DISCUSS THE FRAMEWORK OF CAPACITY MANAGEMENT DECISIONS

capacity management is the set of activities that helps us to understand the levels of demand and supply and dealing with there mismatches, this includes forcasting planning controlling and our responses based on ST MT and LT performance objectives.

there are a series of activities involved in capacity management, these can be split into demand and supply side activities. looking at the supply side, this considers measuring capacity to deliver our products and services. we need to consider the impact of mix time frames and specifications in order to determine the sepcified most appropriate amount to supply. these decisions include setting our base capacity level and then using 2 key methods of managing supply, either level capacity of chase capacity.

when deciding the base level of capacity we need to consider firstly the operations performance objective. our base level should reflect these, for example if our base level of capacity was high compared to average demand this will result in relativly high levels of underutilisation of capacity and thus high costs. however this may also act as a ‘cushion’ enabling the organisation to be flexible and for risk to be minimal. additionally another factor that needs to be considered when detrrmining the base level is the perishability of the operations outputs. if perishable then base capacity will need to be set at a relativley high level as inputs or output cant be stored for long periods of time. for example if a company produces frozen fruit, they will need sufficient freezing and storing and thus capacity. thirdly another factor impacting the base level of capacity is the degree of variability in demand or supply. this will reduce the ability of an operation to process its inputs, and willr reduce its effective capacity.

after determining the base capacity level an organisation needs to decide weather to use level capacity planning or chase capacity planning. level capacity planning keeps this level of capacity fixed throughout the planning period, regardless of the fluctuations in forcast demand . this means that the same number of staff operate the same process so should be capable of producing the same output in each period. this can create high utilisation and productivity but includes a lot of inventory that needs to be financed and stored. however this plan isnt sutiable for perishable products like foods or fashion thats demand changes rapidly and unpredictably. an example of where this could be used is by services such as hotels, services cant be stored as inventory so a level capacity plan would run the operation at a uniformaly high level of capacity availability.

another method they may consider would be chase capavity plan, this attempts to match capacity with the forcasted demand. this means different numbers of staff, different working hours and different amounts of equipment for each period. thus this doesnt work for organisations with non perishable products. this is often adopted by operations that arent able to store their output eg those with perishable products. for example seasonal products such as strawberries that are often eaten in summer may have a chase capacity plan as they can be supplied more in times where demand will be more for example in summer.

further more the other side of the capacity management framework is the demand side. this relates to the pattern of demand for goods and services knowing this rate of change is vital for business planning. in order to forcast this, we can use qualitative or quantative approaches.

qualatative approaches can include the panel approach. this involves focus groups and panel members discussing future demand. it is often difficult to come to a consensous and often the lowdest people take over. moreover we may take the delphi method. this is a more formal method that involves assinging a range of questions to panel experts which are then analysed and weughted. consequences of this include constructing the questionair and selevtign the panel of experts. additionally they may use scenario planning, this is where panel members are asked to devise a range of future scanrios, each is then discussed and the risks are considered. this enables organistions to plan for the future and for potential issues.

additionaly they may use more quantitive approaches to forcasting including time serieis analysis. this is where we plot a variable over time and then by removing variations we can explore and predict future behviour. however this looks at past behaciour to forcast for future behaviour which may ignore many important variables such as external shocks like a pandemic. another method that may be used is casual models, these employ complex technieques to understand the stregth of telationships between the network of variables and the impact they have on each other. from this they can devise a simple regression to find the best fit between 2 variables this enables us to get a relative indicator of uncertianty and variation in demand enabling us to plan.

from demand foracsting we can then manage our demand side, through demand management methods. for example we can use price differentials this involves adjisting our price to reflect demand, for example increasing prices during high demand, this can be seen through airlines, who increase their prices when demand for there service is high such as in peak summer seasons. antoher method includes scheduling promotions. this is varying the degree of market stimulation to encourage dmeand during low periods, for example in summer having sales in sunscreen. another method involves constraining customer acces such as reservations or appointment methods. we can also have service differnetials for example allowing service to deteriorate during high demands. or we can create alternative products or services in order to fill capacity in quiter periods.

we can also manage our demand through yield/profit management. this ensures that an operation mazimises its potential to generate a profit. this is often when the capacity is inflexible for example when an airline overbooks this helps to prevent empty seats, but too many passangers may show up.

for many organisations these pure approaches to demand and supply management dont meet the required combinations of competitive and operational objectives. thus most organisations decide to use a mix of approaches. in order to determine this an organisation needs to consider the balance between predictable and unpredictable demand. with predictable demand it is sstable so is easier to manage if it is unpredictable and changes this makes it more difficult to manage. in order to determine this plan, we have 3 methods adopted to asses our consequences of picking particular capacity management plans

firstly is using cumlative representatiosn to make capacity management decisions. by using cumulative represnetation of demand this reveals more information allowing us to asses the demand more accuratly and effectivly.

another method is using queing principles to make capacity management deicisons. while demand can be satisfied often customers have to wait, these make providing the adequete capacity at all points in time diffficult.

the 3rd method icnludes using a longitudinal perspective to make these capacity management decisions. this involves watching variables over a long period of time making our decision more likely to be successful.

WHAT ARE THE DIFFERENCES BETWEEN CHASE AND LEVEL CAPACITY PLANNING

Capacity maangement is the set of activities to understand the nature of and operations demand and supply and copignwith their mismatches this includes forcasting the demand and supply and controlling planning and responding to it.

we can manage our supply side to enable us to manage capacity more effectivly. to do so we need to conisder our base capcity this is the maximum through put capacity and is the minimum level of inventory needed to maintain an operations requiremnt. often based on factors such as performance objectives, pershability and variablity in demand and supply. fro this organisations then decide to take a level or chase capacity method

level capacity is whre they maintain a consistent level of inventory over time. this keeps the capacity fixed through out the planning period, regardless of the fluctuations in demand. this is more effective when an oeprations output can be stored, for example with non persihable items. for example hotels often use level capacity, keeping the number of staff and rooms consistent with time

for mroe perishable items they may adopt chase capacity. this attempts to match cpaacity with the forcaseted demand. this applies time varying resources such as differences in the number of staff and available equpment. this is more useful for items such as clothes, these go out of fashion and out of demand often both unpredictably and quickly. as a result by using chase capacity they can match these fluctuations in demand.

DISCUSS DIFFERENT METHODS OF QUALATATIVE FORCASTING

This includes non numerical methods to forcasting the demand side of capacity planning. for example we haev the panel approach this involves focus groups and panel members who will discuss future demand, hwoever it is often hard to come to a conculsion and often the loudest will overpower leading to inaccurate conclustions

another popular method is the delphi method this is a more formal method with a set of questions to panel experts this is then analysed and weighted howver it is often diffifuclt to fund thse panel members and come up with the questions as well as being costly

thirdly another method involvs scenario pla nning this is subtable for forcasting more uncertian scenarios. panel members devise a range of future scanrios which are then analysed and used in prediction and prevention