Discussion Thread: Capacity Manage Discussion 2 replies of 150 each
39109The student must then post 2 replies of at least 150 words. Each reply must incorporate at least 2 scholarly citation(s) in APA format. Any sources cited must have been published within the last five years.
Dylan…
Capacity is a key consideration for firms and is a very important topic in operations management. Indeed, capacity planning is a critical strategic decision, as matching capacity and demand requirements is the ideal goal for minimizing operating costs (Stevenson, 2021). So too, altering capacity is an important ability for an adept organization in a dynamic environment. A firm may need to adjust capacity due to demand factors, changes in the external environment, or even technological advancements, thus, an effective management team must ensure that they review capacity and adjust when necessary (Stevenson, 2021). One recent example of an organization that has had to adjust capacity to align with customer demand is Kellogg’s which had to meet a sharp increase in demand for its products due to COVID-19 (Silver, 2021).
For the first three quarters of 2020, Kellogg’s saw overall sales increase 7% from the prior year, however, in some regions this demand increase was even greater (Silver, 2021). This sharp rise in demand was truly unprecedented, dwarfing the demand spikes usually associated with promotions, and Kellogg’s quickly used its “safety stock,” and by March there were days when warehouses did a week’s worth of dispatching (Silver, 2021). The company was able to increase production capacity by substantially increasing hours for its factory and warehouse workers, allowing them to send more of their products to retailers experiencing enormous demand (Silver, 2021). One of the constraints Kellogg’s faced was sourcing the paperboard packaging used for its cereal boxes, necessitating the selection of a new supplier (Silver, 2021). The ability of the human parts of the supply chain to stretch and be resilient was key to Kellogg’s success in increasing its capacity to match customer demand (Silver, 2021). Ultimately, Kellogg’s ability to largely meet the demand for its products proved invaluable in satisfying customers, and, in the wake of this crisis, the company has gained market share (Silver, 2021).
In this time period, demand fluctuations and supply chain disruptions left many manufacturers racing to keep up with demand. This led firms to implement strategies that would not only allow them to manage current demand, but also “future-proof” their business to adapt to disruptions in the future (Sundblad, 2021). Traditional approaches to increasing capacity worked in cases like Kellogg’s, however, finding workers and procuring needed inputs often proved difficult (Sundblad, 2021). Therefore, some firms aimed to implement new technologies leveraging data analytics to increase the efficiency and agility of their production and drive capacity increases (Sundblad, 2021). Utilizing such technologies to conduct analysis of demand data enables firms “to react to all potential demand scenarios by making decisions regarding labor and correct investments” all in the right moment (Gallego-García et al., 2019, p. 1). Such an approach allows companies to improve their adaptability to consumer to demand as well as their ability to react to changes quickly; two characteristics crucial for the long-term viability of any firm in an environment of demand volatility (Gallego-García et al., 2019).
References
Gallego-García, S., Reschke, J., & García-García, M. (2019). Design and Simulation of a Capacity Management Model Using a Digital Twin Approach Based on the Viable System Model: Case Study of an Automotive Plant. Applied Sciences, 9(24), 5567. https://doi.org/10.3390/app9245567
Silver, S. (2021). How Kellogg’s, Nike, and HP handled 2020 supply chain disruptions. FM Magazine. https://www.fm-magazine.com/news/2021/jan/coronavirus-supply-chain-disruptions-kelloggs-nike-hp.html
Stevenson, W. J. (2021). Operations Management (14th ed.). McGraw-Hill Education.
Sundblad, W. (2021). How Manufacturers Are Managing Demand Spikes. Forbes. https://www.forbes.com/sites/willemsundbladeurope/2021/10/28/how-manufacturers-are-managing-demand-spikes/?sh=55accc692410
Christina…
According to an article,” Capacity is the maximum amount your manufacturing operation can produce. Capacity is increased either to meet an actual (immediate) increase in customer demand or an anticipated (future) increase in customer demand” Due to the increase of customer demand, LEGO was recently forced to increase capacity dramatically to better align with the growing demand. According to an article,” Lego reported a decline in revenue growth and profits for the first half of 2016, but only because the Danish toy maker needed time to add production capacity to meet increased demand for its colorful building bricks in North America, the company said on Tuesday”. The key drivers that caused the change in demand was the increase in LEGOs marketing activities. LEGO has been one of the most profitable toy makers of all times, even ahead of Barbie Doll maker. They recently increased their marketing which has increased their sales. However, the company was unable to keep up with the demand so they were forced to reduce their advertisement and invest in new factories in China and Mexico so that they can produce more products. They even doubled the capacity of the plant in Hungary. According to the article,” As a result the company recruited over 3,500 new employees in the first half of 2016, an increase of 24%. We feel we need to invest, to build some breathing space. These investments in people and infrastructure will obviously have an impact on our short-term profit growth. But they are part of our long-term plan to sustain the development and delivery of fun”. The LEGO Company has realized that in order to grow bigger and meet the demands of the customers, they will have to take a small financial hit now and focus on growing other areas of their company. LEGOs were one of my favorite toys growing up. It requires you to have patience and to think critically. The CEO demonstrates these qualities in his company by noticing the increasing customer demand and making the important steps to better his company. The bible talks about having patience in our personal and business life. Romans 12:12,” Rejoice in hope, be patient in tribulation, be constant in prayer.
Reference:
The Bible
Quectel. (2016, September 22). The incredible manufacturing process that brings us Lego.
Retrieved April 11, 2021, from https://www.rcrwireless.com/20160921/big-data-analytics/lego-
automated-factory-tag31-tag99
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