Capacity Shortage

Capacity shortage is a major issue in a robust and growing economy. The way it usually impacts decisions is that capacity is committed to early customers on a first-come-first-serve (FCFS) basis, and customers who delay their decisions end up with denied service. The fact that some customers in this later group would be willing to pay a higher price, leads to lost opportunity, as money is left on the table. Obviously if all customers arrive simultaneously, the supplier could cherry pick high-paying customers to maximize her profit. A simple approach would be to increase price for all so that demand is reduced to match available capacity. However, with volatility in demand, the decision becomes complex. 

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Enticements to involve the retail customer base, as well as the industrial sector, in the solutions desired became popular. Interruption of large commercial load, a provision by contract, had long been used to offset capacity shortages. Interest in this method mounted. In addition, retail customers were provided enticements to cut load, either by manual participation or by automatic devices. These enticements will like continue into the future. 

Polyethylene, polypropylene, poly (vinyl chloride), styrene resins (including ABS), phenolics, and polyesters are the major commercial polymers and together represent over 80% of the total domestic production, also shown in Figure 1). The sharply increased demand in 1972 required manufacturing plants to operate at almost full capacities. Shortages may occur temporarily until new facilities are installed. 

The sixth and final step of the whole process should always be the evaluation and interpretation of the analysis results. Undoubtedly, the first priority for a power system designer is to have a power system that is always able to serve power demand, but the overall system cost should be also taken into account. Sometimes the system designer might choose to have a small amount of annual capacity shortage (less than 1%) if the system needs to be overdimensioned in order to serve such a small amount of energy, which will reflect a significant increase in total power system cost. 

During the past few years there has been a capacity shortage in particular for large-volume commercial manufacturing. Since then, all major CMOs have expanded their capacities, and it is therefore now easier to identify the correct CMO. Nevertheless, outsourcing of the majority of the manufacturing development should be well prepared in advance. 

The decision described above is commonly termed the newsboy model. The optimal capacity decision can be obtained by identifying two costs the marginal cost of excess capacity Q and the marginal cost of capacity shortage Q. In the example above, the marginal cost of excess capadty is... 

Facility location Where a company has multiple factories (facilities) for production and factories are set for a specific product, the planner must identify which facility will be most suitable for new orders. Sometimes there may be a capacity shortage in a factory in that case the planner must decide which facility will be selected for those orders. 

Cost of wasted capacity, C = 10 per dress Cost of capacity shortage, = 5 per dress... 

In the P2 rule with high mc-values as well as in the Pj rule with high a values and the extended (x,7>-nile we are almost not interested in savings on holding costs and therefore we have an advantage of a few orders if we come to a number of periods in which there are severe capacity shortages. We now are curious whether the same elements can be observed in the results of Example 5.2. 

In Table 5.3 we see that the differences between the three penalty functions are much smaller than in the previous situations. In this situation, the capacity is usually enough to produce those orders that give a base cost reduction for one of the types, but the remaining capacity is not enough to produce orders for another type. On the aggregated level capacity shortages hardly occur, therefore there is almost no difference between the penalty functions. Only in the situation with a=0.9, we... 

Due to the production of some extra orders we can also save on the penalty costs. This vtill be profitable for potential late orders, for which penalty costs have to be paid if the orders are not produced by the end of the period. For other orders however, production will only be profitable in the situation in which we are (almost) certain of capacity shortages. If we know that extra capacity will be necessary during the next periods, the extra capacity can be used immediately, but even then it will only be profitable if we can use the capacity for orders that have to be delivered in one of the periods during which capacity shortages occur. Keeping all this in mind, the heuristics... 

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