Operations Management: An Integrated Approach, 5th Edition

EVALUATING THE CURRENT SITUATION

Point of departure

The percentage of normal capacity the company is currently using.

When you are considering the different options, it is important to evaluate your company's current situation in terms of point of departure, magnitude of the change, and duration of the change.

The point of departure is the percentage of normal capacity your company is currently operating at. For example, if you are operating at 100 percent of normal capacity and need to increase capacity by 10 percent, you might use a relatively simple option such as overtime to achieve that 10 percent extra capacity. If you are already using overtime—say, you are operating at 125 percent of normal capacity—you might look for a different way to increase capacity. At this point, subcontracting or hiring temporary workers might be more economical. If you need to increase capacity even more, maybe it is time to hire some new permanent workers. The same is true when you need to reduce capacity. If you are making a small reduction—perhaps down to 90 percent of normal capacity—you might decide to use undertime. For even greater reduction, you might cut back hours or furlough employees. If the need to reduce is still greater, you might choose permanent layoffs. Thus point of departure affords your company perspective on the best options.

Magnitude of the change is the size of change needed. ...