Page 92 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes Output Measures: Usual choice for high-volume processes.
Rated Capacity: Measure of the maximum usable capacity of a particular facility.
Theoretical Capacity: That can be achieved under ideal conditions for a short period of time.

Wait-and-see strategy: Involves smaller, more frequent incremental jumps.

3.12 Self Assessment

State whether the following statements are true or false:

1. If you are the operations manager of a firm, then theoretical capacity will interest you
more.
2. Rated capacity is dependent on efficiency of the firm's capacity.

3. A huge company with turnover in crores is most likely to use output measures for its
capacity.
4. The legal and environmental issues can form a major hindrance in operating at effective
level of capacity.
5. Renting a part of school premises for running coaching classes on holidays is an effective
way to match capacity to growing demand.

6. Wait-and-see strategy is more competent than expansionist strategy.
7. The concept of decision tree is based on guess work.
8. Ball bearings used in automobiles are a type of specialised component.

9. If the capacity is increased to a great extent diseconomies of scale come into play.
10. One of the major challenges posed by services capacity planning is that they can't be
inventoried.

Fill in the blanks:
11. If the rated capacity is 20000 products/month and the efficiency and utilization are both
80%, then the capacity is……………………

12. Capacity planning finds its base mainly in……………………..
13. The items like silver, gold, milk etc. are all ……………………types.
14. Profits= Total Revenue- (…………………+…………………..)
15. If we subtract the value of variable costs form the total revenues earned we will get
the…………………….

3.13 Review Questions

1. "Product design, capacity and process selection have a direct relationship". Substantiate.
2. How capacity planning has become a strategic tool in the operations function?

3. Why theoretical capacity is rendered meaningless for any operations manager?
4. "To estimate capacity, you must first select a yardstick to measure it". Discuss
5. "Capacity planning has to address the external environment of the firm". Why?
6. "Capacity offerings can also yield a competitive advantage". Comment.

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