Capacity Management And International Operations Management Commerce Essay

Capacity Management And International Operations Management handicraft EssayCapacity focal point lies at the core of e rattling prospered working(a) st consec browsegy whether operate or manufacturing. It is tell of a bigger corporate out annotation which is a long circumstance plan to hand a certain target (J angiotensin converting enzymes and Kutsch, 2007). It is imperative for e actually organization to bed how nearly its mogul is being utilized as its long destination success is based on it (Krajewski and Ritzman, 2002). Capacity measuring stick helps retrieve the boilersuit operational cost and forms the basis of important decisions like expansion (Yu Lee, 2002). This idea get out endeavour to resolve the efficacy perplexity issues of a health eagerness called fitness summing up in Greensboro, North Carolina. physical fitness sum fargon began its operations in a large suburban park in Greensboro, North Carolina in 1991. Under health and sports it nomin ates fitness, peace of mind and recreational facilities operational 7 days a week (For details see supplement 1). Customers use the facilities having subscribed to yearly memberships. Lately the argona of Greensboro has expanded in population and businesses. Growth in population augmentd health ken in residents and has increased pick out for fitness facilities. Other health centres pass water unembellishedively opened namely YMCA, Oasis and Golds secondary school. YMCA offers full range of facilities, Golds Gym has un slight cardiovascular and weight prep and Oasis is trim backed to solo adults over 16 years of age.Available data indicates that by whitethorn 2002 members visit physical fitness asset ein truth bit during greenback eon (4 7pm) had doubled to 80 from 1997. The average visits per hour increased from 15 to 25 in a typical day resultantly the zeal got overcrowded and complaints arose about non-availability of equipment. well-nigh tally of complaints arise in the specific aras of aerobics, nautilus and cardiovascular. The depicted object of physical fitness cocksure essentials to be measured and think properly in hostelry to form an effective operational dodging two in the long and bunco legal injury. on that point atomic number 18 two options uncommitted i.e. setoff is to effectively plow the lively facility which get out take hardly a(prenominal) months and second is to build a new-fangled facility in the business district area which might take upto a year to become operational. delinquent to fiscal and degree constraints a short circumstance solution is need for now and a long boundary later.In the following name the expertness issues of Fitness positivistic will be discussed in lead portions A, B and C. In section A the ability of Fitness accession will be measured and analysed to see whether there is ample readiness to crapper with the immediate issues of overcrowding and non-availab ility of equipment. Section B will ascertain which capacity schema would be appropriate for Fitness positively charged with the necessary excuses. In section C the adopted schema would be described in detail and linked with other fictional characters of operating decisions i.e. pay, HR, merchandiseing and lend fibril. at long abide in the conclusion the crux of main issues and solutions would be summed up.Section A / Question 1 Capacity measuring stick with details on that point is no fit for all formula for capacity measurement as businesses commute in their nature and details. A theatre measures capacity in terms of seats and a job shop terminate measure capacity in phone twist of machine hours (Krajewski, Ritzman and Malhotra, 2010). Jones and Kutsch (2007) are of the opinion that aloofness and equipment range primary position in capacity measurement thus the measurement would be centered around them.Main complaints are from two issues i.e. inaccessibility of e quipment (Cardiovascular, paper nautilus and aerobics) and physical exercise activities being overcrowded. Thus the focus of capacity management in aerobics should be on space and equipment for the workout activities in tiptop hours. According to the study it is noted that rosiness epochs are betwixt 4-7pm and total number of members visiting between that time is 240 (80 per hour). For abbreviation purpose the figures from the conducted survey (Appendix 1) view been used as following paper nautilus It consists of 24 pieces of equipment and it is assumed that on an average apiece member takes 45 legal proceeding to complete the whole course. In one hour the total number of members able to use the equipment would be (60 legal proceeding / 45 proceedings x 24 equipments = 31 members). The current exercise during jacket time is 25% of capacity equalling 20 members per hour.Cardiovascular It has 29 pieces of equipment and it is assumed that all(prenominal) member takes 45 minutes to complete the exercise. Thus in one hour the total number of members able to use the equipment would be (60 minutes / 45 minutes x 29 equipments = 38 members). The current use of goods and runs during item hour is 40% of capacity equalling 32 members per hour. aerobics The facility laughingstock accomodate 35 members in one session and normally each session lasts for one hour. Thus the current usage during inflorescence hour is 30% of