Capacity management is defined as the potential of the available resources to facilitate productivity.It is paramount for a business to use what they have appropriately, with a principal objective of creating value for its customers. Levels of labour capacity are organized in different stages. One is theoretical which aims to achieve the maximum output. According to Srivastava (2011,p.320), this phase is recordede during strategic planning meetings, but in most instances is unachievable. The company set too high goals, which are difficult to realizedue to limitation of capital. Second, thenormal average is defined as output for a period of three to five years. It gives a reflection of actual performance, hence helps in projecting the future growth (Bratton and Gold 2012).Furthermore, budgeted and actual levels enable the managers to predict the returns. The overall objective of managing and coordinating the funds is to serve the customer better.
The end user of products and services is considered central in any business. The industry of logistics and supply & management involves giving the customer the right product, with the correct quantity and quality (Adenso et al. 2012, p.286). The process begins with the producer and transitions to the distributors who finally reach out to the customers directly or even breaks the chain further by involving the retailers. Presently, the channels of disseminating the final products to the market have changed. The wake of modern technology has improved the connection between the seller and the buyer. A good example is the use of social media to purchaseproducts and avail them to the customer’s place of residence. Amazon, a US-based electronic company, started its operations by selling books online (Adenso et al. 2012, p.289). Later, it increased the range of products to clothing, shoes, video games and others. The company has been able to cover a vast geographic region since it is not limited to physical space. A conventional online platform controls the broad spectrum of customers. The highest percentage of support staff work on contract basis at aspecific number of hours.
Capacity management and the use of variable hour labour has gained momentum in the current age. The case is witnessed especially in the manufacturing sector, where the employers are opting to reduce the workforce to manageable levels. One of the factors that have contributed to this incidence is anunpredictable global market (Bratton and Gold 2012). The rate of demand for goods and services is not linearly related to the production. Economic ties are impeding the individuals from spending, hence developing a culture of saving for the fear of future scarcity (Srivastava 2011, p.330). Additionally, technological advancements have made it easier for the companies to transact online, instead of incurring the enormous costs of recruiting new staff.
The chapter willreview secondary sources to extract the information from other researchers concerning the same topic. It will depict the reasoning of established scholar, and their contradicting opinions. The first section will discuss the theories surrounding management of capacity; the second part presents the empirical studies.
Theory of constraints is a process of identifying the limiting factors that impede proper flow of supply chain (Saunders et al. 2009). Anything that stands along the way and systematically prevents the normal functioning of the channel is classified as a weakness. According to Christopher (2014), industries have to be careful in their operation by employing more efforts to flaw recognition. He further notes that most of the losses which happens on daily production activity can be mitigated if the employees are trained on how to maintain quality services. Fazlzadeh and Khoshhal (2010, p, 123) notes that constraints theory takes a scientific approach. It hypothesizes that the manufacturing process encompasses complex processes, one of which might act as a weakness. Ability to detect the limiting channel could quickly improve the productivity.
The ultimate goal of logistic and supply management industry is to makeprofit(Hammerschmid et al. 2014,p.105). The ideal environment to achieve maximum productivity is only possible when the right tools for working are available. Also, proper management of skills is needed to improve the quality of services and goods. Christopher (2014) notes that industries such as Coca-cola have dominated the beverage industry due to market awareness. He further affirms that the company has set out its operations clearly, by determining when to hire on permanent or temporal basis. The distributors of the Coca -Cola Companyare selected on acontractual basis, which has enabled representation over wide geographic locations. Additionally, the marketers are employed for a short period, paid on hourly basis hence keeping the business vibrant (Koumparoulis 2012, p.54). Theory of constraint prioritize on improving the final product and achieves the following benefits to the company. One, the profit is increased. The central role of manufacturing is to getreturns. Identifying the blocking factors eliminate the chances of losing funds because the customers receive the products at the right time and incorrectquality. Zhang and Kronprasert (2015) outlines that pleasing the end user could have a positive impact in increasing the sales and also building the organization’s image. Second, the capacity of production is heightened,and fast improvement in clients is realized.
Moreover, theory of capabilityargues that deployment of resourcesis achieved by combining both human labor and finances (Nevile 2013). According to the assumption arrived at by Chritsopher(2014), one single entity cannot enable the organization togrow to the high levels. A combination of efforts is required to propagate the company forward. Normative claims set forward regarding this theory by Levy and Kaplan (2008, p.433)alludes that achieving moral being and capabilities are the two distinctive features of capability theory. The company should always hire by considering individual’s skills, rather than relying on traditional hiring processes which did not factor the aspect of professionalism. Focusing on productivity and quality would increase the competitive edge in the global market.
Management of Capacity practices
Nevile (2013) affirms that control of capacity can be classified into two broad categories. The first one is pricing which involves the actions of a company to optimize on profit. This is achieved byreducing the cost of production or expanding the revenue collection base. On the other hand, non-pricing techniques entail management of assets and debts. The business controls the rate of borrowing and also invest the outsourced funds into income-generatinginvestments (Levy and Kaplan 2008, p.430). There are some practices which are considered helpful in advancing the goals of any organization.
