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Economies of Scale and JIT

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1) What are some practical limits to economies of scale? What is capacity balance? Why is it hard to achieve? What methods are used to deal with capacity imbalances? Why would a business maintain a capacity cushion?

2) Is it possible to achieve zero inventories? Why or why not? Why does JIT manufacturing require a stable schedule? What are some technological advances that support the goals of JIT? Will JIT work in service environments? Why or why not?

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1) What are some practical limits to economies of scale? What is capacity balance? Why is it hard to achieve? What methods are used to deal with capacity imbalances? Why would a business maintain a capacity cushion?

The practical limits to economies of scale are the availability of raw material, the excessive specialization by personnel and the limits on the demand for the product. Moreover, excessive transportation costs set practical limits. The factories need to be located near consumption.

Capacity balance means the need to balance the production capacity with the external demand.

Capacity balance is hard to achieve as the market demand varies from time to time. It becomes difficult to predict the demand. In addition, the production process requires setup processes and cannot vary at very short notice. For example, the setting of the production line need to be changed there is cleaning and chemical ...

Solution provided by:
Hatim Baxamusa, MBA
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  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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