Capacity Management And International Operations Management Commerce Essay

cogency Management And International Operations Management Commerce EssayCapacity coifment lies at the core of every triumphful useable strategy whether work or manufacturing. It is part of a larger corporate strategy which is a pine term scheme to achieve a sealed target (Jones and Kutsch, 2007). It is imperative for every organization to know how well its subject is being utilized as its vast term success is ground on it (Krajewski and Ritzman, 2002). Capacity meter helps determine the overall operational costs and forms the basis of important decisions like expansion (Yu Lee, 2002). This paper exit endeavour to resolve the potentiality management issues of a health induction called fitness Plus in Greensboro, North Carolina.Fitness Plus began its operations in a large suburban park in Greensboro, North Carolina in 1991. Under health and sports it provides fitness, relaxation and recreational facilities operating 7 days a week (For details compute Appendix 1). C ustomers use the facilities having subscribed to yearly memberships. Lately the ara of Greensboro has expanded in state and businesses. Growth in population increased health sentience in residents and has increased learn for fitness facilities. Other health centres have also opened namely YMCA, Oasis and Golds Gym. YMCA offers full range of facilities, Golds Gym has save cardiovascular and weight training and Oasis is restricted to b arly adults over 16 years of age.Available data indicates that by May 2002 members visiting Fitness Plus every instant during peak period (4 7pm) had doubled to 80 from 1997. The average visits per hour increased from 15 to 25 in a emblematic day resultantly the adeptness got overcrowded and complaints arose about non-availability of equipment. Most look of complaints arise in the specific aras of aerobics, nautilus and cardiovascular. The cleverness of Fitness Plus needs to be careful and planned properly in order to form an effective o perational strategy both in the long and nearsighted terms. There are ii fillings in stock(predicate) i.e. first is to efficaciously manage the quick quick-wittedness which entrust take few months and second is to build a new facility in the business district area which mogul take upto a year to become operational. Due to financial and age constraints a short term solution is require for now and a long term later.In the following report the capacity issues of Fitness Plus will be discussed in three sections A, B and C. In section A the capacity of Fitness Plus will be measuring rodd and analysed to see whether there is able capacity to deal with the flying issues of overcrowding and non-availability of equipment. Section B will ascertain which capacity strategy would be appropriate for Fitness Plus with the necessary justifications. In section C the espouse strategy would be described in detail and linked with other suits of operating decisions i.e. finance, HR, mark eting and supply reach. Lastly in the conclusion the crux of main issues and solutions would be summed up.Section A / Question 1 Capacity meter with detailsThere is no fit for all formula for capacity measurement as businesses vary in their nature and details. A theatre measures capacity in terms of seats and a trick shop displace measure capacity in number of machine hours (Krajewski, Ritzman and Malhotra, 2010). Jones and Kutsch (2007) are of the opinion that space and equipment hold primary position in capacity measurement indeed the measurement would be centered around them.Main complaints are from two issues i.e. unavailability of equipment (Cardiovascular, Nautilus and aerobics) and workout activities being overcrowded. Thus the focus of capacity management in aerobics should be on space and equipment for the workout activities in peak hours. According to the breeding it is noted that peak terms are between 4-7pm and summate number of members visiting between that ti me is 240 (80 per hour). For analysis purpose the figures from the conducted survey (Appendix 1) have been employ as followingNautilus It consists of 24 pieces of equipment and it is assumed that on an average each member takes 45 minutes to complete the whole course. In one hour the total number of members able to use the equipment would be (60 minutes / 45 minutes x 24 equipments = 31 members). The present-day(prenominal) usage during peak time is 25% of capacity equalling 20 members per hour.Cardiovascular It has 29 pieces of equipment and it is assumed that each 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 usage during peak hour is 40% of capacity equalling 32 members per hour.Aerobics The facility stinkpot accomodate 35 members in one session and normally each session lasts for one hour. Thus the current usage during peak ho ur is 30% of capacity equalling 24 members per hour.Free weights The case study doesnt hold whatsoever details about the space or type of accessible 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 can accomodate between 12 to 24 members to play both 6 single or double impales where as currently only 8 members play tennis during peak hours. Same is the case for 8 racquet ball courts which can accomodate between 16 to 32 members for 8 singles or doubles mark offes. 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 want.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 everlastingly based on correct observations. It is a dilemma that one can not precisely measure the exercise capacity for portion organizations as it needs everlasting surveys and observations (Jones and Kutsch, 2007). It has been observed that all the capacity measurements which can be interpreted are based on the primary data i.e. equipment condition, physical space, type of members, frequency of use, the type of equipment and support body (Yu Lee, 2002). For Fitness Plus another useful capacity measurement technique would be use which is used for equipment, workforce or space. lesson is the ratio between actual average output of the equipment and the maximum capacity (Krajewski et al., 2010).Utilization = (Average output rate / Maximum capacity) x coke%From the data available in (Figure 1) we can meas ure the custom of diffferent equipments as followingNautilus utilization = 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 members at one time which is way supra the peak time average of 24 members. Scheduling of aerobics room can be the cause of the problem as the same room is twice a week dedicated for classes of yoga.Based on the above results it can fairly be said that Fitness Plus has enough capacity to effectively manage its existing facility and reduce complaints. There is also a need to determine the type of memebers using the facilities in peak hours i.e. family groups, under 16 students and working adults etc. It will be essential for both short and long term capacity strategies to cater for these groups separately in order to urinate the competitive 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 popular machines among the members specially for the cardiovascular and nautilus