Answer :
The importance of a production management system is exaggerated in the early stages of a new business primarily because:
1. The firm has only limited resources and strong time pressures to perform well at the outset. In the initial phases of a new business, resources such as capital, manpower, and infrastructure are usually limited. A well-structured production management system helps in optimizing these resources efficiently to meet the demands of the market.
2. Efficient production management is crucial when there are customers who are ready to pay exorbitant prices for a newly launched product. Ensuring that the production process is streamlined and cost-effective can help the business capitalize on this opportunity and maximize profits.
3. Having a robust production management system is essential, especially when dealing with suppliers who are ready to supply raw materials on credit. Proper management of these suppliers and the raw materials they provide is vital to maintain a smooth production process and avoid disruptions that could affect the business's performance.
4. The need for effective production management is also accentuated when the firm has to pay high-interest rates to banks and other financial institutions. By optimizing production processes, reducing waste, and improving efficiency, the business can mitigate financial risks and enhance its overall profitability despite the high-interest rates.
In conclusion, a well-designed production management system plays a crucial role in the success of a new business by helping to overcome resource constraints, meet customer demands, manage supplier relationships, and navigate financial challenges effectively.
