Each factory produces one supply unit each turn. The cost of building a factory is 3 MegaCredits and one supply unit. The maximum number of factories that you can build on a planet is limited by the size of your colonist population.
When a planet becomes over populated (10,000,000 or so on your homeworld), the colonists will be forced to eat and use supplies to keep from starving. Some planets can reach a state of overpopulation at a much smaller population if they have an arctic or desert climate. There are a few desert and arctic planets where the climate is so bad that even a single clan is considered overpopulated.
If the Pleasure Planets Campaign advantage is active, the factories on a planet will create half as many supplies.