Manufacturing Operations: 4 Key Cycles and Processes

Posted on Jan 11, 2025 in Economy

All 4 Cycles of Operations in a Manufacturing Company

  • The Procurement and Accounts Payable: Operations for the acquisition of goods and services.
  • The Production: Activities relating to the transformation of raw materials into finished products.
  • The Billing and Accounts Receivable: Commercial operations of the company.
  • The Payroll: Expenses related to the staff needed to achieve all activities of the company.

Procurement and Accounts Payable Cycle

Activities of the company with the aim of obtaining the materials and services necessary for its operations.

Purchasing Process

It begins with the need for a good or service and culminates in the acquisition and payment of these.

Involving the purchase process in the following stages:

  • Reception of applications for requisition
  • Issuance of purchase order
  • Approval of purchase order
  • Delivery of purchase order to suppliers
  • Reception of goods and/or services
  • Input record or reception of active service
  • Payment of goods or services received
  • Registration fee

Payment of goods or services: Happens after the issuance of the payment order by the applicant unit.

Accounts payable process: Begins when the company receives ownership of the property purchased or is committed to the acquisition of a service.

Conditions of Purchase

  • Free on Board Shipping Port (FOB): Only includes the purchase cost of goods, and the transfer of ownership is done when the provider places the property in the middle of transportation.
  • Free on Board Destination (FOB Destination): Ownership is transferred when the goods arrive at the port of destination and are discharged.
  • Cost, Insurance, and Freight (CIF): Establishes that the selling price includes all three elements.
  • M & O LAC: Means that the seller covers the cost of moving the merchandise until delivery next to transport.
  • Cost and Freight: The selling price is formed by the cost of the merchandise and the value of freight to transport.
  • Cash On Delivery (COD): The buyer must pay for the goods at the time of delivery, and the goods are considered to have changed ownership from the seller to the buyer.

Registration of liability: Starts when the transfer of ownership of the property is performed.

Classification of Accounts Payable

  • Accounts and Notes Payable Trade: From stock purchases of assets or any goods or services for the normal operations of the company.
  • Accounts Payable to Related Companies: Relating to liabilities arising because of funding obtained from related companies.
  • Other Accounts Payable: From non-commercial operations of the company.
  • Accrued Expenses: Include the registration of liabilities relating to expenditure for services received.

Production Cycle

Activities of the company to produce the goods and services offered to their customers.

Stages of the Production Cycle

  • Planning for Raw Materials: Coordinates units of raw material required to produce the finished product units.
  • Production Planning
  • Inventory Control

Departments in a Company’s Production Cycle

  • Manufacturing
  • Quality Control
  • Programming
  • Maintenance
  • Facilities
  • Industrial Safety

Systems

  • Inventory Control System
  • Production Control System
  • System of New Products in Development and Testing
  • Quality Control System
  • Inventory Control System