Tips

Dealing with Production Capacity Issues

Having production capacity issues is a good problem to have; here's some suggstions on how to take on the challenge.

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Occasionally, shop owners tell me, “We’ve been running at capacity and we’re increasingly unable to fulfill the orders we’re getting on time. We’ve been subbing out some of the work in order to meet deadlines. I want to expand our capacity, but am not sure how to go about it without over-extending an already tight budget.”

That’s a problem many other business owners would die for. I agree with the decision to sub out the overflow of jobs for the time being, provided you are satisfied with the quality of the work your subcontractors produce.

I would consider doing a quick study of the work you’ve had to produce over the past 12 months. Ask yourself all of the following questions:

  • Is the demand consistent from month-to-month or is my business cyclical-periods of chaotic, “too much” work followed months when we are slow?
  • Am I really running at capacity? Could I simply add another shift or extend production hours, at least part of the time?
  • If I had to keep those jobs in-house, what resources (additional or faster equipment, floor space, people, etc.) would I need?
  • If I had to go out and procure those resources, what would it cost the business and, most importantly, would the profits from the overflow work pay for that investment within an acceptable period of time?
  • What is the likelihood that the next 12 months will find me having more work than the shop can produce in-house?

If the answers to these questions do not indicate that the expense of acquiring the additional resources you need are worth the investment-either because the cost is too high or there’s not enough profitability in it-continue to sub out the work. Since demand for your products is high, I would seriously consider raising prices across the board or, at the very least, on the type of jobs you’ve subbed out.

After raising prices, the number of incoming jobs may dip a bit at first, but perhaps you will no longer need to farm out any work and your gross profitability will increase, adding dollars to your bottom line and giving you the capital you’ll need in the future when it is the right time to expand and grow. Good luck.

Vince DiCecco, Your Personal Business Trainer

vince dicecco

Vince DiCecco

Your Personal Business Trainer

Vince is a dynamic seminar speaker and author with a unique perspective on business development and management subjects, primarily in the decorated- and promotional-apparel industries. With 20+ years of experience in sales, marketing and training, he is an independent consultant to businesses looking to profit and sharpen their competitive edge.

Avatar of Matt Dixon

Matt Dixon

Matt Dixon is the executive editor of GRAPHICS PRO and WRAPS magazines. Before that he was served as editor of Sign & Digital Graphics and Sign Business Magazine. He can be reached at 720-566-7286.

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