Production Planning, Quality Management, and Procedures

Running Head : CAPACITY PLANNING STRATEGY FOR MANYCHIP INC

Evaluation for an Appropriate Capacity Planning Strategy for Manychip Inc

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In manufacturing industry , capacity planning is the strategy of a firm that tackles two main production questions when to increase capacity and how much . Inability to address these issues appropriately can lead to possible loss of customers and stagnation during under-capacity or wasteful operations and inefficient investing during over-capacity (www .insight-mss .com . To optimize capacity planning , there are three strategies available to the firm p

An aggressive form of capacity planning , lead strategy intends to increase capacity based on forecasted growth in demand (Russell Taylor , 2003 ,

.393 . It is suitable to firms that are protecting their first-mover advantage and leadership position . A more conservative alternative is lag strategy that uses documented and actual demand prior to capacity decisions (Russell Taylor ,

.393 . Firms carrying products with low differentiation and who has shallow financial backing are common supporters of this strategy . Lastly , match strategy aims to gain the benefit of being market-oriented on one hand while preventing substantial risk of committing resources on the other (Russell Taylor br

.393 . It adds capacity in minimal amounts as response to demand changes

As each strategy is suggested to have specific application , the decision of a firm to select one is motivated by external and internal factors Currently , Manychip uses lead strategy which resulted in adverse consequences such as excess inventory and high asset depreciation Although lead strategy can succeed producing the pre- of 10 million units of memory-chips , depreciation reduces revenues substantially which can undermine additional investment in machinery and equipment . The case also indicated that Manychip is maintaining manufacturing plants and sales offices in developed countries . Consideration of high costs of business such as labor costs and real estate can also affect revenue streams from the major project ( HYPERLINK "http /www .discoversouthwestny .com " www .discoversouthwestny .com

Even tough lag strategy can address these disadvantages and risks losing a major customer can severely affect the reputation of Manychip As a result , matching strategy is proposed to replace lead strategy There are several advantages . Aside from the compatibility with cost structure , Manychip can also address the complexity of dealing with volatile market environment resulting to fluctuation in demand and rapid change in price . With high lead times and various product yields Manychip can also assure quality by not entering the mass production scale that can arise from producing at 10 million units . Memory chips have also short life cycles that value of investing in new machineries is short-lived when there is future improvement in memory technology Finally , Manychip can maintain sound business relationship with the major customer by not it and producing in a level optimal to its cost structure , quality assurance system , market variables and external environment

References

Book

Russell , R Taylor , B (2003 . Operations Management . 4th Ed Singapore : Pearson Education

Electronic Sources

Citrin , S (unknown . Capacity planning : a tactical decision with strategic impact . Insight . Retrieved August 2 , 2007 from HYPERLINK "http /www .insight-mss .com " www .insight-mss .com

Cost of Doing Business (Unknown . SouthWestNY .com . Retrieved August 2 2007 from HYPERLINK "http /www .discoversouthwestny .com www .discoversouthwestny .com

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Capacity Planning Strategy for Manychip Inc ...