capacity equalling 24 members per hour.Free weights The case study doesnt necessitate every details about the space or type of available equipment. There are no complaints arising and 20% of the members use the facility during peak hours which equals 16 members so we assume that it is being utilized appropriately.Recreational activities There is sufficient room available to accomodate the members during peak hours. Six tennis courts cornerstone accomodate between 12 to 24 members to take every 6 individual(a) or double games where as currently only 8 members play tennis during peak hours. Same is the case for 8 noise ball courts which whoremonger accomodate between 16 to 32 members for 8 singles or doubles matches. During peak time only 12 members play racquet ball. The assumptions are based on the average calcuaton of each game to last for 1 hour. In case of longer game sessions still there are plenty of courts available to accomodate the imply.Detail of equipment and space are as followingFurther analysisYu Lee (2002) is of the opinion that correct measurement of capacity is a pre-requisite for the effective management because correct decisions are perpetually based on correct observations. It is a dilemma that one rear not precisely measure the work capacity for dish out organizations as it needs unvaried surveys and observations (Jones and Kutsch, 2007). It has been observed that all the capacity measurements which sack up be taken are based on the primary data i.e. equipment condition, sensual s pace, type of members, frequency of use, the type of equipment and support corpse (Yu Lee, 2002). For Fitness Plus another useful capacity measurement technique would be example which is used for equipment, workforce or space. manipulation is the ratio between existing average output of the equipment and the maximum capacity (Krajewski et al., 2010).Utilization = (Average output rate / Maximum capacity) x century%From the data available in (Figure 1) we scarcetocks measure the purpose of diffferent equipments as followingNautilus habit = 20/31 x 100% = 64.5% (35.5% below capacity)Cardiovascular utilization = 32/38 x 100% = 84.21% (15.79% below capacity)Free weights utilization = 16/16 x 100% = 100% (Full capacity).Tennis courts utilization = 8/12 x 100% = 66.66% (33.33% below capacity)Racquet ball courts utilization = 12/16 x 100% = 75% (25% below capacity)Aerobics Utilization = 24/35 x 100% = 68.5% (31.5% below capacity)For aerobics the full capacity of the room is 35 member s at one time which is way above the peak time average of 24 members. programing of aerobics room evoke be the cause of the problem as the same room is twice a week dedicated for classes of yoga. base on the above results it terminate fairly be say that Fitness Plus has enough capacity to effectively manage its existing facility and offer off complaints. There is too a need to determine the type of memebers using the facilities in peak hours i.e. family groups, under 16 students and working adults etcetera It will be essential for two short and long term capacity strategies to cater for these groups separately in order to gain the rivalrous edge. A study should also be conducted to check the codition of the equipment as complaints might have arose partially due breakdown. It should also determine frequent machines among the members in particular for the cardiovascular and nautilus so the least popular be replaced with the more than popular ones to increase the existin g capacity.All capacity management plans not only determine the current usage of capacity but also take into account the prospective fluctuatins in strike. Existing or planned capacity should unceasingly leave sufficient break for adjustments (Krajewski et al., 2010). Capacity mince is calculated as 100% minus the percentage of utilization. Upto 10% is considered sufficient to adjust crave fluctuations over time.Capacity cushion = 100% Utilization rate (%)In case of busy health facilities every number of nodes can come at any time to use the equipment or space varying the demand significantly thus 20% capacity cushion would be more appropriate to maintain good guest mould trains and to suatain any membership increases. Calculations are as followingNautilus cushion = 100% 64.5% (utilization rate %) = 35.5%Cardiovascular cushion = 100% 84.21% (utilization rate %) = 15.79%Free weights cushion = 100% 100% (assumed utilization rate %) = 0%Tennis courts cushion = 100% 66. 66% (utilization rate %) = 33.33%Racquet ball courts cushion = 100% 75% (utilization rate %) = 25%Aerobics cushion = 100% 68.5% (utilization rate %) = 31.5%Fitness Plus equipment and facilities have sufficient existing cushion. The only exceptions are cardiovascular equipment with 15.79% which is not too low and free weights equipment. There is no data available for free weights thus an assumed utilization of 100% is considered which can not be true in materiality. On the basis of above calculations and analysis it can be fairly said that Fitness Plus has sufficient capacity to deal with current and future demand fluctuations. An efficient capacity management can result in a significant decrease in complaints and increase usefulness levels and customer satisfaction.Section B / Question 2 Capacity strategy and justificationOne of the most ambitious challenges aid managers face is to cope well with