Balancing Supply & Demand Flashcards
Define capacity
- The ability to hold, receive, store or accommodate. (In business generally viewed as the amount of output that a system is capable of achieving over a specific period of time).
What purpose do resources have?
- Resources that are used for the process for converting input into output.
Give an example of a primary resource.
Output: House being built
Process: Construction
Primary resources: bricks, roof tiles, windows, doors, beams and flooring etc.
Give an example of a secondary resource.
Output: Chair
Process: Construction
Secondary resources: training of the carpenter to construct the chair
What does demand help do?
- Determines how many resources are needed. From that you can determine the capacity needed.
To determine how many resources are needed what do you need to do?
- Forecast of demand. From that you can determine the capacity needed.
What determines production largely?
Bottleneck
Define best operating level.
- Maximum operating capacity (doesn’t mean its max speed because it has to take other factors into consideration.
Factors that restrict maximum output.
- Set up time/start up time.
- Maintenance (equipment)
- Breaks, personal care etc (required by law for welfare of workers).
Define utilisation rate.
- Expresses how much of available capacity (best operating level) is being used.
Capacity utilisation rate equation.
Capacity used/best operating level
What does a low utilisation rate mean?
- Lower it is the worst, not very economic because it isn’t as effective as it could be.
Define economies of scale
- Saving in costs gained by an increased level of production (advantages business will get though increased production and size of business as the fixed costs and inefficiency will spread out over more units of output)
Example of a larger scale of production.
- Horizontal flow wrapper.
- variety of capabilities.
Labour as a resource.
- Induction
- Training
- catch up on learning curve
- Capabilities of individuals vary
