ACC 310F Chapter Notes - Chapter 3: Staples Center, Excess Supply, Shortage

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7 Feb 2017
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Characteristics of Short-term Decisions
Closing the Gap between Demand and Supply
Short term decisions:
Decisions that deal with excess supply:
Ex. reducing prices to stimulate demand, running special promotions,
processing special orders, and using extra capacity to make some
production inputs in-house (making parts vs. purchasing them from an
outside supplier)
Decisions that deal with excess demand:
Ex. increasing prices to take advantage of favorable demand conditions,
meeting additional demand by outsourcing production, and altering the
product mix to focus on the most profitable ones
Fixed Supply of Capacity and Demand Changes
Fixed supply of capacity
Capacity is the maximum volume of activity that a company can
sustain with available resources
Ex. the staples center can seat approximately 20,000
Ex. a printing press can produce approximately 60,000 pages per
hour
Organizations make capacity decisions based on the expected volume of
operations over a horizon often spanning many years
These actions are not as reversible, because it takes time and
effort to prepare for demand (build new stadium, install machine,
etc)
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