Businesses provide goods and services. To be able to do this, they need to be able to turn inputs into outputs. This is known as the production process.
A good way to think about the production process is to imagine a transformation that happens to a series of inputs.
Inputs into the production process include:
- Labour – employees providing their time, effort and skills
- Equipment – machinery, buildings, computers and all the other
- Raw materials - Physical substances used as inputs (e.g. steel, energy, ingredients)
- Finance – cash needed to buy equipment, pay for employees, rent a location and undertake marketing
- Enterprise – an input that is often forgotten. Think of enterprise as the creative energy and force that gets a business started and drives it forward
Many of the inputs into the production process are provided by suppliers.
Suppliers provide the goods and services that a business needs in order for it operate.
For example, the suppliers to a Chinese restaurant would include:
- Food ingredients (likely to be from a food wholesaler)
- Energy (electricity, gas, heat & light)
- Property – the landlord
- Marketing – advertising outlets such as newspapers
The outputs from the production process are the finished goods and services.
Outputs are bought by customers – the people who pay. Customers are often, but not always the same as consumers.
Consumers are the actual users of the goods or service. For example, a parent might buy a PlayStation 3 console game for a child. The parent is the customer; the child is the likely consumer.
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