Operations and Supply Chain Management
Operations and Supply Chain Management
14th Edition
ISBN: 9780078024023
Author: F. Robert Jacobs
Publisher: MCG
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Chapter 5, Problem 1DQ
Summary Introduction

To explain: The capacity problems experienced when a new drug is introduced to a market.

Capacity management:

Capacity is the ability of an organization to hold, receive, and accommodate. In business terms, it can be termed as the output capable of being achieved over a period of time. It is vital that a firm has good practices to manage its capacity levels.

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Explanation of Solution

The possible capacity problems when a drug is introduced to the market are:

  • The uncertain demand for the new drug and the high capital investment involved in drug production makes it extremely difficult to predict adequate capacity levels.
  • Since the drug is new, there is no historical sales data which can be used as data to forecast the future demand.
  • If the forecast is too high, the significant capital resources will be underutilized.
  • On the other hand, if the forecast is too low, the firm might not have adequate capital resources to meet the actual demand which can result in lost sales.

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