Capacity Flashcards
Capacity is important
Ensuring that resources are used efficiently to help a business maximise profits
Businesses don’t want resources say idle why?
Since any fixed costs incurred will still have to be paid
It’s not always good to work at full capacity though
- Since downtime is sometimes required for maintenance
2. Staff morale will be lowered if they are constantly being made to work flat out
Formula for capacity utilisation
Actual output
Divide
Capacity x100
Ways of increasing capacity in the short term
- Change shift patterns
- Extend opening hours
- Employ temporary staff
- Use overtime
Ways of increasing capacity levels in the long term
- Expand the business
2. Invest in more equipment
Decrease capacity levels short term
- Stock pile
2. Reduce prices
Decrease capacity levels long term
- Redundancies
2. Closing branches
What is capacity
The highest sustainable level of production that can be achieved with the current level of resources
Holding too much stock may lead too
>storage costs >higher insurance > opportunity cost > increases risk of shrinkage > increased risk of waste > cash flow problems
Not holing enough stock
> loss of sales
lead to a loss of customers
damage business reputation lead to loss of goodwill
longer lead time for customers
Managing stock: what does EPOS stand for
Electronic Point Of Sale > it is a database of stock kept up to date using barcodes > it is common in retail
Waste management
> stock rotation should be used to ensure that wastage is minimised
What does FIFO AND LILO mean?
FIRST IN FIRST OUT
LAST IN LAST OUT
Stock control charts
> traditional method of managing stock > based upon 3 assumptions 1. Deliveries are correct and on time 2. There are no faulty stock 3. Stock is used at a constant rate
