Question

ABC Managed Care an operator of 19 call centers has just hired you as their new Chief Operating Officer. The call centers are operated during regular business hours Monday through Friday (8am—7pm) to handle calls from various subscribers of its insurance company clients. However, given the mobility of its telecommunications technology it is able to generate revenues from other call center functions (e.g., credit card company and airline customer service support) Currently, ABC manages 800,000 subscribers. Your project for the next year is to better manage the capacity utilization of its 19 call centers for the coming year.

Required:

1.         Using the Call Centers as a context, explain what we mean by the following

terms:

Theoretical Capacity

Productive Capacity

Nonproductive Capacity

Idle Capacity

2.         How are the four terms in (1) related?

3.         Use the Call Centers as a context when answering the following questions:

(a) How do Theoretical and Practical capacity differ?

(b) Of what use is Theoretical Capacity?

(c) Of what use is practical capacity?

           

Answer 1

1. a. Theoretical Capacity - Theoretical capacity is generally defined as that level of production that would be attained by an organization if all of it's equipments and operations are performed continuosly throughout the year at highest level of efficiency. It is also known as ideal capacity. In the given case, theoretical capacity of ABC will be achieved if all the 19 call centres work from Monday to Friday from 8 am to 7 pm and manages clients at full capacity. Moreover, along with it they are also able to generate revenue from other sources.

b. Productive Capacity - Productive capacity is the net effective units produced by an enterprise over a period of time. In the given case, productive capacity of total 19 call centres is 800,000 subscribers. This is referred to as productive because it is the capacity handled by ABC.

c. Non-productive capacity - It refers to capacity which is not productive out of overall theoretical capacity. For example if total theroretical capacity of call centres is 1,000,000 subscribers but it handles productively only 800,000 then remaining 200,000 are those not handled by call centres and are termed as non-productive capacity.

d. Idle Capacity - Idle capacity is the time which is lost due to idle time spent by workers which are not productive. This capacity arises due to various reasons like repairs of system, maintenance shutdown, strike or any other failures beyond the control of human.