Sekaran and Bougie (2013) indicatescapacity forecasting as the process of planning for the sustainability of the company. In order to arrive at the best conclusion and have informed progress of the firm, the management should be able to use the available business analytics tool such as customer’s feedback to compile an executive report for reference purpose. The current performance is used to predict the future demand, supply and growth rate. Additionally, the practice is useful in aligning the demand pattern with the supply and assist in countering stiff competition (Mullins 2010). Alibaba is one of the internet based retailers, which hold a business rivalry with Amazon. For the two companies to retain their international statuses, they have to make decisions based on data rather than speculations. They plan and identify areas of weaknesses which they improve on to retain relevancy (Stone 2015).
Second,capacity outsourcing is viewed by Christopher (2014) as the best option for attracting the best brains in the industry. It is defined as the process of hiring from the outside, either through contractual or permanent basis. Levy and Kaplan (2008, p.440) support that focusing on external professionals enables the organization to learn new tricks, which they can use to counter the competitors. Additionally,Adenso et al. (2012, p.300) links zero and short hours contracts to reduced operational cost.
Benefits of Using Zero and Short Hours Contracts
Three extremes affected by contractual basis are: employers, employees and the customers. The perspective varies depending on the party concerned because some are negatively impacted while others are favored. Employers are the huge beneficiaries of this strategy because they save on cost.
CIPD Policy Report(2015) identified that a quarter of the employers use zero hour contracts to have tasks accomplished. The research indicated that individual’s business embracespermanent staff, who are overworked to accomplish the high workloads. Additionally, some of the professions which were cited to employ the strategy were health sectors, social work, and the IT sector was minimally mentioned. The freelance world has made it easier for such services to be offered in online platforms. According to CIPD Policy Report(2015), large organizations are more likely to use zero hour contracts as opposed to small companies. The primary reason is to manage the fluctuation in demand.The affirmation was mentioned by 66% of the employers. Moreover, 48% indicated that it provided flexibility and 48% argued that it covered for absence.
Short contracts are not prevalent in the industry, with 10% of employers embracing its use. Only 21.9% are employed in this form of agreement. The highest percentage is witnessed in large organizations with equal proportions in both the private and public sectors (CIPD Policy Report, 2015). Additionally, 5% of employers commented that an individual has to work for 30 hours in a week to be considered for payment. The reasons listed for allowing short contracts are; negative publicity (11%), management of demand fluctuation (45%), flexibility (32%) and reduced costs (19%).
Employees have different responses pertaining the zero hours contracts. According to the release by CIPD Policy Report (2015),88% indicated that it was not their choice to work part-time. The hiring companies deliberately assume this strategy to leverage on cost. Through the commentaries offered by the participants, 81% affirmed that the employers are unable to provide a platform for them to exercise their skills for long hours (CIPD Policy Report 2015). Based on supervisory, 60% alluded that they had a manager to report to and seek guidance, which improved the quality of goods and services. On the other hand, commentaries on short hours showed that flexibilitywas cited as the primary reason for choosing to enter into temporal jobs. Allowing the employees to work at aspecific number of hours improves productivity, hence increasing the revenue.
The customer is the end user of the products and services offered by a specific company. Logistics and supply& management industryplay a significant role in steering the economic growth. The research conducted by Fazlzadeh and Khoshhal (2010, p.140) affirmed that 80% of customers viewed Zero hour contracts to affectsthe quality of goods negatively. According to their comments, they confirmed that organization which embraced full-time employees produced quality output. Furthermore, 90% alluded that they evaded the products whose specifications were questionable. Concerning the short-hour contract, 86% of the customers appreciated the input of outsourced experts, who brought new insights to meet their needs (Adenso et al. 2012, p.300).The overall effect is improved perception of the business to the outside world, hence increasing the sales.
The business world is evolving at a rapid rate, with changes in routine operations witnessed in all sectors of the economy. The struggle to compete with other industries has necessitated the move to manage the internal resources and maximize on the output. Every company has its way to control its functions, but the external environment such as economic forces has asignificant impact on how things are conducted. Due to theunpredictable commercial situation, most of the businesses have opted to settle for zero hour and short hour contracts. Choosing to hire temporal employees reduce the operational cost of any company (Christopher 2014).
The situation of zero and short hours contract is not going to end any time soon. Instead, more organizations are embracing the practices, since they have been proven to save on operating cost. Additionally, more experienced professionals are outsourced to bring new insight and strategies to solve complicated operational problems. New methodologies are arising as the time progress. In the next five years, what the companies are enjoying right now will eventually change. Technological advancement is availing more opportunities, which can be utilized boost annual returns. For example, most companies are hiring freelancers, who can work remotely (Stone 2015). The organizations connect with the experts though communication platforms such as Skype, Facebook,and others, to instruct and guide on what is expected from them. The business benefits from an array of professionals, who are experienced inaparticular genre.
Additionally, the introduction and theslow inclusion of artificial intelligence in the industries is facing awaythe costs of human labour (Saunders et al. 2009). Machines are programmed to mimic human reasoning and also do routine work in the office and production sectors. A single robot can cut the cost of hiring almost one hundred workers. The new introduction will close the opportunities for employing both on thecontractual and permanent basis. The supply management industries will entirelyoperate through technological machines, hence reducing the demand for human labour.
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