BIDDY'S BAKERY CAPACITY NEEDS
Case Study Analysis: Biddy's Bakery Capacity Needs
The challenge facing the Biddy's Bakery is excess capacity caused by a low production capacity than what is optimal for the bakery and its resources. This implies that the demand for Biddy's products in the market is below what the bakery can potentially supply to the market. The excess capacity arises from management's decision to buy a larger production capacity to accommodate its growing production needs. However, the new production facility is in excess than the bakery's current production rate and market demand for goods. This excess capacity is causing inefficiencies and making the bakery incur extra costs and loses in its market share.
This problem arose from Elizabeth's decision to move the bakery and its operations to a larger facility following the bakery's outgrowth of its previous capacity. The management made this decision from the presumption that the new facility would cater for business, which was expected to continue growing. However, this decision has greatly affected the performance of the bakery. This is because capacity decisions are essential in determining the limit of output and provide useful insight into the operating costs (Ananth & Jain, 2004). This implies that strategic capacity planning is essential if a business is to reach an optimal level in production capabilities and meet market demands.
Prior making the decision on expanding the bakery's facilities, Elizabeth needed to make several considerations. First, Elizabeth needed to consider the bakery's capacity needs entailing space, equipment,...
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