3.4.3 Making operational decisions to improve performance: Capacity Shortage.

Question 1

What is the main cause of capacity shortage?

Answer 1

An increase in demand, outpacing the firm’s ability to increase it’s production levels.

Question 2

Outline the ways of increasing capacity.

Answer 2

Building or extending factories/plants.

Asking staff to work overtime or longer hours.

Hiring new staff.

A flexible workforce.

Outsourcing or subcontracting.

Transferring resources from another area.

Question 3

Outline how a flexible workforce can increase capacity.

Answer 3

Core workers are employed to meet demand; fluctuations in demand can be met by introducing staff on flexible, short-term contracts or by varying the hours of part-time workers.

Question 4

How can transferring resources from another area help to increase capacity?

Answer 4

If spare capacity exists elsewhere in an organisation - shift resources from one area to another.

Question 5

What is the believed ideal capacity utilisation?

Answer 5

90%.