1. Briefly explain the importance of capacity planning in achieving the goals of a firm.

The importance of capacity planning in achieving the goals of a firm lies in the concept
of capacity reflecting the amount and the period during which capacity is accessible. The
capability of a company in order to supply clients with services or products to the amount
demanded at the time requested can therefore be taken as a metric of capacity. Deciding
on the approach in capacity planning can be done by determining its requirements as well
as evaluating capacity plans that can be sourced as a substitute. The goals of a business,
generally, relies on how they could provide their products or services and they do this by
being able to source raw materials and other resources that can also be utilized in
information processing or making products.

Planning for these resources will help the business in their operations especially
determining how much do they need in order to meet demands. This also takes the same
context with supply chain and retail management where inventories should be forecasted
in order to avoid underbuying and overbuying of supplies and materials needed for
operation. When these risks are avoided, then there will be lesser costs and will also
holistically create leverage for the business in their competitive advantage. Procuring
lesser than the needed amount will lead to not meeting the demands of the market and
when procuring more than the needed amount, will lead to another cost where the
inventory will not translate into sales. Forecasts will determine how much of the
resources are needed and when to buy it at the right time to save costs and as well as
maximize profits for the sustainability of the business in the competition.

2. Briefly explain the three pure strategies: (a) level capacity (b) chase demand (c)
demand management

The level capacity approach sets capacity at a continuous level during the planning
period, irrespective of changes in the projected demand from the forecast. This results in
a fixed rate of production, which is normally utilized to satisfy the average demand and to
manage shifts in demand using the inventory. When there is low demand, any
 overproduction in anticipation of sales will be shifted to the finished products inventory
in the future. However, just like what is mentioned above, there will be costs in inventory
holding especially if the inventory consists of perishable goods that will not be turned
into sales immediately because obviously, rotten food items will not be of any use.

In chase demand, the production capacity will be changed in the long run to meet the
demand trend. Different policies, such as altering the part time workforce, changing the
accessibility of staff by overtime, changes to equipment ratios and outsourcing, will alter
capacities. However, this approach is very costly especially with alterations in the staff
and payments for overtime workers especially if the industry of the business belongs to
those who have a scarcity in skillful workforce that is tailored to specialized jobs in the
organization.

Demand management, however, aims in adjusting the demand in order to meet the
capacity. There will be changes in how they formulate their own marketing mix of the
business and will be needing cross-functional communication especially for marketing
people in the organization. Some strategies include varying prices, increasing marketing
efforts, using advertising and existing processes in product development, instant delivery
of products, and utilizing an appointment system.

3. Briefly explain why flexible facilities allow organizations to adapt to changing

customer needs in terms of product range and varying demand.

Making facilities flexible is part on determining the business’s capability to level out
capacity with demand in order to adapt changing customer needs. This is to enable
organizations to cope with shortfalls in their capacity especially when there is failure in
their equipment or components. The organization’s competitive strategy will dictate the
amount of flexibility for these facilities. If they are a business that aims to be on top of a
retail competition, for example, they should be able to know that the retail industry has a
very intense competition especially when they have undifferentiated products or
merchandise. Therefore, they need to have very flexible facilities that will help shape
their merchandise varieties and assortments, as well as what needs to be adjusted in their
strategies for procurement with their wholesalers or suppliers in the supply chain,
especially taking into consideration of the demand that customers want in a ‘preferred’
retail store. This will also assist them in the long run if there are any hindrances in the
operations of the business.