In a time of ever-changing market conditions and competition, companies are faced with the task of not only increasing the industry's market share, but also maintaining it. Production potential is one of the key resources that can provide an advantage in a competitive environment.
In this article we will discuss what production potential is, what it is made up of, how it is evaluated, how it is related to national security and competitiveness.
Semantic content
The term "potential" in the Latin word potentia means power or opportunity. This definition has a double meaning. In the first case, the potential is understood as a physical property, that is, a characteristic that determines the amount of energy reserve of the body. In the second case, the category is perceived in a figurative meaning, indicating the level of latent opportunities (power).
Production potential is a system of relationships formed in the economic environment of economic entities at micro and macro levels. It is necessary to achieve the most effective production result obtained with the maximum use of production resources with the existing level of technology and equipment and progressive methods of organizing production.
Concept introduction
A large number of factors affect the degree of utilization of production potential. Due to a detailed assessment of all the criteria that form it, it is possible to determine the direction vector that can provide the most effective control. However, at first it’s worth knowing how it all began.
The definition of “production potential” was found many times in print publications until 1991. In the planned economy of the country, this criterion was used to calculate plans for production capacity and production facilities. After the transition to a market economy, its availability was forgotten for a while.
Today, the category of “production potential” has again gained importance. This is due to the need to justify the appropriateness of the tax system and the formation of a rental payment scheme.
Introduction to the economy
Economists (A. Arzyamov and A. Berlin) in practice apply a compromise definition of the production and economic potential of the organization. They combine production and marketing (market) components. Under the production and economic potential of the organization refers to the ability to produce and sell products more efficiently than competitors.
In a broad sense, the concept under consideration includes the resources used in production work, and the possibility of their application. In other words, this is the organization’s integrated ability to produce benefits in a given period of time.
In a narrow sense, the category in question is characterized by the total number of manufactured goods for a specific period of time.
Activity levels
Productive potential is a combination of economic relationships that directly affect production capacity and efficiency. It is implemented at several management levels:
- the sole subject of the economy (company, institution, enterprise);
- industries (forestry, oil, chemical);
- subject of the Russian Federation or other territorial system;
- the whole state (national economy).
The production potential differs from one enterprise to another, depending on the totality of the criteria taken, the level of the hierarchy. You can compare them by choosing a common methodology for analysis and assessment.
Quality mark
Production potential is a complex of material, production, labor resources of the organization used to achieve the objectives in the manufacturing business. Assessment of its level is carried out using the following criteria:
- material consumption;
- company capitalization (market value);
- volume of goods sold for a specified period;
- output value (labor productivity);
- the amount of working capital;
- the share of goods of the highest quality category in the overall production program;
- availability of a full portfolio of applications for the sale of goods.
The actual use of production potential can be calculated. To do this, summarize the costs of land, labor, material and technical resources. The greatest production efficiency is achieved while improving production and management. It is also formed due to the most effective interaction of employees with technical equipment. As a result of this, three areas of industrial improvement are distinguished — labor, production, and management.
Parties
Production potential is a special part of the enterprise, which is characterized by the following aspects:
- The subjective side is the ability of employees of the company and the whole unit to observe the sequence of the production process, achieve their goals with the current level of technology, produce a large number of services or material goods, provided that the existing reserves are effectively used.
- The objective side is characterized by a system of natural, material (intangible), labor resources, for certain reasons used (not used) in production and having a real opportunity to participate in the production processes of the company.
The key link of the enterprise is production potential, the main purpose of which is the transformation of the original means of production into finished products. This is done through a manufacturing process.
Control
If the management of production potential is carried out separately from the general functions of company management, questions arise regarding the structural development of the company and the possibilities for realizing the existing potential. The solution of some blocks of functions in the context of working subsystems will not provide such a high result, which can be achieved with the right combination of organization components.
Reducing the negative impact of these shortcomings is possible due to the formation of a common mechanism for managing production potential, which will ensure the creation and application of the latter. This mechanism is a set of links between which interconnectedness is established with each other, because they provide the greatest effectiveness from the application of the production potential of the company.
Analysis
The company always strives to achieve significant savings on production assets through the use of new equipment devices, modern technologies, and new methods of production management. Interchangeability of all types of components of the potential is impossible to achieve, it can only be done within the framework of any component.
The study of methods for assessing production potential made it possible to establish its key types:
- A qualitative method is characterized by an assessment of system components, often carried out in the form of questionnaires and interviews. The advantages of the method are that it works with respect to criteria that are not quantifiable. And also allows you to take into account the impact of individual quality criteria. The minus of the method is that the reliability of the analysis is directly determined by the competence of specialists, and the final value is subjective.
- The quantitative method allows you to find the amount spent on production. The advantage of this type of assessment is determined by the fact that it gives a quantitative idea of the studied object, it becomes possible to find the influence of each link in the structure of production potential (the proportion of any element is found). The disadvantage of using the method is the inability to take into account the qualitative fluctuations of the system.
Universal technique
To date, there is no universal methodology for assessing production potential, which takes into account both quantitative and qualitative quantities. Why? We give an example. Knowing the number of employees in the production workshop, without establishing their level of specialization, it is impossible to identify labor productivity and the level of potential development of the entire production. Thus, we find that there are many factors, moreover, they have different proportionality, and it is difficult to correlate between them.
Prospects
The development of production potential, in addition to the qualitative and efficient use of production resources, also occurs due to external and internal cost savings.
In the difficult conditions of the country's economy, external economy is an important criterion for the formation of production, since the profit obtained from the placement of production in a certain territory can significantly block the cost savings that occur in places of resource extraction or near the sales market.
In places
The production potential of the region is a complex of potential production infrastructures located on the territory of this entity, providing the production of material goods to meet the needs of society.
In the framework of this concept, we can single out the potential of agriculture, industry, construction, that is, the potentials of industries related to the manufacturing field.
Specificity
The instability of the economic and financial situation in the country, characterized by fluctuations in inflation, an increase in interest rates on loans and taxes, can negatively affect sales volumes and the time it takes for "leaving" money to come in, which will inevitably lead to trouble. These problems can reduce the volume of products and lead to defaults on debts.
For the most part, the organization’s production potential is determined by the state of the macroeconomic situation in the country, the subsystem of the economy, and the microsystem itself. Thus, its effective application is crucial for the productive work of a manufacturing company.
The effect of the chosen enterprise development strategy for the most part depends on the use of production potential. This is confirmed by the scientific works of many authors dealing with issues of its evaluation and application.
The future of the country
Scientific discoveries and scientific and production potential (NTP) of enterprises are becoming factors contributing to the sustainable development and strengthening of the national security of each state. In addition, they increase the competitiveness of the state in the international arena.
In modern conditions, to ensure economic growth, government stimulation of the development of scientific and technical progress is of great importance. Scientific and production potential is formed under the influence of innovative factors. This includes qualification conditions for scientific and engineering personnel, development of regulatory protection for intelligent systems, and investment in scientific research. NTP is fraught with great risk.
For most companies, success in competition is directly related to government science and technology strategies. The seven hundred most successful commercial enterprises in the world include 76 companies from Japan, 218 companies from the USA and 218 from Europe.
New technologies
The production and technical potential of the company is the potentially maximum production (quality + volume) of finished goods (services) in the context of the effective use of production mechanisms and the means existing in the company.
In the context of the definition, the expression “potentially maximum” means that certain requirements are met: products are manufactured with the current level of technology and equipment, with the appropriate use of technology, with modern forms of organizational production and management, in the presence of an efficiently developed and implemented motivation system for production workers.