Deck 7: Managing Capacity

Question 1

Management of demand and management of resources constitute the two broad content areas of capacity management.

Answer 1

True

Question 2

Capacity is the minimum amount of output that a system can produce in a sustained manner over a year.

Answer 2

False

Question 3

Capacity management is an operational activity that primarily focuses on the intelligent utilization of capacity.

Answer 3

True

Question 4

Capacity planning is a tactical task that involves the current development and acquisition of capacity in order to meet future market needs.

Question 5

Price changes are useful ways for shifting demand to meet available capacity of a facility.

Question 6

Premium pricing can be used to effectively wean out low-profit customers during off-peak capacity utilization times and bring demand down.

Question 7

Process management can increase capacity by redesigning work flows.

Question 8

Capacity management is not a source of competitive advantage since any well-established firm can match supply and demand.

Question 9

Yield management parses capacity into separate pricing segments in an effort to maximize profits or revenues.

Question 10

Maximizing yield is the same as maximizing capacity utilization.

Question 11

Yield management works with fixed capacities and flexible demands.

Question 12

If demand cannot be segmented into price- and time-sensitive categories, then this is the best situation for yield management to work.

Question 13

Overbooking is when hotels and airlines know some customers will not turn up (no-shows) and they resell these reservations to compensate for the absences.

Question 14

Overbooking is usually best done on the basis of expected number of show-ups.

Question 15

Industries like car rentals use yield management techniques for dynamic capacity, pricing, and overbooking decisions because of the complexity of the problems they face.

Question 16

Appointments, reservations, posted schedules, and wait lines are examples of how variations in capacity are smoothened.

Question 17

Basic waiting line model assumptions include the first come, first served line discipline; the unlimited line length; and no customer reneging (abandoning line) or balking.

Question 18

Waiting line remedies come in two forms: mental and psychological.

Question 19

Employee training and frequent job rotation help reduce service time variability.

Question 20

Line balancing is a strategy to reducing wait times by taking away tasks from underworked stations and distributing them to overloaded stations.

Question 21

Customer involvement and frequent communication can affect customer psychological perceptions of waiting time.

Question 22

Internal performance measures of managing capacity include the percentage reduction in waiting times and the percentage increase in customer satisfaction.

Question 23

Variance in planned capacity expenditures and cost of underutilized capacity are two financial measures of managing capacity.

Question 24

Unexpected declines in demand can be managed by reducing product variety, hiking prices, and using customers to create demand.

Question 25

Facilities closures and slowdowns and using excess capacity for other productive purposes are ways of managing sudden declines in demand.

Question 26

Because of their complexity, capacity management techniques are difficult to integrate with supply chain management, sales, and distribution techniques.

Question 27

Capacity management techniques have found nontraditional applications in areas such finance, telecom, and hospitals.

Question 28

Capacity management is defined as

A) a tactical activity in the present moment
B) primarily focused on the intelligent utilization of capacity
C) use of short-term actions to increase capacity scalability and flexibility to meet current demand
D) all of the above

Question 29

Capacity planning is

A) a strategic task
B) the acquisition of capacity in order to meet future market needs
C) arranging for capacity needs to meet guaranteed customer service levels
D) all of the above

Question 30

Which of the following is not an approach to demand management when capacity cannot be easily expanded or reduced?

A) reservations
B) appointments
C) discount pricing for peak times
D) inexpensive rates for off-peak demand times

Question 31

All of the following can be done when the resources that provide capacity are fixed except

A) workforce scheduling
B) production scheduling
C) both choices A and B
D) none of the above

Question 32

Which of the following statements best describes process management?

A) It increases capacity by removing constraint points (bottlenecks) in the system.
B) It can increase capacity by redesigning work flows.
C) Techniques such as queuing theory rearrange resources to achieve more customers in the system.
D) All of the above are correct in describing process management.

Question 33

Which of the following represents a common way to manage capacity at Wheels 2Go car rental service?

