McGraw-Hill Education: Service Capacity Planning Challenges

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What is the difference between design capacity and effective capacity?

Design capacity is the maximum attainable output, while effective capacity considers factors like machine breakdowns and absenteeism. (correct)

Effective capacity is the maximum attainable output, while design capacity considers external factors.

Design capacity is always greater than effective capacity.

Effective capacity is theoretical, while design capacity is practical.

If a system has a design capacity of 30 units per hour, an effective capacity of 25 units per hour, and an actual output of 20 units per hour, what is the efficiency of the system?

80% (correct)

83.33%

75%

66.67%

Which of the following factors fall under determinants of effective capacity?

Employee turnover rates and learning rates

Supplier management and transportation costs

Quality assurance and equipment breakdowns (correct)

Weather conditions and natural disasters

Why might actual output be less than effective capacity?

Due to machine breakdowns, absenteeism, and material shortages. Signup and view all the answers

Which measure is used to calculate the ratio of actual output to effective capacity?

Efficiency Signup and view all the answers

In the context of determinants of effective capacity, what falls under operational factors?

Quality assurance and maintenance policies Signup and view all the answers

What determines effective capacity according to the text?

Product standards Signup and view all the answers

What is the purpose of the capacity cushion in organizations?

To offset demand uncertainty Signup and view all the answers

Which strategy adds capacity in small increments to match increasing demand?

Tracking strategy Signup and view all the answers

What are strategies typically based on according to the text?

Costs of building and operating facilities Signup and view all the answers

Which factor influences an organization to have a larger capacity cushion?

Demand certainty Signup and view all the answers

What is the first step in the capacity planning process according to the text?

Estimate future capacity requirements Signup and view all the answers

What happens to average per unit costs if the output rate is less than the optimal level?

They decrease Signup and view all the answers

Why do larger plants tend to have higher optimal rates and lower minimum costs than smaller plants?

They can spread fixed costs over a larger number of units Signup and view all the answers

What causes distribution costs to increase in diseconomies of scale?

Traffic congestion and shipping from larger facilities Signup and view all the answers

Why does complexity increase costs in diseconomies of scale?

Control and communication become more problematic Signup and view all the answers

What is a reason for processing costs to decrease due to economies of scale?

Standardization of processes Signup and view all the answers

How can capacity management be enhanced according to the text?

Choosing a strategy if expansion is involved Signup and view all the answers

What is the main focus of cost-volume analysis?

The relationship between cost, revenue, and output volume Signup and view all the answers

How can an organization overcome knowledge and skills constraints?

Seek training or consultants Signup and view all the answers

Which type of costs tend to remain constant regardless of output volume?

Fixed costs Signup and view all the answers

What is a key consideration in evaluating alternatives according to the text?

Economic feasibility Signup and view all the answers

If additional funds are needed, what are the suggested actions according to the text?

Improve cash flow, borrow, or outsource production Signup and view all the answers

How can an organization address issues related to laws or regulations?

Work with regulators or lawmakers Signup and view all the answers

What are some challenges related to service capacity planning?

Inability to store services for later consumption Signup and view all the answers

Which factor tends to make service capacity planning more challenging compared to goods?

Demand volatility Signup and view all the answers

What strategy is used to achieve a closer match between supply and demand?

Pricing discounts Signup and view all the answers

When deciding whether to produce a good or service in-house or outsource, what factor should be considered?

Available capacity Signup and view all the answers

What is a key aspect to consider when developing capacity alternatives?

Design flexibility into systems Signup and view all the answers

How are capacity requirements often related to the life cycle stage of a product or service?

Capacity needs are linked to the product or service's life cycle stage Signup and view all the answers