Capacity and inventoryOnline version Operations managers have to decide where to manufacture different products, how much productive capacity their factories and plants should have, and how much inventory to maintain. Read the sentences and classify them under the headlines choosing the best answer. by Nenika Campos 1 1.-A long lead time may allow competitors to enter the market a The consequences of insufficient capacity b The advantages of having a large inventory c Both of them. 2 2.- As production volume increases, you get economies of scale (the average fixed cost per unit produced decreases). a The advantages of large facilities b The consequences of excess capacity c Both of them. 3 3.- Finding enough workers and coordinating material flows can become difficult. a The disadvantages of having a large inventory. b The disadvantages of large facilities c Both of them. 4 4.- If lead time increases, some customers may go to other suppliers. a The consequences of insufficient capacity b The disadvantages of large facilities c Both of them. 5 5.- Lost sales and market share are usually permanent. a The disadvantages of having a large inventory. b The consequences of insufficient capacity c Both of them. 6 6.- The working environment might get worse and industrial relations could deteriorate. a The disadvantages of having a large inventory. b The disadvantages of large facilities c Both of them. 7 7. There are costs of storage, handling, insurance, depreciation, the opportunity cost of capital, and so on. a The disadvantages of having a large inventory. b The consequences of excess capacity c Both of them. 8 8.- You can be more flexible in product scheduling, and have longer lead times and lower cost operation through larger production runs with fewer set-ups. a The advantages of large facilities b The advantages of having a large inventory c Both of them. 9 9.- There is always a risk of obsolescence, theft, breakage, and so on a The disadvantages of having a large inventory. b The consequences of excess capacity c Both of them. 10 10.- You can meet variation in product demand. a The advantages of having a large inventory b The advantages of large facilities c Both of them. 11 11.- You may be under-utilizing your workforce. a The advantages of large facilities b The consequences of excess capacity c Both of them. 12 12.- You have protection against variation in raw material delivery time (due to, shortages, strikes, lost orders, incorrect or defective shipments, etc) a The advantages of having a large inventory b The advantages of large facilities c Both of them. 13 13.- You may be forced to produce additional, less profitable, products. a The advantages of large facilities b The consequences of excess capacity c Both of them. 14 14.- You can take advantage of quantity discounts in purchasing. a The advantages of having a large inventory b The advantages of large facilities c Both of them. 15 15.- You may have to reduce prices to stimulate demand a The consequences of excess capacity b The disadvantages of having a large inventory c Both of them.
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