A) changing the front desk staffing levels
B) reservations
C) having as many vehicle types as possible
D) carrying only one vehicle type

Question 34

Capacity management is important because it is

A) a powerful source of competitive advantage
B) used to determine bus fares
C) used to guaranteed customer demand levels
D) all of the above

Question 35

An example of a fixed capacity/flexible demand scenario is

A) a cellular network provider
B) an automobile repair facility
C) a fast food restaurant
D) a post office branch

Question 36

Yield management can be described as

A) managing capacity independent of time constraints
B) stabilizing prices so as to offer a best price to all customers
C) maximizing revenue across standardized customer segments
D) enabling fixed capacity businesses to realize optimum revenue, particularly from perishable inventory

Question 37

Which of the following conditions are invalid for yield management?

A) advance sales
B) differentiated customer segments
C) variable capacity
D) flexible demand

Question 38

Yield management can be used by all of the following industries except

A) hotels
B) automobile manufacturers
C) airlines
D) cruise lines

Question 39

Overbooking can be done on the basis of all the following techniques except

A) the manager's experience
B) using the newsvendor model
C) expected cost analysis
D) the average number of no-shows

Question 40

EZjet Airlines usually reserves 10 seats of their standard 100-seat aircraft for last-minute travelers wishing to pay more. This is an example of which practice?

A) price fencing
B) overbooking
C) LCFS
D) none of the above

Question 41

Based on experience, the manager at the Giraffe Hotel decides to accept a reservation for a party of 12 guests knowing that his hotel is sold out. She is accepting the reservation because

A) She can cancel the reservations of the 12 lowest-paying guests and get more revenue from the new guests.
B) She can make arrangements with the neighboring hotel to accept the 12 guests.
C) She is using overbooking techniques and has determined that she can safely accept the 12 guests.
D) She knows she will have 6 cancellations and 6 no-shows among the current reservations.

Question 42

Powerful scheduling software that can accommodate multiple constraints for managing fixed capacity and inflexible demand can be used to schedule

A) classrooms for college courses
B) emergency room nurses
C) fast food workers at a large restaurant chain
D) all of the above

Question 43

Queuing theory, the study of waiting line models, helps operations managers better understand

A) inadequate capacity and variability in demand arrival rates/service times
B) service businesses such as UPS, USPS, or FedEx
C) assembly line-type manufacturing
D) why people go to the bank or doctor's office

Question 44

Which of the following situations is not an example of a common queue?

A) a mailroom clerk following a computer-generated route
B) supermarket shoppers being served by checkout cashiers
C) commuters purchasing tickets at a busy railway station
D) photocopy machinery waiting to be repaired or maintained by a crew of service technicians

Question 45

The basic M/M/1 queuing model has all of the following properties except

A) the line discipline is first come, first served
B) limited customers
C) customers do not abandon or refuse to join the line
D) all of the above

Question 46

Which of the following scenario(s) violates the basic M/M/1 model requirements?

A) customers checking out at a local library
B) customers waiting to be seated in a casual-dining restaurant
C) patients entering a hospital emergency room
D) All of the above satisfy the basic M/M/1 model.

Question 47

During finals week, students arrive randomly at the help desk of the computer lab. There is only one technician due to budget cuts, and the time required to provide service varies from student to student. The average arrival rate is 15 students per hour, and the average service rate is 20 students per hour. Arrival rates have been found to follow the Poisson distribution, and the service times follow the exponential distribution. What is the average time spent waiting in line for each student?

A) 15 minutes
B) 20 minutes
C) 5 minutes
D) 9 minutes

Question 48

In the previous example, what is the average number of students in the line?

A) 2.25 students
B) 5 students
C) 15 students
D) 20 students

Question 49

The technician in question 20 claims he is always busy. Using the data from question 20, how often is he actually busy?

A) 25 percent of the time
B) 75 percent of the time
C) 100 percent of the time
D) 95 percent of the time

Question 50

The administration finally increases the budget for the computer lab after numerous student protests, and the lab hires a new technician, Speedy McQueen. Unfortunately, he realizes that he will get paid per hour and not per student, so he works at the same rate as the first technician. What is the average waiting time per student now?

