Strategic Capacity Management

These flashcards cover key concepts and terminology related to Strategic Capacity Management as outlined in the lecture notes.

What is capacity?

Capacity refers to the maximum output that an organization can produce in a given timeframe.

How is capacity measured in manufacturing?

Capacity in manufacturing is typically measured in terms of units produced per time period.

What is the Expansionist capacity strategy?

An Expansionist strategy involves adding capacity in anticipation of increased demand.

What is a capacity cushion?

A capacity cushion is the extra capacity that a company maintains to meet unexpected demand.

Define economies of scale.

Economies of scale refer to the cost advantages that a business obtains due to the scale of operation, with cost per unit of output generally decreasing with increasing scale.

What factors influence capacity decision considerations?

Factors include scale, volume uncertainty, utilization, and demand variability.

What is the formula for calculating capacity requirements?

M = Processing time required for year’s demand / Time available from a single capacity unit per year after deducting desired cushion.

How does capacity utilization relate to fixed costs?

High capacity utilization can spread fixed costs over more units, lowering the cost per unit.

What is demand variability?

Demand variability refers to fluctuations in customer demand, which can be high in service industries.

Define diseconomies of scale.

Diseconomies of scale occur when a company's production costs increase as it produces more goods, often due to complexity and increased inefficiencies.