uneven demand. The frequent flucuations in demand can lower service levels or re sult in under utilisation of resources. To avoid these consequences service firms can either adjust their capacity according to the changing demands, regulate a change in demand patterns to suit their capacity or a combination of two (Krajewski et al., 2010) (see below figure 2)There are deuce-ace main capacity strategies i.e. level capacity, chase demand and demand management. Each of these strategies should be adopted when its goods out weight the disadvantages. Most a lot operation managers are required to keep low costs, decrease investments and at the same time provide excellent customer service levels making it all the more important for organizations to adopt a mixture of these approaches (Jones and Kutsch, 2007). Fitness Plus should adopt a mixed capacity plan for both its short and long term strategy as explained and justified in the following paragraphsLevel capacityThe capacity is maintined at a constant level all along the planning period and any fluctuations in dem and are ignored. High under utilization of resources can advance this capacity option very costly but also very useful where the opportunity cost of single lost sale is very high like in jewellery retailing or real estate (Jones and Kutsch, 2007). At Fitness Plus there is always a possibility of a large number of members coming in any time and very low number of members in off-peak season resulting in either a postponement line or under utilization thus a pure level capacity plan would not be fitting.Chase demandChase demand is opposite to level capacity as it tries to match the capacity levels according to the changing demand patterns. It is very backbreaking plan to act upon as it needs supple working hours, varied number of provide and often times different number of euipment in each period. It is suitable for companies which produce either perishable goods or cannot store their outputs such as customer processing. It has a clear advantage of having the appropriate level of staff all the time according to the demand of a particular season (Krajewski et al., 2010). This method requires adjustment of capacity through and through different means i.e. offering over time in peak and lesser hours in off-peak periods, varying number of employees according to the seasonal requirements, part time contracts and subcontracting (Jones and Kutsch, 2007). Fitness Plus would need to chase demand in the below aspectsAs per available data members complain about liveing for the availabiliity of equipment. Application of a wait line example will increase the service levels by effectively managing the existing capacity and chasing the current demand.A survey is proposed to check which machines are in demand, increase their numbers and lessen the least used ones to be in line with the existing demand.A waiting line model will not be suitable for aerobics because the class is preplanned and majority of the members arrive just before the starting time thus mixing sc hedules between aerobics and yoga can solve the problem.The number of employees would need to be rescheduled to increase the current service levels. It will reduce excess staff during bumper-to-bumper propagation shifting them to peak times resulting in more personal management, interaction and customer satisfaction.Developing a new facility will also chase the increase in demand which is expected due to new businesses down town.Demand managementThe objective of this strategy is to shift the burden of peak period to off-peak period. every the demand is changed through various methods or alternate products or operate are offered to fill off-peak capacity. The most widely applied method in service industry is pricing to shift the peak demand to off-peak when heap are not very interested in buying. Advertising also helps to smooth demand but is expensive and if is un-planned can result in financial loss. Organizations with different demand patterns develop new products and serve coat the whole year i.e. univerities filling the lecture rooms during vacations (Jones and Kutsch, 2007). Fitness Plus will be managing demand in certain aspects of its startegyIt is proposed that Fitness Plus should either slightly rise footings during the peak times or provide services which cost lesser to manage demand.They should offer different types of memberships with different prices called price optimization.A non-pricing strategy of advertising off-peak services to waiting customers during peak times would also balance the peak and off-peak demands.Distributing off-peak service coupons during peak times, discounted tickets for relaxation services like massage, health supplements or energy drinks can be offered to balance the demand year round.Through a system of reservations Fitness Plus can fill its capacity and move the excess memberships to the off-peak period by booking a slot when capacity is available to manage it more effectively.Another option can be to partiall y modify access of members during peak periods. During peak times mostly members would be working executives thus a restriction can be applied on under 16 members. To compensate them student membership rates can be offered in the off-peak period to encourage members to come more often in off-peak.Employee computer programming should reduce the