A) the same as before
B) half the amount as before
C) less than half the amount as before
D) impossible to tell without additional information

Question 51

Reducing service time variability is another lever to push in the actual reduction of wait times. This can be accomplished by

A) employee training
B) line balancing
C) cellular manufacturing
D) all of the above

Question 52

Magazines, TVs, elevator music, and frequent communication are all

A) psychological ways of reducing wait times
B) physical ways of reducing wait times
C) social ways of reducing wait times
D) none of the above

Question 53

Which of the following is not a performance measure of managing capacity?

A) percentage increase in productivity
B) percentage increase in inventory levels
C) percentage increase in customer satisfaction
D) percentage decrease in waiting times

Question 54

All of the following actions can be taken if demand falls suddenly except

A) shifting capacity to growth markets
B) closing facilities
C) increasing the variety of products
D) increasing advertising

Question 55

If demand increases suddenly, then management can

A) reduce the variety of products and services offered
B) offer customers incentives to wait
C) rotate employees in the stressful, customer-interface positions
D) all of the above

Question 56

__________ is a tactical activity primarily focused on the intelligent utilization of capacity.

Question 57

__________ is a strategic task that involves the future development and acquisition of capacity in order to meet future market needs.

Question 58

Manipulating demand to meet available capacity when capacity cannot be easily expanded or reduced is done through __________.

Question 59

A technique for allocating fixed capacity to different customers differentiated by timing and price elasticity is known as __________.

Question 60

__________ can increase capacity by redesigning work flows and identifying and managing constraint points in a system.

Question 61

__________ is done because rooms and departures would go empty due to last minute customer cancellations or customers simply not turning up (no-shows).

Question 62

Waiting line times can be reduced in two ways: __________ and __________.

Question 63

Wally's Car Wash operates seven days a week. The daily worker requirements are estimated as follows:
Each worker is required to work five days per week, and each must have two consecutive days off. What is the minimum number of workers needed? (Name the workers A, B, C, etc., or make up any names you want.) Provide the days off that each worker receives.

Question 64

__________ and __________ can help reduce seasonality in demand for waiting lines.

Question 65

Two performance measures of managing capacity are __________ and __________.

Question 66

Hospitals use number of beds and inpatient utilization (inpatient days) to measure capacity. There's no time period on the former measure of capacity, and thus there is no "throughput." Why would these measures be misleading? How can hospitals better manage their capacity?

Question 67

What is the fundamental difference between capacity management and capacity planning? Support your answer with a brief example.

Question 68

Distinguish between managing capacity with demand management and managing capacity with resource management.

Question 69

Why is the capacity management important? Explain why it is important to businesses and to you.

Question 70

Identify and discuss the techniques for managing capacity.

Question 71

What is yield management (also called revenue management)? Explain its relationship with overbooking.

Question 72

What are the assumptions of the basic waiting line model? Are these valid in real life? Give examples in which the model might be the most accurate and the most inaccurate.

Question 73

Discuss the physical and psychological ways that waiting line times might be reduced.

Question 74

Identify and discuss at least five performance measures of managing capacity, including at least one in each of the three categories of measurements.

Question 75

What are some of the measures an operations manager can take if demand falls suddenly? What if demand increases unexpectedly?

Question 76

How has capacity management been evolving in recent times? Briefly discuss a few areas of nontraditional application.

Question 77

Customers arrive at drive-thru window at the local fast food place at an average rate of 12 per hour, following a Poisson distribution. The server at the window can service an average of 3 cars every 12 minutes with service times described by an exponential distribution. The manager asks you to help him figure out the following:

A) average utilization
B) average time a customer spends in line waiting to enter the drive-thru bay
C) average number of customers waiting in line
D) probability of having more than 4 cars in the system

Question 78

Customers arrive at drive-thru window at the local fast food place at an average rate of 12 per hour, following a Poisson distribution. The server at the window can service an average of 3 cars every 12 minutes with service times described by an exponential distribution. If a second lane is added where the server can process 4 cars every 15 minutes, calculate the following:

A) average utilization for one server and two servers
B) average time a customer spends in line waiting to enter the drive-thru bay for one server and two servers
C) average number of customers waiting in line for one server and two servers
D) Which system is better?