Capacity Management And International Operations Management Commerce Essay

Capacity direction lies at the nucleus of every successful operational scheme whether service or fabrication. It is portion of a larger corporate scheme which is a long term program to accomplish a certain mark ( Jones and Kutsch, 2007 ) . It is imperative for every organisation to cognize how good its capacity is being utilized as its long term success is based on it ( Krajewski and Ritzman, 2002 ) . Capacity measuring helps find the overall operational costs and forms the footing of of import determinations like enlargement ( Yu Lee, 2002 ) . This paper will endeavor to decide the capacity direction issues of a wellness installation called Fitness Plus in Greensboro, North Carolina.

Fitness Plus began its operations in a big suburban park in Greensboro, North Carolina in 1991. Under wellness and athleticss it provides fittingness, relaxation and recreational installations runing 7 yearss a hebdomad ( For inside informations see Appendix 1 ) . Customers use the installations holding subscribed to annually ranks. Recently the country of Greensboro has expanded in population and concerns. Growth in population increased wellness consciousness in occupants and has increased demand for fittingness installations. Other wellness Centres have besides opened viz. YMCA, Oasis and Golds Gym. YMCA offers full scope of installations, Golds Gym has merely cardiovascular and weight preparation and Oasis is restricted to merely adults over 16 old ages of age.

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Available informations indicates that by May 2002 members sing Fitness Plus every hr during peak clip ( 4 – 7pm ) had doubled to 80 from 1997. The mean visits per hr increased from 15 to 25 in a typical twenty-four hours resultantly the installation got overcrowded and ailments arose about non-availability of equipment. Most figure of ailments originate in the specific countries of aerobic exercises, nautilus and cardiovascular. The capacity of Fitness Plus needs to be measured and planned decently in order to organize an effectual operational scheme both in the long and short footings. There are two options available i.e. first is to efficaciously pull off the bing installation which will take few months and 2nd is to construct a new installation in the business district country which might take upto a twelvemonth to go operational. Due to fiscal and clip restraints a short term solution is needed for now and a long term subsequently.

In the undermentioned study the capacity issues of Fitness Plus will be discussed in three subdivisions A, B and C. In subdivision “ A ” the capacity of Fitness Plus will be measured and analysed to see whether there is sufficient capacity to cover with the immediate issues of overcrowding and non-availability of equipment. Section “ B ” will determine which capacity scheme would be appropriate for Fitness Plus with the necessary justifications. In subdivision “ C ” the adopted scheme would be described in item and linked with other types of operating determinations i.e. finance, HR, selling and supply concatenation. Last in the decision the Southern Cross of chief issues and solutions would be summed up.

Section “ A ” / Question 1: Capacity measuring with inside informations

There is no tantrum for all expression for capacity measuring as concerns vary in their nature and inside informations. A theatre steps capacity in footings of seats and a occupation store can mensurate capacity in figure of machine hours ( Krajewski, Ritzman and Malhotra, 2010 ) . Jones and Kutsch ( 2007 ) are of the sentiment that infinite and equipment hold primary place in capacity measuring therefore the measuring would be centered around them.

Main ailments are from two issues i.e. inaccessibility of equipment ( Cardiovascular, Nautilus and aerobic exercises ) and exercise activities being overcrowded. Thus the focal point of capacity direction in aerobic exercises should be on infinite and equipment for the exercise activities in extremum hours. Harmonizing to the survey it is noted that peak times are between 4-7pm and entire figure of members sing between that clip is 240 ( 80 per hr ) . For analysis purpose the figures from the conducted study ( Appendix 1 ) have been used as followers:

Nautilus: It consists of 24 pieces of equipment and it is assumed that on an mean each member takes 45 proceedingss to finish the whole class. In one hr the entire figure of members able to utilize the equipment would be ( 60 proceedingss / 45 proceedingss x 24 equipments = 31 members ) . The current use during peak clip is 25 % of capacity bing 20 members per hr.

Cardiovascular: It has 29 pieces of equipment and it is assumed that each member takes 45 proceedingss to finish the exercising. Therefore in one hr the entire figure of members able to utilize the equipment would be ( 60 proceedingss / 45 proceedingss x 29 equipments = 38 members ) . The current use during peak hr is 40 % of capacity bing 32 members per hr.

Aerobicss: The installation can accomodate 35 members in one session and usually each session lasts for one hr. Thus the current use during peak hr is 30 % of capacity bing 24 members per hr.

