Page 177 - Operations Strategy

152 CHAPTER 4 • CAPACiTy sTRATEgy
a change in capacity that weigh heavily with operations, especially when forecasts of
future demand are uncertain. Generally, the more uncertain is future demand, the
more likely operations are to choose relatively small increments of capacity change.
Notwithstanding this, there is a general pressure in many industries towards building
new capacity, even when over-capacity exists in the industry.

Where should capacity be located?
Required service levels from customers will influence this decision. Fast and regular sup-
ply implies location close to customer locations. Other market-related factors include
the suitability of the site and the general image of its location. As far as operations
resources are concerned, significant factors include the resource costs associated with
the site, such as land and energy costs, the investment needed in land and facilities, the
availability of any specialist resources required and general community factors.

Further reading

DeToni, A., Filippini, R. and Forza, C. (1992) ‘Manufacturing strategy in global market:
an operations management model’, International Journal of Operations and Production
Management, 12(4).
DuBois, F.L., Toyne, B. and Oliff, M.D. (1993) ‘International manufacturing strategies of
US multinationals: a conceptual framework based on a four industry study’, Journal of
International Business Studies, 24(2).
Evans, P. and Wurster, T.S. (2000) Blown to Bits: How the new economics of information
transforms strategy. Boston: Harvard Business School Press.
Gunther, N.J. (2006) Guerrilla Capacity Planning: A Tactical Approach to Planning for Highly
Scalable Applications and Services. Berlin and Heidelberg: Springer-Verlag.
Hill, C.W.L. (2012) International Business: Competing in the Global Market Place. New York:
McGraw-Hill.
Küpper, A. (2005) Location-Based Services: Fundamentals and Operation: Fundamentals and
Application. Oxford: Wiley-Blackwell.
Tombak, M.M. (1995) ‘Multinational plant location as a game of timing’, European Journal
of Operational Research, 86(4).
Wolfe, D. and Lucas, M. (eds) (2005) Global Networks and Local Linkages: The Paradox of Cluster
Development in an Open Economy. School of Policy Studies, Queen’s University.

notes on the chapter

1 Sources include: The Economist (2016) ‘Too little freight, too much space’, 19 March; The
Economist (2015) ‘Low rates on the high seas’, 14 March.
2 Sources include: Blakely, R. (2010) ‘Britain can learn from India’s assembly-line heart opera-
tions, says doctor’, The Times, 14 May; The Economist (2011) ‘Economies of scale made steel–
The economics of very big ships’, 12 November; Maersk website, http://www.maersk.com/
innovation/
3 Sources include: The Economist (2014) ‘Big carmakers, Kings of the road, Size is not everything
for mass-market carmakers. But it helps’, 11 January.
4 Hewitson, J. (2015) ‘Old vinyl races to the top of the charts’, The Times, 15 May; Sevcenko, M.
(2015) ‘Time for vinyl to get back in its groove after pressing times’, The Guardian, 20 September;
Shar, N. (2014) ‘The Biggest Music Comeback’, Wall Street Journal, 11 December.

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