in comparison to the savings and based on financial analysis the move from seasonal to level production should definitely be undertaken.
