Overview
Modeling the supply side of a company means modeling the production process that creates and manages the product that the company is selling.
From a theoretical perspective, the mathematical description of a firm is provided by microeconomic theory. The production process is described by the firm's production function.
Given the theoretical description of the firm provided by microeconomics, there are practical tools that can help visualize the firms production processes and measure its inputs. These include the following:
- Cost Allocation: is the process of taking a set of firm wide costs and attributing a portion of each cost to each product produced or service provided.
- Process Modeling: seeks to understand the process that a company undergoes to deliver a product or service, by mapping out the process into a series of steps, possibly by also specifying the inputs and outputs of each step.