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In general, you are wanting to match demand for your products with your ability to produce and sell them. An imbalance (either excess demand or idle capacity) is a lost opportunity to earn profit!
Managing Your Product Line
One of the traps many companies fall into is having too many products. It is important to launch new products and modify existing products to meet changing market needs. However, it is also important to review the product line and abandon products which are no longer performing, as having many products produces unnecessary complexity which will increase factory lead times and result in poor delivery performance. (Note that if a firm is attempting to sell multiple products to the same market segment, they will cannibalize each other significantly.)
Product Pricing, Advertising and Production Decisions
The goal of these product-specific decisions is to match product demand with production volume, so that the overall firm profit is maximized. You will need to consider the potential demand and margin for all your products and decide roughly how much capacity to allocate each of them.
Demand will be influenced by retail price, advertising, distribution, quality (warranty claim rate), delivery responsiveness, and product attributes. Different market segments have different requirements and sensitivities to these factors. See the Summary of Segment Data for further information.
Your factory, on the other hand, must have sufficient capacity to produce the required volumes of products at the required quality and with the required delivery responsiveness. Your decisions on target production volume and finished goods stock should reflect the decisions you have made for operations responsiveness and quality.