Free weights: The instance survey doesnt hold any inside informations about the infinite or type of available equipment. There are no ailments originating and 20 % of the members use the installation during extremum hours which equals 16 members so we assume that it is being utilised suitably.

Recreational activities: There is sufficient room available to accomodate the members during peak hours. Six tennis tribunals can accomodate between 12 to 24 members to play either 6 individual or dual games where every bit presently merely 8 members play tennis during peak hours. Same is the instance for 8 racket ball tribunals which can accomodate between 16 to 32 members for 8 singles or doubles lucifers. During peak clip merely 12 members play racquet ball. The premises are based on the mean calcuaton of each game to last for 1 hr. In instance of longer game Sessionss still there are plentifulness of tribunals available to accomodate the demand.

Detail of equipment and infinite are as followers:

Further analysis:

Yu Lee ( 2002 ) is of the sentiment that right measuring of capacity is a pre-requisite for the effectual direction because right determinations are ever based on right observations. It is a quandary that one can non exactly mensurate the use capacity for service organisations as it needs changeless studies and observations ( Jones and Kutsch, 2007 ) . It has been observed that all the capacity measurings which can be taken are based on the primary informations i.e. equipment status, physical infinite, type of members, frequence of usage, the type of equipment and support system ( Yu Lee, 2002 ) . For Fitness Plus another utile capacity measuring technique would be “ Utilization ” which is used for equipment, work force or infinite. Use is the ratio between existent mean end product of the equipment and the maximal capacity ( Krajewski et al. , 2010 ) .

Use = ( Average end product rate / Maximum capacity ) x 100 %

From the informations available in ( Figure 1 ) we can mensurate the use of diffferent equipments as followers:

Nautilus use = 20/31 ten 100 % = 64.5 % ( 35.5 % below capacity )

Cardiovascular use = 32/38 ten 100 % = 84.21 % ( 15.79 % below capacity )

Free weights use = 16/16 ten 100 % = 100 % ( Full capacity ) .

Tennis tribunals use = 8/12 ten 100 % = 66.66 % ( 33.33 % below capacity )

Racquet ball tribunals use = 12/16 ten 100 % = 75 % ( 25 % below capacity )

Aerobicss Utilization = 24/35 ten 100 % = 68.5 % ( 31.5 % below capacity )

For aerobics the full capacity of the room is 35 members at one clip which is manner above the peak clip norm of 24 members. Scheduling of aerobic exercises room can be the cause of the job as the same room is twice a hebdomad dedicated for categories of yoga.

Based on the above consequences it can reasonably be said that Fitness Plus has adequate capacity to efficaciously pull off its bing installation and cut down ailments. There is besides a demand to find the type of memebers utilizing the installations in extremum hours i.e. household groups, under 16 pupils and working grownups etc. It will be indispensable for both short and long term capacity schemes to provide for these groups individually in order to derive the competitory border. A survey should besides be conducted to look into the codition of the equipment as ailments might hold arose partly due dislocation. It should besides find popular machines among the members specially for the cardiovascular and nautilus so the least popular be replaced with the more popular 1s to increase the bing capacity.

All capacity direction plans non merely find the current use of capacity but besides take into history the hereafter fluctuatins in demand. Existing or planned capacity should ever go forth sufficient shock absorber for accommodations ( Krajewski et al. , 2010 ) . Capacity shock absorber is calculated as 100 % minus the per centum of use. Upto 10 % is considered sufficient to set demand fluctuations over clip.

Capacity shock absorber = 100 % – Use rate ( % )

In instance of busy wellness installations any figure of clients can come at any clip to utilize the equipment or infinite changing the demand significantly therefore 20 % capacity shock absorber would be more appropriate to keep good client service degrees and to suatain any rank additions. Calculations are as followers:

Nautilus shock absorber = 100 % – 64.5 % ( utilization rate % ) = 35.5 %

Cardiovascular shock absorber = 100 % – 84.21 % ( utilization rate % ) = 15.79 %

Free weights shock absorber = 100 % – 100 % ( false use rate % ) = 0 %

Tennis tribunals shock absorber = 100 % – 66.66 % ( utilization rate % ) = 33.33 %

Racquet ball tribunals shock absorber = 100 % – 75 % ( utilization rate % ) = 25 %

Aerobicss shock absorber = 100 % – 68.5 % ( utilization rate % ) = 31.5 %

Fitness Plus equipment and installations have sufficient bing shock absorber. The lone exclusions are cardiovascular equipment with 15.79 % which is non excessively low and free weights equipment. There is no information available for free weights therefore an false use of 100 % is considered which can non be true in world. On the footing of above computations and analysis it can be reasonably said that Fitness Plus has sufficient capacity to cover with current and future demand fluctuations. An efficient capacity direction can ensue in a important lessening in ailments and increase service degrees and client satisfaction.

