Capacity Planning and Control: Nestle

2257 Words Nov 25th, 2008 10 Pages
Capacity Planning and Control: Nestle

Course Work in Operations Management

May, 2005

A business organization is an entity that inputs capital and resources, processes them and gets an output – products and services. Any business invests much capital into R’n’D and marketing for studying the customers’ opinion because it is a priority for any business to satisfy its customers. The more satisfied the customers are the better off the business is. Thus both parties are well off – customers get what they pay for – quality, brand etc, company generates brand identity, high revenues and profit. The bad story in the case is that any business experiences difficulties on the way, no matter how popular the product is or how well it sells.

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Thus in order to deal with the picks and falls of demand at a given period of time chase demand plan involves the following measures: 1. reduce/extend working day 2. hire/lay off extra staff 3. part time recruitment

• demand management Managing demand is another mechanism of dealing with fluctuations. It leads to reducing costs, improving services, better utilization of resources and capacity, increase in profits. The process involves transferring demand of customers from more dense periods to more relaxed times. This is done usually through devising alternative products/services, discounts, new outputs, etc. One good example is setting lower prices of ski equipment during the summer season in order to increase customer demand and purchase power of this product at that time of the year and thus sell the stored products.

In choosing the best capacity plan a business needs to evaluate the consequences. These can be best measured through two main ways – cumulative representations (which graphically represent the demand and capacity curves. A method of dealing with fluctuations is best to adopt where its cumulative production line lies above the cumulative demand line) and queuing theory (often referred to as a trade –off between customer waiting time and system utilization. There are two main cases – one where capacity exceeds demand – waiting time is not long and
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