What are the reasons why organizations create capacity which exceeds demand? What are the strategies used to manage excess capacity?
Question asks for two pages of hand written response
Expert Answer
Capacity which exceeds the demand is a major problem for most of the organisations. Exceeding capacity directly decreases the company’s overall profits as most of the cost goes to the production and the sales is very low as compared to the product produced. this specific situation to decrease the overall efficiency organisation.
Some major reasons for organisations creating capacity which exceeds the demand are as follows :-
Wrong forecasting of the
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