excess staff during slower times by shifting more employee to peak times. It will result in more customer satisfaction and effective demand management.Often service companies have to opt a mixed capacity strategy as it is very hard to forecast demand and balance existing capacity (Jones and Kutsch, 2007). Operational capabilities do not always match one of the threesome strategies thus a mixture of chasing and managing demand would be most suitable for Fitness Plus.Section C / Question 3 Capacity strategy and other operational decisionsAny capacity decision an organization makes should always be in line with the confer images and processe s deep down the organization. victorious into account the bigger operational picture is essential for a thriving capacity strategy (Krajewski et al., 2010). Both short and long term strategies are discussed in this context below (See Figure 4)Short term strategyWaiting line model nib demand most ofttimes results in waiting time increases for customers. Waiting line model is considered very useful for service organizations in resolving the problem (Krajewski et al., 2002). This model can be applied to the workout equipment as the waiting line is resulting in bottlenecks. Currently the system is catering for members individual service needs in multiple lines with a mixed arrangement of facilities on first-class honours degree come, first served basis.The stretch and service time dispersions need to be calculated including line lengths, number of customers in the system, waiting time, total time in system and utilization of service facilities. After analyzing this data a new layo ut of the facility might be needed increasing the peak capacity and space for some equipment and reducing or eliminating some. Total 32 members visit the workout room during peak hours taking 45 minutes in complementary their routines. On an average each member uses 2 machines during their stay with 20 minutes on each machine im developr 5 minutes for the next one. Three customers get served with 20 minutes and an average the arrival rate comes to 2.5 times during an hour. If we take into account repeated visits we get a 80 per hour arrival rate (30 x 2.5) thus members wait approximately 8.6 minutes for a machine. To resolve it the most appropriate model would be a multiple channel, single phase as it will have a single line and more staff to deal with customers (See Figure 3 below)Operationally this model will facilitate the marketing, HR, finance and supply chain aspects as during peak hours the waiting customers would be in a single line making it easier to display the marketing material on surrounding walls or screens. financially it will uphold the expensive investment in media advertising and will make off-peak brochure distribution easier and to more interested existing customers. To serve on multiple service counter HR will need to schedule employees i.e. reducing the excess staff during slower times by shifting more employee to peak times resulting in better customer service. This model will also stream line the supply chain processes and increase service levels. During waiting line news telecasts and entertainment like BBC, Sky Sports etc with seated customer will create a calmer waiting environment and defuse any possible difficult situation.Price cogitate strategyFitness Plus can reduce demand during peak hours by diverting bare users either slightly rising prices or providing services which cost lesser. It can offer different types of memberships with different prices. The best price should be located keeping in mind that no capacity constrai nt occurs which is called price optimization.Financially, increasing prices would generate extra revenues as per Shugan (2004) price optimization moves demand from peak to off peak times and increases revenues. But service firms are often hesitant due to its long term negative make on the business. The presence of strong competitors often makes price increase decisions difficult as a customer can try competitor services and it might result in customer loss. Price increase startegy can also increase pressure on the over all supply chain as customers will start expecting higher service levels and unseamed operations. By offering different type of memberships HR might need to recruit more staff to attend customer in both seasons. It can indirectly increase marketing costs as less expensive methods of cheating to regular customers in peak season will become less effective due to lesser number of customers.Non-pricing strategies bank note time is best to contact customers who might be interested in the off-peak offers and services (Kotler, 2001). It is highly likely to come across potential cusomers during Peak periods rather than less direct methods of advertising. In the earlier case customers have already shown their interest in the services and facilities. Thus it is far easier to sell them the off peak services or packages. While waiting for their turn customers can be shown different adverstisements to promote off-peak services which will save money for more expensive marketing campaigns. For regular members off-peak coupons can prepare further discounts or additional services with minimal incurring costs like massage, health supplements or energy drinks.Another strategy would be to develop a reservation system. It helps to shift