Evaluate
the benefits of investment as a means of increasing capacity utilisation.
(12 marks)
Note to self: are there any terms in the title I should define? (yes) if so which ones? (capacity utilisation)
(So I define capacity utilisation....then I continue......) Investment is often aimed at increasing capacity rather than increasing the utilisation of existing capacity. When, for example, BMW invested in robots, this increased the capacity of the plant. When investment is used to increase capacity utilisation there are various benefits which will now be assessed.
Note to self: I have referred to the case study and also made it clear I am writing about capacity utilisation not increasing capacity. That's pretty good - I am on the right track!
(So I define capacity utilisation....then I continue......) Investment is often aimed at increasing capacity rather than increasing the utilisation of existing capacity. When, for example, BMW invested in robots, this increased the capacity of the plant. When investment is used to increase capacity utilisation there are various benefits which will now be assessed.
Note to self: I have referred to the case study and also made it clear I am writing about capacity utilisation not increasing capacity. That's pretty good - I am on the right track!
The ‘bottleneck’ concept is
useful here. When technology and investment offer improvements in any factor
which limits capacity, the capacity of the business can be increased and other
factors can realise more of their potential. To take a simple example,
Silentnight could have identified a hold-up in bed manufacture which could be
removed by automating a process. If this allows workers to use the time in
other productive ways, there is a sense in which this increases the capacity of
the Barnoldswick factory. It also allows increased labour productivity.
Note to self: an alternative to using the workers I could make them redundant. Thus I would be increasing capacity utliisation without increasing capacity. I am continuing to refer to the case study.
Note to self: an alternative to using the workers I could make them redundant. Thus I would be increasing capacity utliisation without increasing capacity. I am continuing to refer to the case study.
There is a possible distinction
between small scale investment to address ‘bottlenecks’ and more fundamental
large scale investment to reconstruct entire production processes in more
capital intensive ways. Large scale investment will normally set out to raise
both labour productivity and capacity. This would happen, for example, when a
car production line is speeded up by introducing robots. The capacity of the
production line is clearly increased.
Note to self: I seem to be drifting off capacity utilisation here...that's not so good...of course what I should have done is read more about capacity utilisation itself for example here then I would have realised that I can increase capacity utilisation by increasing sales, building up stock or subcontracting. If I had thought of that then I could have dealt more with investment in marketing etc.
Oh well, I had better move on to the evaluation bit....
Note to self: I seem to be drifting off capacity utilisation here...that's not so good...of course what I should have done is read more about capacity utilisation itself for example here then I would have realised that I can increase capacity utilisation by increasing sales, building up stock or subcontracting. If I had thought of that then I could have dealt more with investment in marketing etc.
Oh well, I had better move on to the evaluation bit....
Investment has no guarantee of
success as there are always business risks. Less than half of the businesses
offered investment on ‘Dragons’ Den’ go on to succeed, for example.
I thought that was pretty good, bringing in Dragons Den but on the other hand...is this directly relevant to the details in the Case Study? Hmmmm I should have dealt with capacity utilisation for BMW etc. Drat! I thought I was being clever!
Failure can follow investment if the technology or the equipment involved fails to deliver the anticipated outcomes, or if consumers are not attracted to the product. For example, Google Glass (in 2011) brought computer power to ‘high-tech spectacles’. Google’s investment in this product was scrapped after extensive problems in both production and use. Silentnight still faces ‘major challenges’ after reorganisation. Addressing bottlenecks has limited value if sales are too low to keep capacity occupied.
Well, I went back to the case study AND brought in a real world example, but I haven't really done much evaluation. I think I need to read more about evaluation...
I thought that was pretty good, bringing in Dragons Den but on the other hand...is this directly relevant to the details in the Case Study? Hmmmm I should have dealt with capacity utilisation for BMW etc. Drat! I thought I was being clever!
Failure can follow investment if the technology or the equipment involved fails to deliver the anticipated outcomes, or if consumers are not attracted to the product. For example, Google Glass (in 2011) brought computer power to ‘high-tech spectacles’. Google’s investment in this product was scrapped after extensive problems in both production and use. Silentnight still faces ‘major challenges’ after reorganisation. Addressing bottlenecks has limited value if sales are too low to keep capacity occupied.
Well, I went back to the case study AND brought in a real world example, but I haven't really done much evaluation. I think I need to read more about evaluation...
Successful, large scale,
innovative investment will generally increase capacity rather than increase the
utilisation of existing capacity. Smaller scale investment to tackle
‘bottlenecks’ can be seen as targetting increased capacity utilisation.
However, there is no hard and fast guarantee that investment will succeed in
increasing capacity utilisation.
I thought that was good when it was written but looking gain, that first sentence doesn't seem very relevant, the second sentence adds nothing and the third one just says it may not succeed. Not very impressive....
I thought that was good when it was written but looking gain, that first sentence doesn't seem very relevant, the second sentence adds nothing and the third one just says it may not succeed. Not very impressive....
