Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
1

How to best structure capacity cases?

Hi experts,

I recently have encounted 2 cases regarding capacity that I thought the usual structure could not answer well.

1) McKinsey, chocolate factory wants to increase capacity.

2) McKinsey. burrito cart considering opening a second burrito cart.

I was not satisfied with Victor Cheng's Supply, Demand and cost of expansion framework.

I was thinking about considering current capacity, market(demand, competition), cost of expansion, benefits of expansion(financial & non-financial), and risks.

I would love to hear your thoughts!

Thanks! :)

Hi experts,

I recently have encounted 2 cases regarding capacity that I thought the usual structure could not answer well.

1) McKinsey, chocolate factory wants to increase capacity.

2) McKinsey. burrito cart considering opening a second burrito cart.

I was not satisfied with Victor Cheng's Supply, Demand and cost of expansion framework.

I was thinking about considering current capacity, market(demand, competition), cost of expansion, benefits of expansion(financial & non-financial), and risks.

I would love to hear your thoughts!

Thanks! :)

1 answer

  • Upvotes
  • Date ascending
  • Date descending
Best Answer

Before capacity expansion I would consider comparing demand versus our bottleneck, whereby the focus would be to improve that slowest bottleneck (by e.g. installing a quality assurance control point before the bottleneck).

The second option to consider would be to share the workload with another machine within the same plant, or with another plant.

The third option to consider would be to see whether the customer (demand) can accept deliveries in smaller batches, that fits within the output that we can realize.

The last option would be to indeed increase capacity. I think here it's a straightforward cost-benefit analysis, where you take things like distance to customer (for transportation cost if it's a new plant) etc.

Before capacity expansion I would consider comparing demand versus our bottleneck, whereby the focus would be to improve that slowest bottleneck (by e.g. installing a quality assurance control point before the bottleneck).

The second option to consider would be to share the workload with another machine within the same plant, or with another plant.

The third option to consider would be to see whether the customer (demand) can accept deliveries in smaller batches, that fits within the output that we can realize.

The last option would be to indeed increase capacity. I think here it's a straightforward cost-benefit analysis, where you take things like distance to customer (for transportation cost if it's a new plant) etc.

Related case(s)

McKinsey Questions

Solved 39.4k times
McKinsey Questions Tell me of a situation where you had an opinion and no one seemed to agree with you. What was your goal when you decided to join university / work / clubs / a sports team? Did you have a goal that you were not able to reach? What did you do? What do you want to be remembered for and how are you achieving it? What is your typical way of dealing with conflict?
4.5 5 863
| Rating: (4.5 / 5.0) |
Difficulty: Intermediate | Style: Fit Interview | Topics: Personal fit

Tell me of a situation where you had an opinion and no one seemed to agree with you. What was your goal when you decided to join university / work / clubs / a sports team? Did you have a goal that you were not able to reach? What did you do? What do you want to be remembered for and how are you ... Open whole case

Well Being health care

Solved 32.4k times
Well Being health care Your client is Well Being (WB), a private healthcare company based in Germany.   Well Being operates 10 hospitals in Germany (in comparison to 1,000 public hospitals). These hospitals are normally half the size of the public ones and are not providing Accident and Emergency (ER). Revenue comes from patients claiming their own private insurance or paying by cash. In 2012 Well Being had revenues of €100 m (<1% share in the market) and an operating profit of €0.5 m. Their main competitor is the governmental national health care (NHC). NHC has asked to outsource some of their patients to WB and WB wants our advice on this offer.
4.3 5 1972
| Rating: (4.3 / 5.0) |

Your client is Well Being (WB), a private healthcare company based in Germany. Well Being operates 10 hospitals in Germany (in comparison to 1,000 public hospitals). These hospitals are normally half the size of the public ones and are not providing Accident and Emergency (ER). Revenue comes fro ... Open whole case

MBB Final Round Case - Smart Education

Solved 16.8k times
MBB Final Round Case - Smart Education Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvantaged areas. The client is considering starting operations for its services in the Chicago area. They hired us to understand if that makes sense. Due to the nonprofit regulation, SmartBridge should operate on its own in the market, without any partnership. How would you help our client?
4.6 5 594
| Rating: (4.6 / 5.0)

Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvant ... Open whole case

Bookl

Solved 12.5k times
Bookl Your client, Bookl, is a publishing company with stable sales in terms of both volume and price. Its distribution warehouse is reaching maximum capacity. This has lowered its service quality. The head of Bookl’s distribution department wants to extend the warehouse. The extension will cost $15 m and will NOT increase the company’s revenues. The CEO wants your company to determine whether the investment is necessary. 
4.1 5 377
| Rating: (4.1 / 5.0) |

Your client, Bookl, is a publishing company with stable sales in terms of both volume and price. Its distribution warehouse is reaching maximum capacity. This has lowered its service quality. The head of Bookl’s distribution department wants to extend the warehouse. The extension will cost $15 m a ... Open whole case

Sandwich Bags

Solved 9.9k times
Sandwich Bags Your client is a very small consumer packaging company. One of their product lines is plastic bags that are designed to store food. They currently have one production machine dedicated to this product. Since product demand currently exceeds your client’s production capacity, they want you to answer two key questions: 1. How can they best utilize their current bag capacity? 2. Should they invest in a new bag machine?
3.9 5 2747
| Rating: (3.9 / 5.0)

Your client is a very small consumer packaging company. One of their product lines is plastic bags that are designed to store food. They currently have one production machine dedicated to this product. Since product demand currently exceeds your client’s production capacity, they want you to answer ... Open whole case