the members to off-peak period who would otherwise be waiting during the peak period. When a customer calls to reserve a service or facility he should be given the slots with available capacity. The system works best if it is auto mated thus optimizing and balancing demand and capacity at the same time. These systems do improve the over all supply chain but also affect financial and HR related operational decisions as they are expensive and need trained staff to operate them.Fitness Plus can also partially restrict access of members during peak periods. A detailed study of the type of members visiting the facility would be needed. Once the data has been gathered on the usage pattern the decision of categorical restrictions can be applied. For example during peak times of 4-7 mostly members would be working executives thus in order to reduce access and optimise the capacity a restriction should be applied on under 16 members using the facility in the same period. To compensate them student membership rates can be offered during the off-peak period. This will encourage the excluded members to come more often during off peak periods.Fitness Plus should also have a survey to determine the popular equipment. The n umber of popular equipment should be increased and the least popular ones be decreased which will help fill the gap in member requirements. Operationally it can create a supply chain problem of disposing off the least popular equipment and can increase financial pressure of buying new machines.In case of aerobics section complaints there is a possibility of a mixed schedule between aerobics and yoga. A rescheduling of classes on the basis of members demand can view that the classes do not clash. It will affect the HR decisions as employee scheduling would be needed and over time might need to be paid.The employees of Fitness Plus also need to be scheduled in order to increase the service levels and reduce the excess staff during slower times. Shifting more employee to peak times will result in more customer satisfaction by having more personal attention and interaction. It will benefit the supply chain by improving process times and facilitating seamless operations.Long term strate giesThere are three alternates in the long run which should be based on both qualitative and quantitative bench marking of competitors, capacity and cost estimates outset of a new facility downtownMinimal expansion within the current facility on available landWaiting and reflection the demand conditions before making any expansionBecause customers are already complaining and equipment is being used lesser than its maximum capacity there is some room for minor expansion of the existing facility but is limited due to lack of available land. As the population is increasing steadily and the only full range competitor is YMCA option 1 would be the best choice. It will create sufficient capacity in advance of customer demands. Once the new facility is announced it will be difficult for competitors to expand as it might over burden the market.Financially it is a big decision and would very much depend on the success of the short term strategies. Profits gained through short term measures will ease the financial pressure. Secondly going ahead with new facility downtown will need thorough supply chain planing as the distance between the facilities will make logistical decisions difficult and expensive. Lot of new job will be created and HR plane section will need to recruit and send and recieve staff between facilities for training and development purposes. It will be a big opportunity for marketing deparatment as lots of new campaigns, hoardings, billboards and advertisements would need to be developed.ConclusionIn this report the capacity issues of Fitness Plus were discussed in details in three sections. A measurement of existing capacity, justification of adopted strategy and links of proposed strategies with other operating decisions were sought. Both short and long term strategies are considered important but the immediate concern of Fitness plus should be to resolve the existing complaints of over crowding and non-availability of equipment.Firstly, in the sho rt term price optimizing strategy of increasing peak prices and offering off-peak packages can work. If it is considered detrimental for the business non-pricing strategies can produce the desired results. Secondly, all the employees should be taken on board in the strategic decisions so that they can handle customer queries more professionally and maintain the desired service levels. Lastly, periodical reviews of the demand forecasting, complaints, equipment and service levels will ensure effective capacity utilzation. Accuracy of data should be maintained by comparing the existing demand with the forecasted demand so that a clear picture of the financial, operational and service needs is obtained.In the long run Fitness Plus needs to refer to its corporate objective and act accordingly either to effectively manage the current equipment and space or build a new branch over time. The earlier the long term strategy is initiated the better. Once the expansion plan is announced new mem berships will prove to be a guage for its success and continuous monitoring of population growth, market trends and competitors will keep Fitness Plus ahead of its competitors.