Section “ B ” / Question 2: Capacity scheme and justification

One of the most hard challenges service directors face is to get by good with uneven demand. The frequent flucuations in demand can take down service degrees or consequence in under use of resources. To avoid these effects service houses can either set their capacity harmonizing to the altering demands, influence a alteration in demand forms to accommodate their capacity or a combination of both ( Krajewski et al. , 2010 ) ( see below figure 2 ) :

There are three chief capacity schemes i.e. degree capacity, chase demand and demand direction. Each of these schemes should be adopted when its advantages out weight the disadvantages. Most frequently operation directors are required to maintain low costs, lessening investings and at the same clip supply first-class client service degrees doing it all the more of import for organisations to follow a mixture of these attacks ( Jones and Kutsch, 2007 ) . Fitness Plus should follow a assorted capacity program for both its short and long term scheme as explained and justified in the undermentioned paragraphs:

Flat capacity:

The capacity is maintined at a changeless degree wholly along the planning period and any fluctuations in demand are ignored. High under use of resources can do this capacity option really expensive but besides really utile where the chance cost of individual lost sale is really high like in jewelry retailing or existent estate ( Jones and Kutsch, 2007 ) . At Fitness Plus there is ever a possibility of a big figure of members coming in any clip and really low figure of members in off-peak season ensuing in either a waiting line or under utilization therefore a pure degree capacity program would non be suited.

Chase demand:

Chase demand is opposite to level capacity as it tries to fit the capacity degrees harmonizing to the altering demand forms. It is really hard program to move upon as it needs flexible working hours, different figure of staff and frequently different figure of euipment in each period. It is suited for companies which produce either perishable goods or can non hive away their end products such as client processing. It has a clear advantage of holding the appropriate degree of staff all the clip harmonizing to the demand of a peculiar season ( Krajewski et al. , 2010 ) . This method requires accommodation of capacity through different agencies i.e. offering over clip in extremum and lesser hours in off-peak periods, changing figure of employees harmonizing to the seasonal demands, portion clip contracts and farm outing ( Jones and Kutsch, 2007 ) . Fitness Plus would necessitate to trail demand in the below facets:

As per available informations members complain about waiting for the availabiliity of equipment. Application of a waiting line theoretical account will increase the service degrees by efficaciously pull offing the bing capacity and trailing the current demand.

A study is proposed to look into which machines are in demand, increasing their Numberss and diminishing the least used 1s to be in line with the bing demand.

A waiting line theoretical account will non be suited for aerobic exercises because the category is preplanned and bulk of the members arrive merely before the start therefore blending agendas between aerobic exercises and yoga can work out the job.

The figure of employees would necessitate to be rescheduled to increase the current service degrees. It will cut down extra staff during slower times switching them to top out times ensuing in more personal attending, interaction and client satisfaction.

Developing a new installation will besides trail the addition in demand which is expected due to new concerns down town.

Demand direction:

The aim of this scheme is to switch the load of peak period to off-peak period. Either the demand is changed through assorted methods or surrogate merchandises or services are offered to make full off-peak capacity. The most widely applied method in service industry is pricing to switch the peak demand to off-peak when people are non really interested in purchasing. Ad besides helps to smooth demand but is expensive and if is un-planned can ensue in fiscal loss. Organizations with different demand forms develop new merchandises and services covering the whole twelvemonth i.e. univerities make fulling the talk suites during holidaies ( Jones and Kutsch, 2007 ) . Fitness Plus will be pull offing demand in certain facets of its startegy:

It is proposed that Fitness Plus should either somewhat rise monetary values during the peak times or supply services which cost lesser to pull off demand.

They should offer different types of ranks with different monetary values called monetary value optimisation.

A non-pricing scheme of advertisement off-peak services to waiting clients during peak times would besides equilibrate the extremum and off-peak demands.

Distributing off-peak service vouchers during peak times, discounted tickets for relaxation services like massage, wellness addendums or energy drinks can be offered to equilibrate the demand twelvemonth unit of ammunition.

