Capacity Strategy Game Exercise - Outline Example

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Before I work out how much capacity of BITS (the product) I should hold it would be wise to seek as much information as possible in order to avoid coming up with irrational decisions. The capacity I decide on should be justifiable, practical and sensible, and should take into…
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CAPA STRATEGY GAME EXERCISE al Affiliation) Before I work out how much capa of BITS (the product) I should hold it would be wise to seek as much information as possible in order to avoid coming up with irrational decisions. The capacity I decide on should be justifiable, practical and sensible, and should take into consideration all factors that may influence the overall outcome of this exercise. It is not wise to build a very low or very high capacity, and the capacity costs must be considered as well. Focus should be placed on my ability to recoup my costs and keep my product moving out of the shelves. Building too much capacity and selling my product at a very low price would mean being in the red and paying out interest on accumulated debts during every period (Henderson 2008, p.16).
Working out the Capacity
I think that the capacity cost (at GBP 10 per period) is relatively low, and therefore once I have put up entry costs I will stick around for a long time. In this scenario, even if you end up with profits that are relatively low (on top of your starting cash) you will probably earn more than most of your competitors (An & Fromm 2005, p.11). After taking into consideration all the factors mentioned above, I think that a capacity of 200 units would be the best option for me; let me explain why. First of all, minimum demand was 140 BTS while maximum demand was 260 BTS; this gives us a mean of 200. Apart from this, most of the time demand fluctuated between 160 and 240 BTS; this also gives us a mean of 200. In light of the fact that the two most important factors here (the average demand and the average fluctuating figure) both equal 200, it would only be wise to hold 200 units because it appears like that is what the market dictates (Klammer 2006, p.27).
An, C., & Fromm, H. 2005, Supply chain management on demand strategies, technologies,
applications, Berlin: Springer.
Henderson, H. D. 2008, Supply and demand, Chicago: University of Chicago Press.
Klammer, T. P. 2006, Capacity measurement & improvement: a managers guide to evaluating
and optimizing capacity productivity, Chicago: Irwin Professional Publications. Read More
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