Answered: DESCRIBE CAPACITY DECISIONS ARE…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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DESCRIBE CAPACITY DECISIONS ARE STRATEGICHOW IT'S WORK?

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Capacity planning:

Capacity is the ability to store, produce, or achieve. In any organization, capacity is termed as the ability to produce the required output within a specific period. Capacity is the number of input resources available to produce the relative output in a specific period. Capacity planning is vital for organizations to determine the optimum utilization of all its resources. Capacity planning plays an important role in the decision-making process.

Strategic capacity planning for products and services:

The strategic planning of capacity is aimed at matching the long-term supply capabilities of the organization and the forecasted level of long-term demand. The two measures of capacity are:

Design capacity – is the maximum output rate or service a facility is designed for.
Effective capacity – is the capacity excluding the non-productive times such as maintenance, scrap, personal time, and so on.

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