STRATIGIC OPERATIONAL MANAGEMENT

Strategic Operational Management



Strategic Operational Management

Question-1

Introduction

Capacity refers to a system's potential for producing goods or delivering services over a specified time interval. Capacity planning involves long-term and short term considerations. Long-term considerations relate to the overall level of capacity; short-term considerations relate to variations in capacity requirements due to seasonal, random, and irregular fluctuations in demand ( Bohan, 1991, pp.309-17).

Excess capacity arises when actual production is less than what is achievable or optimal for a firm. This often means that the demand in the market for the product is below what the firm could potentially supply to the market. Excess capacity is inefficient and will cause manufacturers to incur extra costs or lose market share. Capacity can be broken down in two categories: Design Capacity and Effective Capacity: refers to the maximum designed service capacity or output rate. Effective capacity is design capacity minus personal and other allowances. Product and service factors effect capacity tremendously (Carr, 1992, pp.72-7).

Paper focuses on capacity planning for products and services for Grammatix Clothing. Capacity is the ability of a systems potential for producing goods or delivering services over a specific time interval. The capacity decisions within a company are very important because they help determine the limit of output and provide a major insight to determining operating costs. Basic decisions about capacity often have long term consequences and this chapter explains the ramifications of those choices. When considering capacity planning within a company, three key inputs should be considered. The three inputs are the kind of capacity to be determined, how much of the products will be needed, and when will the product be needed.

The most important concept of capacity planning is to find a medium between long term supply and capabilities of an organization and the predicted level of long term demand. Organizations also have to plan for actual changes in capacity, changes in consumer wants and demand, technology and even the environment. When evaluating alternatives in capacity planning, managers have to consider qualitative and quantitative aspects of the business. These aspects involve economic factors, public opinions, personal preferences of managers. Strategy in any organization plays a very important role in gaining competitive edge (Crandall, 1996, pp.106-20).

This paper describes capacity planning as a key factor in designing systems. The capacity decision is strategic and long-term in Grammatix Clothing. Capacity planning is described as matching the capabilities of an organization with the predicted level of future demand. Many organizations become involved with capacity planning due to changes in demand, technology, the environment, etc (East, 1994, pp.56-71). Organizations have capacities or limits that their system can handle. Three key inputs to capacity planning:

The kind of capacity that will be needed

How much capacity will be needed

When will it be needed

Capacity Planning In Grammatix Clothing

No single capacity measure is applicable to all types of situations. Hospitals measure capacity as the number of patients that can be treated per day; a retailer measures capacity as annual sales dollars generated per square foot; an airline measures ...