Ramp-Up - Overview, Breakdown, and Practical Example

Big companies use ramp-up to introduce new lines of products or services to customers, or to expand its operation into new markets. Announcements of ramp-ups by ... Home›Resources›Knowledge›Strategy›Ramp-UpRamp-UpAtermthatdescribesthesignificantincreaseintheoutputofacompany’sproductsorservicesUpdatedJuly2,2020WhatisRamp-Up?Inbusiness,ramp-upisatermthatdescribesasignificantincreaseintheoutputofacompany’sproductsorservices.Essentially,ramp-upimpliesbringingthecompany’scapacityutilizationclosetomaximum.Itcanbeachievedthroughsubstantialcapitalexpendituresorimprovementsinproductdevelopment,andtriggeredbyacompanyenteringnewmarketsorgeographiclocations.BreakingDowntheRamp-UpConceptTherighttimingisessentialforsuccessfulramp-ups.Themainprerequisiteforitssuccessisthecorrectanticipationofanincreaseindemandforthecompany’sproductsorservices.Iftheselectedtimeforramp-updoesnotcorrespondtotheperiodofhigherdemand,thenthecompany’seffortstoincreaseitsoutputwillnotresultinattractivefinancialreturns.Thus,acompanythatisplanningtorampupshouldbecertainaboutthedemandoutlook.Althoughtheconceptiswidelyattributedtosmallercompanies,ramp-upcanbeusedbylargecorporationsaswell.Bigcompaniesuseramp-uptointroducenewlinesofproductsorservicestocustomers,ortoexpanditsoperationintonewmarkets.Announcementsoframp-upsbylargecompaniesgenerallyindicateacompany’ssolidfinancialposition,aswellasthemanagement’sconfidenceregardingthefutureoutlookforthebusiness.Inaddition,thetermisfrequentlyusedinthecontextofventurecapital.Inventurecapitalfinancing,ramp-upoccurspriortotheexitofaventurecapitalistfromtheinvestment.Insuchacase,theventurecapitalistusestheramp-uptoincreasethecompany’soutputandperformancetoboostitsvaluation.Ahighervaluationofthecompanydeliversmorelucrativeexitopportunitiesfortheventurecapitalistsandincreasestheinvestors’returnoninvestment.ExampleofRamp-UpOneofthemostnotableexamplesofaramp-upisautomotiveandenergycompanyTesla’sproductionofitsall-electricModel3sedan.TheModel3isprobablythemostanticipatedamongthecompany’svehiclelineup,becauseofitsaffordability.Followingtheannouncementofthemodel,thecompanyfacedanenormousdemandfromcustomers.Inordertomeetthehighdemand,Teslawentthroughanextensiveramp-upfromsluggishproductionlevelsthatcouldnotmeetinitialtargetstothemassiveproductionofmorethan4,000vehiclesperweek.Theautomakermanagedtoachieveitstargetsbyredesigningthecompany’sproductionoperations.Itturnedtowidespreadautomationtoincreaseefficiencyandbuiltnewmanufacturingfacilitiestoachieveitsdesiredproductionrates.AdditionalResourcesCFIistheofficialprovideroftheglobalFinancialModeling&ValuationAnalyst(FMVA)™certificationprogram,designedtohelpanyonebecomeaworld-classfinancialanalyst.Tokeeplearningandadvancingyourcareer,theadditionalCFIresourcesbelowwillbeuseful:CostofGoodsManufactured(COGM)DiversificationEconomicEfficiencySupplyandDemandCFI'sCorporate&BusinessStrategyCourseLearntoperformStrategicAnalysisinCFI’sonlineBusinessStrategyCourse!Thecomprehensivecoursecoversallthemostimportanttopicsincorporatestrategy!SharethisarticleCorporateFinanceInstituteBacktoWebsite0searchresultsfor‘’Peoplealsosearchfor:excelFreefreecoursesaccountingBalancesheetDCF2ExploreOurCertificationsFinancialModeling&ValuationAnalyst(FMVA)®LearnmoreCommercialBanking&CreditAnalyst(CBCA)™LearnmoreCapitalMarkets&SecuritiesAnalyst(CMSA)®LearnmoreCertifiedBusinessIntelligence&DataAnalyst(BIDA)™LearnmoreResourcesExcelShortcutsPCMacListofExcelShortcuts Excelshortcuts[citation...FreeFinancialModelingGuideACompleteGuidetoFinancialModeling Thisresourceisdesignedtobethebestfreeguidetofinancialmodeling!Wewillbreakdownthemostimportant...SQLDataTypesWhatareSQLDataTypes? TheStructuredQueryLanguage(SQL)comprisesseveraldifferentdatatypesthatallowittostoredifferenttypesofinformation...StructuredQueryLanguage(SQL)WhatisStructuredQueryLanguage(SQL)? StructuredQueryLanguage(SQL)isaspecializedprogramminglanguagedesignedforinteractingwithadatabase....SeeAllResourcesSeeAllPopularCoursesFree!FMVA®-PrepCourses3.5hExcelFundamentals-FormulasforFinanceFMVA®-Required5.5hBuildinga3StatementFinancialModelFMVA®-Required7.5hBusinessValuationModelingPartIFMVA®-Required2.5hScenario&SensitivityAnalysisinExcelFMVA®-Required6hDashboards&DataVisualizationFMVA®-Electives11hLeveragedBuyoutLBOModelingSeeAllCoursesSeeAllRecentSearchesSuggestionsFreeCoursesExcelCoursesFinancialModeling&ValuationAnalyst(FMVA)®