Free Example of Manufacturing Environment Essay

Globally, many changes are taking place causing different companies to close down if they do not follow the correct strategies. In the manufacturing industries, organizations with excellent strategies and plans tend to emerge victorious while those organizations with poor strategies and plans are closing down. Among the different strategies, budgeting is proving to be a vital technique for manufacturing organizations in a manufacturing environment. This is because organizations that are applying this strategy properly gain a competitive advantage over the other organizations. Additionally, budgeting tend to save an organization many expenses resulting to an increase total profits. Therefore, it is essential to learn the role of budgeting, in a manufacturing environment to understand the importance of budgeting.

The first role of budgeting in a manufacturing environment is to predict future production levels. What manufacturers should understand is that budgeting is not the same as forecasting. In a forecast, it is where an organization is heading depending on the current business environment and trends of the company. In budgeting, this is where an organization wants to be in future based on their goals. Therefore, with this definition, it is clear that budgeting helps the company to establish their future manufacturing production levels. In this case, the organization can know their future production levels since these are where they want to be in the future. In order to predict future production levels, an organization must exercise effective budgeting. According to the above facts, the role of effective budgeting is predicting the future production of a manufacturing company.

The second role of budgeting is facilitating value adding in the manufacturing process. In this role, several areas exist in which budgeting plays a crucial role. The first area is the purchasing department of an organization. In purchasing, a manufacturing organization chooses a supplier who provides excellent goods and services at low costs. Additionally, budgeting helps in creating proper relations with the suppliers since they know what is expected of them by the manufacturing organization. In this case, with the help of budgeting, a manufacturing organization can acquire high quality goods and services just in time at low costs. As a result, the quality of goods and services in the manufacturing organization is going to increase. For this reason, budgeting is playing a crucial role in facilitating value adding in the manufacturing process.

The other area of facilitating value adding in the manufacturing process as a role of budgeting is planning and coordinating of processes in an organization. In this case, management of a manufacturing organization will be able to identify areas in the manufacturing process that contain flaws. As a resulting of identifying them, management will be able to implement those creating proper measures. This will result to increasing quality in the manufacturing process in the organization. In addition, management of an organization will be able to implement new changes in the manufacturing process through planning and coordinating. Finally, with the use of budgeting, management will be able to ensure that all employees in the organization are following the necessary steps. All this will lead to the increase of quality in an organization. Therefore, budgeting helps in facilitating value adding in a manufacturing process. The final area of facilitating value adding in a manufacturing organization as a role of budgeting is the selection and implementation of the marketing process. Currently, many changes are taking place in the business environment. First, there is an introduction of new technology in the manufacturing process. This means that the latest technology is improving the quality at a high rate. Secondly, there is an introduction of new processes in the manufacturing process. For instance, based on customer requirements, an organization may be required to change their manufacturing process to accommodate the customer requirements. Therefore, it can be seen that budgeting plays a prominent role in implementing and selection, in value adding process of a manufacturing organization.

The evaluation of overall performance in an organization is another role of budgeting in a manufacturing environment. In this case, two main areas exist where budgeting helps in evaluating a manufacturing process. The first area is an evaluation of the employees in a manufacturing organization. During the manufacturing process, employees are expected to perform to their level best for purposes of improving the quality in an organization. Therefore, based on past performances, the organization can compare each employee’s performance and implement motivational employee strategies that are going to increasing overall performance in the organization. For this reason, it is clear that budgeting plays a significant role in evaluating employee performance in a manufacturing organization.

The second area of evaluating performance is the evaluation of quality in goods and services provided by the manufacturing organization. To begin with, the current global changes taking place are causing the customer requirements and other factors to keep on constantly changing with the environment. For this reason, what industries and customer used to regard as quality is currently of low quality. For instance, a computer that people were using a decade ago and people were accepting it as excellent quality is not applicable at present. This is because customer requirements are changing together with other factors. In this case, with the use of a budgeting, industries are able to evaluate the quality of their products and institute value-adding strategies. Therefore, budgeting plays a crucial role in evaluating the quality of products in a manufacturing organization.

