Certified Production & Operations Manager (POM) Practice Exam

Do cost and competitive priorities increase effective capacities?

1. True

2. False

The correct answer is: False

The assertion that cost and competitive priorities increase effective capacities is not accurate. Effective capacity refers to the maximum output that can be achieved under normal working conditions while considering constraints such as maintenance, quality, and workforce availability. While cost and competitive priorities can influence productivity and decision-making, they do not directly increase the inherent capacity of a production system. Effective capacities are often constrained by factors such as equipment limitations, employee productivity, and system bottlenecks. Focus on cost management or competitive positioning may lead to strategies that optimize existing resources rather than increase effective capacity. For instance, pursuing a low-cost strategy might involve reducing costs through layoffs or cuts to maintenance, potentially leading to reduced capacity if not managed carefully. While organizations strive to align their operational priorities with cost efficiency and competitiveness, these priorities must be harmonized with a sustainable capacity planning approach. Effective capacity can be improved through investments in new technology, workforce training, and better process management, rather than relying solely on prioritizing cost and competition.