What trade-offs must a firm make in developing a long-range capacity plan?
How does capacity planning differ from manufacturing and service firms?
I have an idea of what the answer to these two are but I do not know if they are right. Just need a little clarification.
# 1 - Review the Capacity Tradeoffs section that begins on page 145 of the course text.
# 2 - Review the information under the Capacity Planning in Services section on page 150 of the text.
By reading the course materials, these answers should be readily available to you.
Sure! I can help clarify those questions for you.
1. What trade-offs must a firm make in developing a long-range capacity plan?
In developing a long-range capacity plan, a firm typically needs to make several trade-offs. These trade-offs involve balancing various factors such as cost, flexibility, efficiency, and customer demand. Some common trade-offs are:
a) Cost vs. Capacity: Increasing capacity usually requires investments in resources, equipment, and infrastructure. A firm must determine how much it is willing to spend on expanding capacity while considering the financial impact.
b) Flexibility vs. Specialization: Increasing capacity often involves making decisions on whether to specialize in certain products or services or to maintain flexibility to adapt to changes in demand. Specialization may lead to higher efficiency but might limit the firm's ability to respond to changing market conditions.
c) Lead Time vs. Capacity: Developing a long-range capacity plan involves estimating lead time, which is the time it takes to respond to changes in demand. A firm must determine how much lead time it is willing to accept in balancing its capacity to meet customer expectations.
2. How does capacity planning differ between manufacturing and service firms?
Capacity planning differs between manufacturing and service firms due to the nature of their operations. Here are a few key differences:
a) Tangibility: Manufacturing firms typically deal with physical products, while service firms focus on intangible services. Manufacturing firms can measure capacity in terms of units produced, while service firms measure capacity in terms of customers served or transactions processed.
b) Inventory: Manufacturing firms can build inventory as a buffer for fluctuations in demand, whereas service firms often have little to no inventory. Service firms need to ensure sufficient capacity to handle unpredictable customer demand in real-time.
c) Process Complexity: Manufacturing involves various processes like procurement, production, and distribution, each requiring different capacity considerations. Service firms generally have more complex processes as customer interactions and service delivery might vary greatly.
d) Timing: Manufacturing firms can accumulate and store inventory for future demand, enabling flexibility in timing for capacity adjustments. Service firms, on the other hand, typically need to provide capacity in real-time based on immediate customer demand.
These differences influence the way capacity planning is approached in each type of firm. It's important to consider these distinctions when developing capacity plans for specific industries.