MGSC 395 Exam 2 Questions With Verified Answers

Capacity - Answer The max rate of output of a process or system What do long-term capacity plans involve? - Answer Investments in new facilities and equip at the organizational level, and require top mgmt participation and approval bc they are not easily reversed When choosing a capacity strategy, what do managers need to consider? - Answer How much of a cushion is needed for variable demand & should we expand capacity ahead of demand or wait until demand is more certain 2 ways capacity can be expressed - Answer 1. output measures 2. input measures When are output measures of capacity best utilized? - Answer When applied to individual processes within the firm or when the firm provides a relatively small number of standardized services or products When are input measures of capacity best utilized? - Answer Low volume, flexible processes What is the problem w/ input measures? - Answer Demand is invariably expressed as an output rate Utilzation - Answer The degree to which a resource such as equipment, space, or the workforce is currently being used Utilization formula - Answer U= Average output rate / Max capacity * 100% Deciding on the best level of capacity involves consideration for the __ of ___ - Answer Efficiency of operations Economies of scale - Answer States that the average unit cost of a service or good can be reduced by increasing its output rate 4 reasons why economies of scale can drive costs down when output increases - Answer 1. fixed costs are spread over more units 2. construction costs are reduced 3. costs of purchased materials are cut 4. process advantages are found Diseconomies of scale - Answer Occurs when the average cost per unit increases as the facility's size increases 3 dimensions of capacity strategy - Answer 1. sizing capacity cushions 2. timing and sizing expansion 3. linking process capacity and other operating decisions Capacity cushion - Answer The amount of reserve capacity a process uses to handle sudden increases in demand or temporary losses of production capacity Capacity cushion formula - Answer CC= 100% - Average Utilization Rate % In a capital intensive industry, a capacity cushion of __ % is preferred - Answer 10% or under In less capital intensive industries, the capacity cushion should be around __ % - Answer 30-40% Businesses find large capacity cushions appropriate when ___ varies - Answer demand 2 extreme strategies for expanding capacity - Answer 1. expansionist strategy (large, infrequent jumps in capacity) 2. wait & see strategy (smaller. more frequent jumps) A ___ approach is needed for long term capacity decisions - Answer systematic 4 steps for a sound capacity decision (assuming mgmt already determined existing capacity & whether current capacity cushion is appropriate) - Answer 1. estimate future capacity requirements 2. identify gaps by comparing requirements w/ available capacity 3. develop alt plans for reducing the gaps 4. evaluate each alt, both quant and qual, and make a final choice Capacity requirements - Answer What a process's capacity should be for some future time period to meet the demand of customers (ext or int) given the firm's desired capacity cushion 2 ways capacity requirements can be expressed - Answer 1. output measure 2. input measure 4 potential foundations for the estimate of capacity requirements - Answer 1. forecasts of demand 2. productivity 3. competition 4. technological change Planning horizon - Answer The set of consecutive time periods considered for planning purposes What is the simplest way to express capacity requirements? - Answer an output rate 4 situations output measures might be insignificant - Answer 1. product variety and process divergence is high 2. the product or service mix is changing 3. productivity rates are expected to change 4. significant learning effects are expected 3 things using an input measure for cap req brings toether - Answer 1. demand forecasts 2. process time estimates 3. desired cap cushion setup time - Answer The time required to change a process or an op from making one service or product to making another Capacity gap - Answer Positive or negative difference between projected demand and current capacity If one operation is more constrained than the others, total process capacity can be expanded only if __________ - Answer the capacity of the constrained operation is expanded Base case - Answer The act of doing nothing and losing orders from any demand that exceeds current capacity, or incur costs because capacity is too large When would qualitative factors tend to dominate? - Answer When a business is trying to enter new markets or change the focus of its business strategy What to managers assess when they are looking at something qualitatively? - Answer How each alt fits the overall cap strategy and other aspects of the business not covered by the financial analysis What to managers assess when they are looking at something quantitatively? - Answer The mgr estimates the change in cash flows for each alt over the forecast time horizon compared to the base case Cash flow - Answer The difference between the flow of funds into and out of an org over a period of time, including revenues, costs, and changes in assets and liabilities Why do waiting lines form? - Answer Because of a temporary imbalance between the demand for service and the capacity of the system to provide the service 4 elements that exist in all situations where waiting lines may form - Answer 1. An input, or customer population, that generates potential customers 2. A waiting line of customers 3. The service facility, consisting of a person (or crew), a machine (or group of machines), or both necessary to perform the service for the customer 4. A priority rule, which selects the next customer to be served by the service facility Service system - Answer Describes the number of lines and the arrangement of the facilities If the potential number of new customers for the service system is appreciably affected by the number of customers already in the system, the input source is said to be ___ - Answer finite A customer population in which the number of customers in the system does not affect the rate at which the population generates new customers is said to be ___ - Answer infinite 2 ways that can describe the service system - Answer 1. number of lines 2. arraignment of facilities channel - Answer One or more facilities required to perform a given service phase - Answer a single step in providing a service In a ___-channel, ___-phase system all services demanded by a customer can be performed by a single server facility (ex. car wash) - Answer single, single