Question

A good capacity decision requires that it be tightly integrated with the organization's strategy and investments....

A good capacity decision requires that it be tightly integrated with the organization's strategy and investments. But there are other "considerations" to making a good capacity decision. Name them. Describe each in a sentence or two

Homework Answers

Answer #1

Capacity planning involves determining the kind of human labour & machinery required and when is it required. ​There are some important considerations to make a good capacity decision.

  • Demand forecasts or level of demand
  • Cost of operation or production
  • Funds & its availability
  • Management Policy

H​ere is the further explanation -

  • The capacity of the plan is limited by demand levels. Stable demand makes the capacity planning simple. ​
  • Fluctuations in demand can create an issue concerning the amount of resource to be required. Hence estimation of the level of demand is an important consideration.
  • It helps to synergise between internal management & external environment.
  • The design capacity helps to understand the maximum possible output that can be produced in a given time period and with the resources available.
  • Knowing the future capacity needs also serve as an important consideration. The gap between existing and estimated capacity helps to plan the manufacturing in a much better manner.

Other Considerations

  • ​The facilities are an important consideration. It includes the size and whether the provision of expansion is present. Design, locational factors and layout all play an important role.
  • The design of the product also has an important influence on capacity utilization. For example - if the output is more uniform then standard material and methods can be used.
  • The process and its quantitative capacity is another important consideration.
  • Human consideration like job design, nature, training and learning, motivation, leadership style and effectiveness, turnover rates etc all play an important role as well.
  • Operational considerations involve material management, scheduling, quality standardisation, policies, maintenance and reports to ensure effective capacity.
  • External considerations in the form or minimum product standards, pollution standards, safety and trade union management.

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