Alternative size of capacity expansion
•The benefitsof large increases include longer periods without disruptions, less risk of not meeting unexpected demand, and the expansion might give economies of scale.
•On the other hand, there is not such a close match to demand, disruptions may be more serious, capital costs are higher, utilisation is low, and there are risks if demand changes.
Short-term adjustments to capacity
There are two ways of making these short-term adjustments to capacity:
•capacity management adjusts capacity to match demand;
•demand management adjusts demand to match available capacity.
Capacity Management
Ways of adjusting capacity include:
•changing the work pattern to match demand
•employing part-time staff to cover peak demands
•using outside contractors
•renting or leasing extra facilities
•adjusting the speed of working
•rescheduling maintenance periods
•making the customer do some work, such as packing their own bags in supermarkets.
Demand Management
Ways to adjust demand include:
•vary the price
•limit the customers served, by demanding specific ‘qualifications’
•change the marketing effort
•offer incentives to change demand patterns, such as off-peak travel rates
•change related products to encourage substitution, such as holiday destinations
•vary the lead time
•use a reservation or appointment system
•use stocks to cushion demand.
Changing capacity over time
One of the most obvious is the effect of a learning curve. The more often you repeat something, the easier it becomes and the faster you can do it.