Through a system of reserves Fitness Plus can make full its capacity and travel the extra ranks to the off-peak period by booking a slot when capacity is available to pull off it more efficaciously.

Another option can be to partly curtail entree of members during peak periods. During peak times largely members would be working executives therefore a limitation can be applied on under 16 members. To counterbalance them student rank rates can be offered in the off-peak period to promote members to come more frequently in off-peak.

Employee programming should cut down the extra staff during slower times by switching more employee to top out times. It will ensue in more client satisfaction and effectual demand direction.

Often service companies have to choose a assorted capacity scheme as it is really difficult to calculate demand and balance bing capacity ( Jones and Kutsch, 2007 ) . Operational capablenesss do non ever fit one of the three schemes therefore a mixture of chasing and managing demand would be most suited for Fitness Plus.

Section “ C ” / Question 3: Capacity scheme and other operational determinations

Any capacity determination an organisation makes should ever be in line with the supply ironss and procedures within the organisation. Taking into history the bigger operational image is indispensable for a successful capacity scheme ( Krajewski et al. , 2010 ) . Both short and long term schemes are discussed in this context below ( See Figure 4 ) :

Short term scheme:

Waiting line theoretical account:

Peak demand most often consequences in waiting clip additions for clients. Waiting line theoretical account is considered really utile for service organisations in deciding the job ( Krajewski et al. , 2002 ) . This theoretical account can be applied to the exercise equipment as the waiting line is ensuing in constrictions. Presently the system is providing for members single service demands in multiple lines with a assorted agreement of installations on first semen, foremost served footing.

The reaching and service clip distributions need to be calculated including line lengths, figure of clients in the system, waiting clip, entire clip in system and use of service installations. After analysing this data a new layout of the installation might be needed increasing the extremum capacity and infinite for some equipment and reduction or extinguishing some. Entire 32 members visit the exercise room during peak hours taking 45 proceedingss in finishing their modus operandis. On an mean each member uses 2 machines during their stay with 20 proceedingss on each machine plus 5 proceedingss for the following 1. Three clients get served with 20 proceedingss and an mean the arrival rate comes to 2.5 times during an hr. If we take into history repeated visits we get a 80 per hr reaching rate ( 30 x 2.5 ) therefore members wait about 8.6 proceedingss for a machine. To decide it the most appropriate theoretical account would be a multiple channel, individual stage as it will hold a individual line and more staff to cover with clients ( See Figure 3 below ) :

Operationally this theoretical account will ease the selling, HR, finance and supply concatenation facets as during extremum hours the waiting clients would be in a individual line doing it easier to expose the selling stuff on environing walls or screens. Financially it will salvage the expensive investing in media advertisement and will do off-peak booklet distribution easier and to more interested bing clients. To function on multiple service counter HR will necessitate to schedule employees i.e. cut downing the extra staff during slower times by switching more employee to top out times ensuing in better client service. This theoretical account will besides stream line the supply concatenation procedures and increase service degrees. During waiting line intelligence telecasts and amusement like BBC, Sky Sports etc with seated client will make a calmer waiting environment and defuse any possible hard state of affairs.

Price related scheme:

Fitness Plus can cut down demand during peak hours by deviating excess users either somewhat lifting monetary values or supplying services which cost lesser. It can offer different types of ranks with different monetary values. The best monetary value should be determined maintaining in head that no capacity restraint occurs which is called monetary value optimisation.

Financially, increasing monetary values would bring forth excess grosss as per Shugan ( 2004 ) monetary value optimisation moves demand from extremum to murder peak times and increases grosss. But service houses are frequently hesitating due to its long term negative effects on the concern. The presence of strong rivals frequently makes monetary value addition determinations hard as a client can seek rival services and it might ensue in client loss. Price addition startegy can besides increase force per unit area on the over all supply concatenation as clients will get down anticipating higher service degrees and seamless operations. By offering different type of ranks HR might necessitate to enroll more staff to go to client in both seasons. It can indirectly increase selling costs as less expensive methods of selling to regular clients in extremum season will go less effectual due to lesser figure of clients.

