Chapter 5: Strategic Capacity Planning for Products And Services

Question 1

refers to an upper limit or ceiling on the load that an operating unit can handle

Answer 1

Capacity

Question 2

GOAL of strategic capacity planning

Answer 2

is to achieve a match between long-term supply capabilities of an organization and the predicted level of demand

Question 3

Organizations become involved in capacity planning for various reasons

Answer 3

• Changes in demand
• Changes in Technology
• Changes in Environment
• Perceived threats and opportunities

Question 4

causes operating cost that are too high

Answer 4

Overcapacity

Question 5

causes strained resources and possible loss of customers.

Answer 5

Under-capacity

Question 6

the maximum output rate or service capacity an operation, process or facility is designed for

Answer 6

Design Capacity

Question 7

It is the maximum theoretical output of a system in a given period under ideal conditions.

Answer 7

Design Capacity

Question 8

design capacity minus allowances such as personal time, maintenance, and scrap

Answer 8

Effective Capacity

Question 9

It is the capacity a firm expects to achieve given the current operating constraints

Answer 9

Effective Capacity

Question 10

Determinants of Effective Capacity

Answer 10

• Facilities
• Products and Services
• Process Factors
• Human Factors
• Operational Factors
• Supply Chain Factors
• External Factors

Question 11

including size and provision for expansion

Answer 11

Facilities

Question 12

ability of the system to produce those items is generally much greater than when successive items differ

Answer 12

Products and Services

Question 13

quantity capability of a process is an obvious determinant of capacity

Answer 13

Process Factors

Question 14

Management policy can affect capacity by allowing or not allowing capacity options such as overtime or second or third shifts.

Answer 14

Human Factors

Question 15

Scheduling problems may occur when organization has differences in equipment capabilities among alternative pieces of equipment or differences in job requirements.

Answer 15

Operational Factors

Question 16

must be taken into account in capacity planning if substantial capacity changes are involved

Answer 16

Supply Chain Factors

Question 17

Product standards, especially minimum quality and performance standards, can restrict management options for increasing and using capacity.

Answer 17

External Factors

Question 18

Convenience for customers is often an important aspects of services. Generally, a service must be located near customer.

Answer 18

The need to be near customers.

Question 19

Speed of the delivery, or customers waiting time become a major concern in a service capacity planning.

Answer 19

The inability to store service.

Question 20

Demand volatility presents problem for capacity planners. Demand volatility tend to be higher for services than goods, not only in timing of demand, But also in amount of time required to the service individual customers.

Answer 20

The degree of volatility.

Question 21

Once capacity requirements have been determined, the organization must decide whether to produce a good or provide a service itself, or outsource or buy from another organization.

Answer 21

Make or Buy

Question 22

Make or Buy Factors

Answer 22

• Available Capacity
• Expertise
• Quality Considerations
• The Nature of Demand
• Cost
• Risk

Question 23

If an organization has available the equipment, necessary skills, and time, if often makes sense to produce an item of perform a service in-house, the additional cost would be relatively small compared with those required to buy items or subcontract services

Answer 23

Available Capacity

Question 24

If a firm lacks the expertise to do the job satisfactory buying might be reasonable alternative.

Answer 24

Expertise

Question 25

Firm that specialize can usually offer higher quality than an organization can attain itself. Conversely unique quality requirements or the desire to closely monitor quality may cause an organization to perform a job itself.

Answer 25

Quality Considerations

Question 26

savings achieved from buying of making must weighed against the preceding factors

Answer 26

Cost

Question 27

Outsourcing may involve this. One is loss of control over operations. Another is the need to disclosed proprietary information.

Answer 27

Risk

Question 28

Provisions for Future Expansion in the original Design.

Answer 28

Design Flexibility into system.

Question 29

Capacity requirements are often closely linked to the stage of the life cycle that a product or service is in.

Answer 29

Take Stage of life cycle into account.

Question 30

When developing capacity alternatives, it is important to consider how parts of the system interrelate.

Answer 30

Take a “Big Picture” approach to capacity changes.

Question 31

Of the output rate is less than the optimal level, increasing the output rate results in decreasing average unit costs.

Answer 31

Economies of Scale

Question 32

If the output rate is more than the optimal level, increasing the output rate results in increasing average unit costs.

Answer 32

Diseconomies of Scale

Question 33

Consider whether incremental expansion or single step is more appropriate

Answer 33

Choose a strategy if expansion is involved

Question 34

The difference between cash received from sales and other sources, and cash outflow for labor, material, overhead, and taxes

Answer 34

Cash flow

Question 35

The sum, in current value, of all future cash flow of an investment proposal

Answer 35

Present value

Question 36

represents a general approach to decision making which is suitable for a wide range of operations management decisions

Answer 36

Decision Theory