Chapter 3 Capacity Mgmt Problem Solutions Fall 2011

Chapter 3 Capacity - Chapter 03 Strategic Capacity Management CHAPTER 3 STRATEGIC CAPACITY MANAGEMENT Review and Discussion Questions 1 What

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Chapter 03 - Strategic Capacity Management 3-1 CHAPTER 3 STRATEGIC CAPACITY MANAGEMENT Review and Discussion Questions 1. What capacity problems were encountered when a new drug was introduced to the market?? The first two problems are the high capital cost of capacity and the opportunity cost of restricting investments in other facilities. These problems are exacerbated by uncertainty over patent infringement, competitor’s response and that there is only a 45% probability of launching the product. If the product is launched it is possible to lose sales because there is not sufficient capacity to meet customer demand. The estimates of demand varied by 600% and if actual sales are at the high end or the low end of the estimates the project will be a financial disaster unless the correct capacity decision is made. 2. List some practical limits to economies of scale; that is, when should a plant stop growing? The obvious answer is that a plant should stop growing when its long-run average cost curve hits the inflection point. However, since this determination is often difficult to make (in the short run), other factors such as coordination problems, excess capacity, capacity imbalance, and market shifts indicate a need to consider setting capacity limits. 3. What are some capacity balance problems faced by the following organizations or facilities? a. An airline terminal. Waiting areas, distances from boarding gates, ground crew requirements, landing strips. b. A university computing lab. The number of computer workstations, the size of each workstation (room for student papers, etc.), the mix of different computer types (Mac or PC), the number of printers, the capacity of the network access, study space for students waiting. . c. A clothing manufacturer. Many manufacturers now use highly decentralized shops to make clothes. This means that capacity of multiple sites must be accounted for in planning production. 4. What are some major capacity considerations in a hospital? How do they differ from those of a factory? Some capacity considerations are size and composition of nursing staff (RNs vs. LPNs), balance between operating room and intensive care units, emergency rooms, etc., and, of course, how many beds are to be available. One of the differences in capacity considerations between a hospital and a factory is that a hospital can add capacity rather quickly in the short run, through “simply” adding more staff and more beds. A factory is usually technologically limited, and, therefore, must plan well in advance to add major chunks of capacity. On the other hand, though, the general uncertainty which surrounds the demand for hospital services on any given day is much greater than would be faced by a factory. Additionally, factory
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Chapter 03 - Strategic Capacity Management 3-2 management generally has the ability to backlog demand in such a way as to achieve more efficient levels of capacity utilization than does a hospital. 5.
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This document was uploaded on 10/31/2011 for the course BUS 361 at BYU.

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Chapter 3 Capacity - Chapter 03 Strategic Capacity Management CHAPTER 3 STRATEGIC CAPACITY MANAGEMENT Review and Discussion Questions 1 What

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