The other role of budgeting is the calculation of costs in a manufacturing environment. In this case, using the various financial calculation methods, the management of an organization can determine the amount of expenses they are going to spend in the manufacturing process in a manufacturing organization. For example, the total direct cost and variable cost of a certain product in a given period may be calculated depending on past calculations to come up with the exact figures. To begin with, direct costs and fixed cost are easy to calculate. However, the variable costs may be difficult to calculate. For this reason, with the help of budgeting the costs are going to be calculated easily. When all this is done, the two costs add up to the total costs. In this case, management is going to make the necessary plans easily is since they have the exact calculation of costs. Therefore, budgeting plays a substantial role in calculating the overall costs in a manufacturing process.

The other role of budgeting is the creating of new strategies by the management. In this case, budgeting provides the management of an organization with evidence or basis in which they can use to create tactful strategies that are going to help manufacturing industries. An excellent example is when a manufacturing organization is making a strategic decision about their financial situation. In the manufacturing environment, the management of an organization will make a decision as to whether to produce a certain product based on cost analysis made available by budgeting. For example, this product might be profitable for the organization if they are going to manufacture. In this case, the strategic decision for the management is to manufacture. On the other hand, if the product will be a enormous to the company according to budgeting, management should consider not manufacturing the product as a strategic decision. Therefore, it is clear that budgeting plays a crucial role in helping the management make strategic decisions in a manufacturing organization.

The evaluation of the amount of money to be spent in a certain manufacturing process over a period is another role of budgeting in a manufacturing environment. In budgeting, the main purpose is to evaluate the amount of money an organization is going to spend based on their strategies and goals. For example, after calculation of all costs using budgeting, direct and variable costs, the management of the organization will be able to know the amount of money they are going to spend in the manufacturing process in the next period in line with the strategies and goals. In this case, management of the organization will be able to institute measures that are going to save money since they know the amount of money they are going to spend. Therefore, evaluation of the amount of money to be spent in a manufacturing process is a crucial role budgeting plays.

Finally, improving the profitability of a manufacturing industry is another role of budgeting in a manufacturing environment. To begin with, budgeting helps in facilitating the value-adding process. These processes improve the quality of a product and as a result, it increases the number of customers leading to an increase in revenues. Secondly, using budgeting, management of an organization can establish the amount of money they require in a certain process. In this case, they have the ability to save money. Thirdly, budgeting helps the organization in detecting flaws in the production process. As a result, it increases the quality of a product. This leads to increase in customers resulting to high rates of revenues. Therefore, with the above information management of an organization can make strategic decisions for the community that will lead to the improvement of profitability levels. For this reason, budgeting plays a crucial role in improving profits in a manufacturing organization.

Conclusion

According to the above analysis, budgeting is extremely crucial to manufacturing organization in a manufacturing environment. In the current global environment, manufacturing organizations that do not apply budgeting as a strategic tool in the organization are not likely going to make it in and as a result, they are going to close down. This is because the roles of budgeting improve the manufacturing organization value and profitability. In this case, the manufacturing organization gains competitive advantage over the other organizations. Therefore, industries must learn the following roles in order to be able to apply effecting budgeting as one of their strategies.

The first role is predicting future productions. In this case, management will know the productivity level of an organization. Secondly, facilitating value adding is the other role of budgeting. This improves overall quality of goods and services provided in the organization. Thirdly, evaluation of overall performance in the organization is another role of budgeting. In this situation, management can create strategies that are going to improve of performance because budgeting helps in providing performance evaluation information. Calculation of costs is the other role of budgeting. This helps in saving money during the manufacturing process. Additionally, the management use budgeting in creating new strategies. This means that budgeting plays an influential role in helping managers make significant decision that will improve the organization. Finally, improvement of profitability in a manufacturing organization is the other role of budgeting. Therefore, this analysis helps managers understand how they can apply budgeting to their advantage.