Capacity introduction -W
The introduction contains 3 parts. To start with, we will take a look of the overview. What is capacity and why we need to manage capacity. Later/Also/on top of that, we will go through how to manage capacity including planning process and daily management.
Why manage capacity. The goal of capacity management is to fulfill various capacity requirements in the cost effective ways.
Firstly, we need to ensure there is enough space or capacity for inventory, otherwise we cannot receive the arriving commodities thus we cannot deliver orders to customers in time. This is against our customer centric principle.
What’s more, the cost of capacity is almost the most expensive part of the fulfillment cost. The table below shows that in China, the fixed cost is around XX times of variable cost and accounts for XX% of total fulfillment cost. I also saw some data of XX. The proportion of fixed cost is higher than that in China, that is, more than XX% of the total fulfillment cost. Fixed cost is mainly about rental. So you could guess the most effective cost down actions. The more we optimize the capacity, the less space we use, the lower cost we will get.