Without production, no supply will be produced for your units, nor new troops and equipment. Each town automatically produces supply and sends it to its SHQ, as long as there is a land or sea (using 2 harbours) connection.
If a town has no reachable SHQ set, even using ports, it displays a little red “NP” in the bottom of the hex indicating that it cannot produce anything (even supply) since it cannot deliver the production anywhere.
You can also order a town to produce extra supply, but this is rarely necessary unless you have a very large army relative to your production base, especially since SHQs can stockpile immense amounts of supply. SHQs can also ship supply to one another.
Towns can produce units, political points, or supply. Any units produced in the town will be delivered to your choice of SHQ (see production screen). The selected SHQ must be within a land supply line to the town, however. Having a town sending production to an overseas SHQ will not work, even if there is a harbour connection. The game will show a little red “N” in the bottom of the town hex to warn you if this situation might occur.
Units can be produced in more than one turn. So a town with 500 production will build one fighter (1000 production) every two turns.
Production spent on "fractions" of units is stored up. So if a town with 1500 people is producing fighters (1000 production per fighter), it will produce one fighter the first turn and two fighters on the second turn. Stored production can also be spent on different units. If on the second turn the town switches to light infantry (50 production) it will produce 40 light infantry (since it has 2000 production available).
Not every people can produce every unit type depending upon the scenario you are playing.
Political points can be spent on research, as well as officers, new units, and diplomacy. Note that when you research a new technology, your old units remain on the field. This can be difficult to manage, since you cannot mix Fighters and Improved Fighters in the same unit! It is also very difficult to return units to the SHQ in order to replace them with new units.
For this reason, you must plan your technology upgrades strategically.