FARE 3310 Lecture Notes - Lecture 8: Capacity Management, Variable Cost, Shortage

• School: University of Guelph
• Department: Food, Agricultural and Resource Economics
• Course: FARE 3310
• Professor: Predrag Rajsic

Document Summary

Capacity: the number of units a facility can hold, receive, store or produce in a given time. If except capacity is inadequate, additional capacity may be necessary. Capacity and strategy: capacity decisions much be integrated into companies mission. Capacity considerations: forecast demand accurately, understand the technology and capacity increments, find the optimum operating size, build for change. Managing demand: poor match may result in demand exceeding capacity- increase prices to curtail demand. Demand and capacity management in service sector: demand management- appointments, reservations, first come first serve, early bird discounts, capacity management- when managing demand is not feasible, changes in staffing can help. Theory of constraints: a body of knowledge that deals with anything that limits or constrains an organizations ability to achieve its goals. Identify constraints: develop a plan for overcoming, focus resources on overcoming, reduce effects of constraints by offloading work of by expanding capabilities, when one set of constraints is overcome, identify new ones.