Capacity Planning and Control: Nestle
Capacity Planning and Control: Nestle
Course Work in Operations Management
May, 2005
A business organization is an entity that inputs capital and resources, processes them and gets an output – products and services. Any business invests much capital into R’n’D and marketing for studying the customers’ opinion because it is a priority for any business to satisfy its customers. The more satisfied the customers are the better off the business is. Thus both parties are well off – customers get what they pay for – quality, brand etc, company generates brand identity, high revenues and profit. The bad story in the case is that any business experiences difficulties on the way, no matter how popular the product is or how well it sells.
One major concern for many businesses is seasonality. Organizations involved in bathing suit industry, ice-cream, medicine, tea and others face this problem very often. There are periods of time when the demand for a particular product is extremely high. Ice cream for example is a seasonal product that sells mainly during the summer. Ski equipment is gear that sells only during the winter season. There are exceptions of course as medicines and tea. Both can be bought and consumed at any time where as, medicines peak sales in winter and tea also. This does not mean though that the products die during the other seasons. However, it is evident that demand drops. In such cases sales drop too, so does revenue and profits, labor force becomes too much in the organization, costs for supporting depreciating machineries increase especially for the production of limited number of goods, expenses for salaries increase and as a whole the business starts going down. Many businesses face this situation nowadays. The question is how to deal with it. One main way of coping with this problem is cutting expenses.
According to Slack et. al. (2001) the best mechanism for running a business is to match level of demand (goods, services that customers need)
Course Work in Operations Management
May, 2005
A business organization is an entity that inputs capital and resources, processes them and gets an output – products and services. Any business invests much capital into R’n’D and marketing for studying the customers’ opinion because it is a priority for any business to satisfy its customers. The more satisfied the customers are the better off the business is. Thus both parties are well off – customers get what they pay for – quality, brand etc, company generates brand identity, high revenues and profit. The bad story in the case is that any business experiences difficulties on the way, no matter how popular the product is or how well it sells.
One major concern for many businesses is seasonality. Organizations involved in bathing suit industry, ice-cream, medicine, tea and others face this problem very often. There are periods of time when the demand for a particular product is extremely high. Ice cream for example is a seasonal product that sells mainly during the summer. Ski equipment is gear that sells only during the winter season. There are exceptions of course as medicines and tea. Both can be bought and consumed at any time where as, medicines peak sales in winter and tea also. This does not mean though that the products die during the other seasons. However, it is evident that demand drops. In such cases sales drop too, so does revenue and profits, labor force becomes too much in the organization, costs for supporting depreciating machineries increase especially for the production of limited number of goods, expenses for salaries increase and as a whole the business starts going down. Many businesses face this situation nowadays. The question is how to deal with it. One main way of coping with this problem is cutting expenses.
According to Slack et. al. (2001) the best mechanism for running a business is to match level of demand (goods, services that customers need)
References: 1. Nestle; Good Food, Good Life [Online], Available: http://www.nestle.bg/pageSimple.asp?pID=9&lang=2 [Accessed: 2005, May 6]. 2. Slack, N., Chambers, S., Harland C., Harrison A. and Johnson R. (2001) Operations Managemnt (3rd edition) Pitman Publishing ----------------------- [1] Slack et. al. (2001) also state that fluctuations in demand may not only be seasonal, but also weekly and daily as in the case of a supermarket when there are national holidays for example.