MGT 302 Chapter Notes - Chapter 4: Net Present Value, Capacity Utilization, Outsourcing
8 Jan 2017
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Capacity management in operations and supply chain management. An operations and supply chain management view of capacity emphasizes the time dimension of capacity. Intermediate range monthly or quarterly plans for the next 6-18 months. Strategic capacity planning- finding the overall capacity level of capital-intensive resources to best support the firm"s long-term strategy. Capacity- the output that a system is capable of achieving over a period of time. Best operating level- output level where average unit cost is minimized. Capacity utilization rate- measure of how close the firm"s current output rate is to its best operating level (percent) Capacity utilization rate = capacity used / best operating level. Economies of scale- idea that as the plant gets larger and volume increases, the average cost per unit drops. At some point, the plant gets too large and cost per unit increases. The idea that a production facility works best when it is concentrated on a limited set of production objectives.
