Question

There are many avenues that companies can use to increase their capacity. Some are more permanent (hard ceiling capacity increases) some are more temporary (soft ceiling capacity increases). Suppose that you are running a company that produces a component for the automotive industry. Your current capacity is 5,000 units per week. You have calculated that you will need to increase your capacity to 7,500 units a week to meet your current demand. You are considering the following methods of increasing your capacity. The use of dedicated and flexible facilities: Your Company has several permanent storage facilities and has used temporary storage in the past. Flexible workforce: Your Company’s workforce generally works 8–5 Monday through Friday. You are considering adjusting existing workforce time structures to meet planned demand. Subcontracting: With the planned demand increasing, perhaps temporarily, subcontracting the additional resources might be an option. Product design flexibility: Your Company is considering modifying its factory production lines to be better able to handle future demand. Which of these methods would you consider a hard ceiling increase? Explain? Which of these methods would you consider a soft ceiling increase? Explain? Which of these methods would you recommend for your company? Identify the advantages and disadvantages of using your chosen methodology.

Answer 1

The use of dedicated and flexible facilities: Your Company has several permanent storage facilities and has used temporary storage in the past

Flexible facilities comes under the soft ceiling capacity increase strategy, wherein facilities that do not require a heavy capital investment, can be quickly setup to meet the increment in demand in the market.

Flexible workforce: Your Company’s workforce generally works 8–5 Monday through Friday. You are considering adjusting existing workforce time structures to meet planned demand

Adjusting workforce time structures, thereby increasing the work hours, is a hard ceiling capacity increase since the changes that are being made is of permanent nature.

Subcontracting: With the planned demand increasing, perhaps temporarily, subcontracting the additional resources might be an option

Temporary subcontracting can be termed as soft ceiling capacity increase

Product design flexibility: Your Company is considering modifying its factory production lines to be better able to handle future demand

Altering production lines is a permanent change and hence the same is a hard ceiling capacity increase measure.

For any given company, adopting a hard ceiling or soft ceiling capacity increase strategy is dependent upon the variation that is expected in demand. Certain businesses that are seasonal and hence experience sudden surges at certain times of the year, but regularly, can adopt a hard ceiling approach. On the other hand, if the industry that I am operating in is fairly stable and has erratic demand increases very rarely, should adopt a soft ceiling approach. Since altering infrastructure in a factory is often associated with heavy capital expenditures, permanent changes should be thought through.