What is a Ramp Up?

Ramp up is a substantial increase in the output level of the products or services of a company. Typically, a ramp up occurs in expectation of a huge increase in demand.

Although it is just another feature of smaller companies that are operating at the initial development stage, a ramp up can also be experienced by massive companies that are introducing new products or expanding their geographical locations.

Understanding Ramping Up

Often, a firm has to increase the capacity use to fulfil an upsurge in demand or anticipated demand in the near future. Naturally, a ramp up involves significant outlays of Capital expenses, which are generally huge amounts of expenditure by a firm on physical assets, like Manufacturing equipment, buildings or property.

In spending, a ramp up may also comprise funds that are used for up-gradation of technology and investment in hiring staff for an anticipated increase in production or sales. As a result, the firm will only regard a ramp up once it has got a reasonable certainty about extra demand.

Then, if the expected demand doesn’t materialize, the firm will be left with excessive inventory and extra capacity. This term can also be applied to any expense increase that is larger-than-normal. In case a firm says that it will ramp up its product’s production, it may also say that it will ramp up the purchasing of equipment to support the expansion of needed capacity.

Ramp Up Example

The term ramp up can also be used by executives who anticipate favourable Economic Conditions to quicken the demand for their products. Also, it is a rare occasion when a company would publicly announce about ramping down.

Back in June 2008, after the launch of a joint venture with Guangzhou Automobile, Toyota publicly stated that it would ramp up the production in China to meet the anticipated increase in the Market demand by developing a plant in Guangdong.

Apparently, this plant said to produce approximately 120000 extra Camry sedans. Thus, similarly, in the Industry of consumer electronics, often, manufacturers ramp up their production to meet their demands during the holiday season.