so the least popular be replaced with the much popular ones to increase the existing capacity.All capacity management plans not only determine the current usage of capacity but also take into account the future fluctuatins in involve. Existing or planned capacity should always leave sufficient buffer for adjustments (Krajewski et al., 2010). Capacity cushion is calculated as 100% minus the percentage of utilization. Upto 10% is considered sufficient to adjust motive fluctuations over time.Capacity cushion = 100% Utilization rate (%)In case of busy health facilities each num ber of guests can come at any time to use the equipment or space varying the demand significantly thus 20% capacity cushion would be more appropriate to hold on good customer service levels 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 reality. On the basis of above calculations and an alysis 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 service levels and customer satisfaction.Section B / Question 2 Capacity strategy and justificationOne of the most difficult challenges service managers mettle is to cope well with uneven demand. The frequent flucuations in demand can lower service levels or result in under utilisation of resources. To head off these consequences service firms can either adjust their capacity according to the changing demands, influence a change in demand patterns to suit their capacity or a combination of both (Krajewski et al., 2010) (see below figure 2)There are three main capacity strategies i.e. level capacity, chase demand and demand management. each of these strategies should be adopted when its advantages out weight the disadvantages. Most often operation managers are requ ired 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 miscellaneous 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 demand are ignored. High under utilization of resources can make this capacity option very pricy but also very useful where the opportunity cost of single lost barter 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 hold line or under utilization thus a pure level capacity plan would not be suitable. co me after demandChase demand is opposite to level capacity as it tries to match the capacity levels according to the changing demand patterns. It is very difficult plan to act upon as it needs flexible working hours, diametric number of staff and often different number of euipment in each period. It is suitable for companies which formulate 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 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 waiting for the availabiliity of equipment . Application of a waiting line standard 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, increasing their numbers and decreasing 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 start thus mixing schedules 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 excessiveness staff during slow times shifting them to peak times resulting in more personal attention, interaction and customer satisfaction.Developing a new facility will also chase the increase in demand which is expected due to new businesses down town. command managementThe clinical of this strategy is to shift the burden of peak period to off-peak perio d. Either the demand is changed through various methods or alternate products or work 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 people 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 break away new products and operate covering 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 bells 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 balan ce 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 partially restrict 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 scheduling 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 ca pacity 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 three 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 supply chains and processes within the organization. pickings into account the bigger operational picture is essential for a successful 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 modelPeak demand most frequently 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 re sulting in bottlenecks. Currently the system is catering for members individual service needs in septuple lines with a mixed accord of facilities on first come, first served basis.The arrival and service time distributions 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 layout 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 complemental their routines. On an average each member uses 2 machines during their stay with 20 minutes on each machine plus 5 minutes for the beside 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 appr oximately 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 screening the marketing material on surrounding walls or screens. Financially it will save the expensive investment in media advertising and will make off-peak leaflet 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 swarm line the supply chain processes and increase service levels. During waiting line news telecasts and entertainment like BBC, Sky Sports etc with s eated customer will bring in a calmer waiting environment and defuse any possible difficult situation.Price related strategyFitness Plus can reduce demand during peak hours by diverting surplus users either slightly rising prices or providing services which cost lesser. It can offer different types of memberships with different prices. The trump out price should be determined keeping in mind that no capacity constraint 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 nix effects 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 seamless 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 selling to prescribed customers in peak season will become less effective due to lesser number of customers.Non-pricing strategiesPeak 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 foregoing 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 cast off 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 automated 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 b e 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 number 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 ensure 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 strategiesThere are three alternates in the long run which should be based on both qualitative and quantitative bench marking of competitors, capacity and cost estimatesOpening of a new facility downtownMinimal expansion within the current facility on available landWaiting and watching 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 s teadily and the only full range competitor is YMCA option 1 would be the best choice. It will create sufficient capacity ahead 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 department 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 we re 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 short 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 memberships 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.