Non-pricing schemes:

Peak clip is best to reach clients who might be interested in the off-peak offers and services ( Kotler, 2001 ) . It is extremely likely to come across possible cusomers during Peak periods instead than less direct methods of advertisement. In the earlier instance clients have already shown their involvement in the services and installations. Thus it is far easier to sell them the off extremum services or bundles. While waiting for their bend clients can be shown different adverstisements to advance off-peak services which will salvage money for more expensive selling runs. For regular members off-peak vouchers can give farther price reductions or extra services with minimum incurring costs like massage, wellness addendums or energy drinks.

Another scheme would be to develop a reserve system. It helps to switch the members to off-peak period who would otherwise be waiting during the peak period. When a client calls to reserve a service or installation he should be given the slots with available capacity. The system works best if it is automated therefore optimising and equilibrating demand and capacity at the same clip. These systems do better the over all supply concatenation but besides affect fiscal and HR related operational determinations as they are expensive and need trained staff to run them.

Fitness Plus can besides partly restrict entree of members during peak periods. A elaborate survey of the type of members sing the installation would be needed. Once the information has been gathered on the use pattern the determination of categorical limitations can be applied. For illustration during peak times of 4-7 largely members would be working executives therefore in order to cut down entree and optimize the capacity a limitation should be applied on under 16 members utilizing the installation in the same period. To counterbalance them student rank rates can be offered during the off-peak period. This will promote the excluded members to come more frequently during off peak periods.

Fitness Plus should besides hold a study to find the popular equipment. The figure of popular equipment should be increased and the least popular 1s be decreased which will assist make full the spread in member demands. Operationally it can make a supply concatenation job of disposing off the least popular equipment and can increase fiscal force per unit area of purchasing new machines.

In instance of aerobic exercises subdivision ailments there is a possibility of a assorted agenda between aerobic exercises and yoga. A rescheduling of categories on the footing of member ‘s demand can guarantee that the categories do non collide. It will impact the HR determinations as employee programming would be needed and over clip might necessitate to be paid.

The employees of Fitness Plus besides need to be scheduled in order to increase the service degrees and cut down the extra staff during slower times. Switching more employee to top out times will ensue in more client satisfaction by holding more personal attending and interaction. It will profit the supply concatenation by bettering procedure times and easing seamless operations.

Long term schemes:

There are three surrogates in the long tally which should be based on both qualitative and quantitative bench marker of rivals, capacity and cost estimations:

Opening of a new installation business district

Minimal enlargement within the current installation on available land

Waiting and watching the demand conditions before doing any enlargement

Because clients are already kicking and equipment is being used lesser than its maximal capacity there is some room for minor enlargement of the bing installation but is limited due to miss of available land. As the population is increasing steadily and the lone full scope rival is YMCA option 1 would be the best pick. It will make sufficient capacity in front of client demands. Once the new installation is announced it will be hard for rivals to spread out as it might over burden the market.

Financially it is a large determination and would really much depend on the success of the short term schemes. Net incomes gained through short term steps will ease the fiscal force per unit area. Second traveling in front with new installation business district will necessitate thorough supply concatenation planing as the distance between the installations will do logistical determinations hard and expensive. Lot of new occupation will be created and HR section will necessitate to enroll and direct and recieve staff between installations for preparation and development intents. It will be a large chance for marketing deparatment as tonss of new runs, billboards, hoardings and advertizements would necessitate to be developed.


In this study the capacity issues of Fitness Plus were discussed in inside informations in three subdivisions. A measuring of bing capacity, justification of adopted scheme and links of proposed schemes with other runing determinations were sought. Both short and long term schemes are considered of import but the immediate concern of Fitness plus should be to decide the bing ailments of over crowding and non-availability of equipment.

First, in the short term monetary value optimising scheme of increasing extremum monetary values and offering off-peak bundles can work. If it is considered damaging for the concern non-pricing schemes can bring forth the coveted consequences. Second, all the employees should be taken on board in the strategic determinations so that they can manage client questions more professionally and keep the coveted service degrees. Last, periodical reappraisals of the demand prediction, ailments, equipment and service degrees will guarantee effectual capacity utilzation. Accuracy of informations should be maintained by comparing the bing demand with the forecasted demand so that a clear image of the fiscal, operational and service demands is obtained.

In the long tally Fitness Plus demands to mention to its corporate aim and act consequently either to efficaciously pull off the current equipment and infinite or construct a new subdivision over clip. The earlier the long term scheme is initiated the better. Once the enlargement program is proclaimed new ranks will turn out to be a guage for its success and uninterrupted monitoring of population growing, market tendencies and rivals will maintain Fitness Plus in front of its rivals.


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