Essentials of Supply Chain Management: Chapter 10 (Test 2)

What is capacity?

The capability of a manufacturing or service system, such as a facility, process, workstation, or piece of equipment, to accomplish its purpose or to produce output in a period of time

A baseball stadium expects a larger crowd than usual for an upcoming weekend series. The manager decides to add two temporary concession workers and extend employee shifts for those games to serve fans faster. What type of capacity decision is this?

Short-term capacity decision

A professional baseball team expects fan attendance to increase over the next 10 years. The organization decides to build a larger stadium with additional seating and more concession stands to handle future demand. What type of capacity decision is this?

Long-term capacity decision

A baseball stadium can serve 5,000 fans per hour, but 7,000 fans per hour need service during a sold-out game. What problem does the stadium face?

Demand exceeds capacity

What are economies of scale?

When the average unit cost of a good or service decreases as the capacity and/or volume of the number of products increases

What are diseconomies of scale?

When the average unit cost of the good or service begins to increase as the capacity and/or volume of the product increases

A focused factory achieves economies of scale without extensive investments in facilities and capacity by focusing on what?

All of the above

What is theoretical capacity?

The maximum rate of output that can be produced in a period of time under ideal operating conditions

Why can a company’s theoretical capacity be reduced?

All of the above

What is effective capacity?

The actual capacity that can reasonably be expected to be achieved in the long run under normal operating conditions

True or false: short setup times clearly increase capacity and improve flexibility by allowing rapid changeovers to different models or products on manufacturing or assembly lines

true

Capacity-planning decisions should be based on what?

Effective capacity as ideal operating conditions are nearly impossible to sustain

To satisfy customers over time, how should effective capacity compare to average demand?

At least as large as average demand

What can happen when customer demand is higher than a company's capacity?

Lost sales or longer wait times

What can happen when a company’s capacity is greater than customer demand?

Idle equipment or extra inventory

What is safety capacity?

An amount of capacity reserved for unanticipated events such as demand surges, materials shortages, and equipment breakdowns

What is a work order?

Specification of work to be performed for a customer or a client

What do long-term capacity strategies do?

Addresses the trade-off between the cost of capacity and the opportunity cost of not having adequate capacity

What are complementary goods and services?

Produced or delivered using the same resources available to the firm

Which of the following is a way to adjust short-term capacity?

Adding equipment or changing employee schedules

How can a business shift or increase customer demand?

Changing prices, advertising, or offering promotions

What does providing reservations allow a business to do?

Promise to provide a good or service at a future time and place

What is one way a business can handle periods when demand is low?

Shift work to slower periods

What does changing the labor skill mix mean?

Adjusting the types of skills employees have available to meet demand

What is the main purpose of a Revenue Management System (RMS)?

Forecast demand, manage limited capacity, decide when to overbook, and set prices for different customer groups

What does an Revenue Management System help a business decide about overbooking and pricing?

When to accept extra reservations and what prices to charge different customer groups

What is the learning curve?

The more experience you gain, the faster and more efficiently you can complete a task

What is the P-percent learning curve?

Characterizes a process in which the time of the 2xth unit is p percent of the time of the xth unit

 What do learning curves exhibit?

A steep initial decline and then levels off as employees become more proficient in their tasks

 What can learning curves be used to estimate?

Labor-hours for repetitive work and are therefore useful in computing capacity requirements in both the short and long term

What does the experience curve state?

That the cost of doing any repetitive tasks, work activity, or project decreases as the accumulated experience of doing the job increases