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Bùi Bình Minh đang tìm kiếm từ khóa Increasing allows the firm to be more responsive to changing market conditions. được Update vào lúc : 2022-12-10 10:55:11 . Với phương châm chia sẻ Kinh Nghiệm về trong nội dung bài viết một cách Chi Tiết 2022. Nếu sau khi tham khảo Post vẫn ko hiểu thì hoàn toàn có thể lại Comment ở cuối bài để Tác giả lý giải và hướng dẫn lại nha.What Is Capacity Management?
Capacity management refers to the strategy applied by businesses to maximize production efficiency owing to the overall demand for a product or service in the market. Its goals include identifying and eliminating bottlenecks in the manufacturing process and increasing the production speed by optimizing available resources and removing time and capacity constraints.
Nội dung chính Show- What Is Capacity Management?How
Does Capacity Management Work?Capacity Management StrategiesCapacity Management ExamplesRecommended ArticlesWhich of the following are ways to enhance the development of capacity strategies?Which of the following are ways to enhance the development of capacity strategies quizlet?What are the three primary capacity strategies?Which of the following factors are probable reasons for actual output being less than effective capacity?
It helps companies overcome challenges in meeting short- and mid-term customer demand, managing supply chain operations, and formulating long-term organizational plans. In doing so, an organization must analyze the availability of its resources to ensure it achieves the production output within the given period. This practice is common in industries like manufacturing, retail, service, and information technology.
- Capacity management helps businesses meet consumer demand by cost-effectively improving their production efficiency over a set period. It is accomplished by removing bottlenecks in the production process and utilizing available resources, which leads to maximum output.The more commonly used management strategies include lead strategy, lag strategy, match strategy, and dynamic strategy.Using this strategy offers several benefits for businesses, such as streamlined
operations, increased market share, customer retention and acquisitionAcquisition refers to the strategic move of one company buying another company by acquiring major stakes of the firm. Usually, companies acquire an existing business to share its customer base,
operations and market presence. It is one of the popular ways of business expansion.read more, and better inventory and supply chain management.Aside from being heavily employed in the manufacturing industry, the strategy is practiced in the retail and commercial, information technology, and service industries.
How Does Capacity Management Work?
Implementation of best practices in industries has helped businesses achieve growth in terms of market shareMarket share determines the company's contribution in percentage to the total revenue generated within an industry or market in a certain period. It depicts the company's market position when compared to that of its competitors.read more and revenueRevenue is the amount of money that a business can earn in its normal course of business by selling its goods and services. In the case of the federal government, it refers to the total amount of income generated from taxes, which remains unfiltered from any deductions.read more. In the era of the Industrial Revolution, various industries explored capacity management as a way out to increasing production pressure. But it was during the First World War when the organizations started to consider matching their capacity with the available resources to meet demand.
Market demand keeps changing due to many external factors, such as consumer choices, seasonal changes, macroeconomicsMacroeconomics aims studying aspects and phenomena important to the national economy and world economy large like GDP, inflation, fiscal policies, monetary policies, unemployment rates.read more, and the industrial revolution. All this may affect the way a business is run and result in loss of capacity. The failure to keep production maximum efficiency will have a direct impact on profits.
So to achieve maximum efficiency, a business needs to track the data about its human and material resources, inventory, expected profitabilityProfitability refers to a company's ability to generate revenue and maximize profit above its expenditure and operational costs. It is measured using specific ratios such as gross profit margin, EBITDA, and net profit margin. It aids investors in analyzing the company's performance.read more, etc. All this combined constitute an effective capacity management strategy. It can use this information to match capacity to demand and efficiently allocate resources to achieve its target. Although there are many resource capacity planning tools to calculate and organize these data, knowing about the strategy behind all this is still a required skill.
Strategic capacity planning in operations management requires businesses to:
- Determine their goalsUnderstand the sales demandsAnalyze the opportunitiesEvaluate their resourcesEliminate bottlenecksReview production capacity
For example, if a production line can theoretically assemble 500 goods per hour but assembles only 400 most of the time, there must be a bottleneck.
Capacity Management Strategies
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Capacity Management (wallstreetmojo.com)
Industrial managers have devised a few strategies to achieve better results to increase the business production capacity. Below are some of the most popular capacity management strategies:
#1 – Lag StrategyUsing this conservative approach, a manager determines the capacity and then waits until there is an actual steady increase in demand. Then, the manager raises the production capabilities to a level to satiate the current market need.
