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Part Three
Planning and control
Short case
Producing while the sun shines 2
The sales of some products are profoundly affected
by the weather. Sunglasses, sunscreen, waterproof
clothing and ice cream are all obvious examples. Yet the
range of operations interested in weather forecasting
has expanded significantly. Energy utilities, soft drink
producers and fresh food producers and retailers are all
keen to purchase the latest weather forecasts. But so
are operations such as banking call centres and mobile
phone operators. It would appear that the demand for
telephone banking falls dramatically when the sun shines,
as does the use of mobile phones. A motorway catering
group was surprised to find that their sales of hot meals
fell predictably by A110,000 per day for each degree
temperature rise above 20 °C. Similarly, insurance
companies have found it wise to sell their products when
the weather is poor and likely customers are trapped
indoors rather than relaxing outside in the sun, refusing
to worry about the future. In the not-for-profit sector new
understanding is being developed on the link between
various illnesses and temperature. Here temperature is
often used as a predictor of demand. So, for example,
coronary thrombosis cases peak two days after a drop
in temperature, for strokes the delay is around five days,
while deaths from respiratory infections peak twelve days
from a temperature drop. Knowing this, hospital managers
can plan for changes in their demand.
Because of this, meteorological services around the
world now sell increasingly sophisticated forecasts to a
wide range of companies. In the UK, the Meteorological
Office offers an internet-based service for its customers.
It is also used to help insurance specialists price
insurance policies to provide compensation against
weather-related risk. Complex financial products called
‘weather derivates’ are now available to compensate for
weather-related uncertainty. So, for example, an energy
company could buy a financial option before winter
where the seller pays the company a guaranteed sum
of money if the temperature rises above a certain level.
If the weather is mild and energy sales are low, the
company gets compensation. If the weather is cold, the
company loses the premium it has paid to the seller but
makes up for it by selling more power at higher prices.
However, as meteorologists point out, it is up to the
individual businesses to use the information wisely.
Only they have the experience to assess the full impact
of weather on their operation. So, for example,
supermarkets know that a rise in temperature will
impact on the sales of cottage cheese (whereas,
unaccountably, the sales of cottage cheese with
pineapple chunks are not affected).
Source: Alamy/Medical-on-line
Measuring capacity
Output capacity measure
Input capacity measures
The main problem with measuring capacity is the complexity of most operations. Only when
the operation is highly standardized and repetitive is capacity easy to define unambiguously.
So if a television factory produces only one basic model, the weekly capacity could be described
as 2,000 Model A televisions. A government office may have the capacity to print and post
500,000 tax forms per week. A fast ride at a theme park might be designed to process batches
of 60 people every three minutes – a capacity to convey 1,200 people per hour. In each case,
an output capacity measure is the most appropriate measure because the output from
the operation does not vary in its nature. For many operations, however, the definition of
capacity is not so obvious. When a much wider range of outputs places varying demands
on the process, for instance, output measures of capacity are less useful. Here input capacity
measures are frequently used to define capacity. Almost every type of operation could use
a mixture of both input and output measures, but in practice, most choose to use one or the
other (see Table 11.1).
Capacity depends on activity mix
The hospital measures its capacity in terms of its resources, partly because there is not a clear
relationship between the number of beds it has and the number of patients it treats. If all