Question

Describe a business you are familiar with. Discuss ONE way this firm adjusts its short-term capacity levels. Make sure to provide enough information on the business.

Answer 1

Describe a business you are familiar with. Discuss ONE way this firm adjusts its short-term capacity levels. Make sure to provide enough information on the business.

I worked at a small food service business. Next door to our business was a small convenience store. In the beginning both businesses had their own cardboard recycling bin. To save on money, the two businesses decided to split the cost of one recycle bin that was slightly larger, but less expensive between the two businesses. We also shared the cost of an outhouse for customers to use.

Short-term adjustments to capacity can be done in a variety of ways and two way is summarized below.

• Add or Share EquipmentCapacity levels that are limited by machine and equipment availability are more difficult to change in the short run because of high capital expense. However, leasing equipment as needed, can accomplish this in a cost-effective manner. Another way is through innovative partnership arrangements and capacity sharing. For example, a consortium of several hospitals might be set up in which each hospital focuses on a particular specialty and shares services.
• Sell Unused CapacitySome firms might sell idle capacity, such as computer storage space and computing capacity, to outside buyers and even to competitors. For example, hotels often develop partnership arrangements to accommodate their competitor’s guests when they are overbooked.

This question allows student to apply these ideas to a business they know such as cell phone service centers, food service, dorms, airlines, and many summer jobs they might have held.