The main drawback of this option is that the business will lose the chance to sell more if the demand goes up too quickly, as increasing production often takes time. Also, a shortage of inventory might result in customer attrition.
#2 – Lead StrategyUnlike the lag strategy, this strategy is very aggressive and much riskier. The business decides to increase the capacity before there is an actual demand and anticipates that this will suffice if it goes up. It is used in cases where a company expands or in industries where sales demand goes up quickly. So, small firms usually avoid this kind of strategy.
However, there are a few issues with this approach. For instance, if the actual demand does not go up, it could increase the inventory storage costs and the risk of inventory wastage.
#3 – Dynamic StrategyThis forecast-driven strategy focuses on relying on market trends to increase capacity. The manager analyzes the sales forecast data and actual demand and then makes adjustments to production in advance.
It is one of the safest approaches as managers have accurate forecast data that will qualify their capacity targets. Also, it decreases the risk of shortage or wastage of inventory.
#4 – Match StrategyThis strategy mixes up lead and lag strategies. It uses small yet significant additions in the capacity of the company by following the market demand. Whenever it is clear that demand will rise, the company boosts its production in small amounts.
If the demand goes up quickly, the company can least grow its sales a bit. If it does not, the company will not suffer huge losses. However, the business will never fully enjoy a significant spike in demand or escape unharmed from a sudden recession in the market.
Capacity Management Examples
Todd is the manager of a company that produces paper sheets. He evaluates the company sales and notices that the company is constantly selling 500,000 packages every month, which is its maximum capacity.
So, he decides to use a lead strategy and bets on growth. Todd increases the production to sell 600,000 packages monthly, so the company will not lose the chance to enjoy any spike in demand.
Clair, on the other hand, is the manager of another company in the same industry. Sales here are very different each month, ranging from 300,000 in some months to 500,000 in others. Unlike Todd, she uses a lag strategy. If demand skyrockets, she will upgrade the production. She does not have the same incentives to enhance production so quickly.
The COVID-19 outbreak across the world has affected supply chains of various industries, including healthcare. Moreover, the ramped-up manufacturing and distribution of vaccines in response to the pandemic have posed many challenges before drug manufacturers. But applying capacity management practice could help pharmaceutical companies overcome these challenges to keep vaccine production flowing.
Benefits
A strong capacity management strategy will bring several benefits to a business. These are some of the main positive aspects that it will change:
- It will enhance their ability to monitor the costs, especially during growths or recessions. This way, the business will detect shifts in price quickly and can act accordingly.Using capacity management helps plan production cycles ahead of time to maximize production efficiency.It will
reduce the overall costs of doing business. As such, a company can identify parts of its business not optimized and remove the bottlenecks.Good capacity management planning will help manage inventory better and giảm giá with problems in the supply chain.It allows better allocation of human and material resources.Finally, it helps to scale a business, for example, having an in-depth understanding of how to operate before opening a
new branch.
Recommended Articles
This has been a guide to Capacity Management and its definition. Here we discuss how it works along with its 4 strategies, example, and benefits. You may learn more about financing from the following articles –
- Capacity Utilization RateValue AnalysisCash Management
Which of the following are ways to enhance the development of capacity strategies?
Which of the following are ways to enhance the development of capacity strategies?. Closing brand facilities.. Contracting an existing facility.. Relocating existing operations.. Expanding an existing facility.. Opening branch facilities..Which of the following are ways to enhance the development of capacity strategies quizlet?
Which of the following are ways to enhance the development of capacity strategies? Consider which life cycle stage the product is in. Take into account the acquisition of capacity chunks. Make provisions for possible future expansion.What are the three primary capacity strategies?
There are three commonly recognized capacity strategies: lead, lag, and tracking. A lead capacity strategy adds capacity in anticipation of increasing demand.Which of the following factors are probable reasons for actual output being less than effective capacity?
Actual output cannot exceed effective capacity and is often less because of machine breakdowns, absenteeism, shortages of materials, and quality problems. Tải thêm tài liệu liên quan đến nội dung bài viết Increasing allows the firm to be more responsive to changing market conditions.