BUS 370 Exam 2 Study Guide

BUS 370 Exam 2 Study Guide - BUS 370 Exam 2 Study Guide...

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BUS 370 Exam 2 Study Guide Chapter 8: Managing Capacity Capacity – The capability of a worker, machine, work center, plant or organization to produce output per time period. Measures of Capacity – companies measure capacity in terms of inputs, outputs, or some combination of the two. Examples: Jiffy Lube – oil changers per hours, Law Firm – billable hours, College – Student hours per semester. Factors Affecting Capacity – conformance quality – if there is poor conformance quality then it reduces available capacity – quality improvement can increase an organization’s effective capacity by reducing the amount of resources needed to provide a product/service. Product variations is another factor. Ex – number of shifts or lines active at any time is a controllable factor. Theoretical Capacity – the maximum output capability, allowing for no adjustments for preventive maintenance or unplanned downtime. Rated Capacity – The long-term, expected output capability of a resource or system. PC Plant Example- Capacity for a PC Assembly Plant:(800units shift/line)*(No.of Lines)*(No.of Shifts). The Plant is large enough to have three assembly lines. Management wants to have a maximum of two shifts. 800 is minimum and 4,800 is maximum of capacity. Lead Capacity Strategy Definition - A capacity strategy in which capacity is added in anticipation of (before) demand. Advantages - Assures adequate capacity to meet all demand, even with high growth; Preempt competitors; can be cheaper and less disruptive. Risks Demand is unpredictable (demand may never materialize); technology is evolving rapidly (your product or service becomes obsolete soon after building the capacity). Lag Capacity Strategy - A capacity strategy in which capacity is added only after demand has materialized – typically a good strategy for mature, cost sensitive products and services. Advantages - Reduced risk of overbuilding; greater productivity due to higher utilization levels; ability to put off large investments. Risks – Reduced availability of products or services during periods of high demand. Organizations that follow this strategy often provide mature, cost-sensitive products or services. Match Capacity Strategy – a capacity strategy that strikes a balance between the lead and lag capacity strategies by avoiding periods of high under- or overutilization. Virtual Supply Chain – a collection of firms that typically exists for only a short period. Virtual supply chains are more flexible than traditional supply chains, but less efficient. Evaluating Capacity Alternatives Fixed Costs - Expenses an organization incurs regardless of the level of business activity. Examples include lease payments on equipment, mortgage payments on buildings and monthly software costs.
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