Watching your business grow is exciting. But to meet the demands of increased growth, it’s likely that you’ll need to increase production capacity as well.
It might mean that you need to take on more staff, update your equipment or expand your facilities. Most of the time, increasing your production capacity will mean an outlay of cash, but the investment will pay off. The worst case scenario is having too much business to cope with (often by accepting all the work that is coming in), and then if you can’t deliver on time, you’ll lose credibility and can lose customers.
Key strategies to follow
You can look at using some of these strategies at the same time.
Make an investment
If you know that the sudden increase in business is long term and sustainable, then you need to sit down with your advisers and make the decision that you’ll need to expand capacity. This could be additional machinery (or bigger/faster), more people, bigger or more locations for storage, etc. Talk to your bank manager and accountant to identify funding and the length of payback.
Prevent overtrading
If you are swamped, then review all your customers and make the tough decision to only say yes to the best ones. Large orders, pay fast, most profitable. Say no to the customers that are annoying, pay late or take up all your time.
Make the most of your network
Do you have reliable businesses that you can sub-contract to? Identify third party contractors or other companies that could take up extra slack to increase your capacity at any time. Having a number of other people or businesses that you can contract to will also help you assess the demand before you employ extra staff or invest in large pieces of capital.
Review supplier efficiency
Often suppliers can be the problem slowing you down, if you have to wait for them to deliver, or they can only partially deliver. If this happens, try and find a supplier that also has the capacity to supply all your needs as you grow.
Review your internal processes
It’s possible you could increase capacity by being more efficient. Often businesses can produce more by identifying what’s wasting time or output and then eliminate these limiting factors.
This includes:
- Streamlining systems and processes such as properly delegating work, using technology to set work, ditching un-necessary tasks and making sure staff are working efficiently by conducting a time in motion study.
- Asking staff in the front line what they think they could do to speed up/reduce wastage. Often they’ll know.
Check your staff capability
Increasing capacity is one thing, having staff that can keep up is another. If you started small and have the same employees after significant growth, make sure they are able to manage a larger operation. It’s unusual for a person managing 3 staff to be able to effectively manage 300. Consider:
- Having the right mix of employees in your business. Who else do you need?
- Ensuring you have more employees directly contributing to output, than those managing.
- Removing unnecessary employees if their skills are no longer needed, or retrain them in the new skills they will need as the business grows.
- Bring in fast any new skills that you need in-house.
Summary
Don’t be afraid to expand your operations if there’s enough demand to justify it. You’ve heard the old saying – you have to spend money to make money – and this is especially true of spending to increase your production capacity if you’re getting the kind of orders that require a larger operation. Make all the internal capacity improvements checks first, become as efficient as possible, and then scale up.