Final answer:
Capacity is considered perishable because any unused potential to produce services or goods within a certain timeframe is lost, much like an empty airline seat after departure. It's essential for operations managers to maximize the use of resources due to scarcity but also to maintain a balance to avoid overutilization and maintain quality. Opportunity cost plays a key role in decisions regarding capacity management.
Step-by-step explanation:
When we say 'capacity is like a perishable article,' it primarily means that the potential to produce goods or services in a given time frame can be wasted if not utilized. Operations managers understand this as a crucial concept because any unused capacity represents a lost opportunity to generate revenue. It is akin to an airline seat; once the flight departs, the seat's capacity to generate income for that flight is lost if it remains empty. Scarcity plays a significant role here because resources are limited, and maximizing their use is essential for efficiency.
Some managers adhere to the philosophy that all resources should be fully utilized due to the perishability of capacity. While it's essential to strive for high levels of resource utilization to avoid waste, it's also crucial to recognize the need for flexibility and balance. Overutilization can lead to employee burnout, degradation of equipment, and potentially a decrease in quality. Therefore, capacity management should involve a strategic approach that balances resource utilization with the need for quality, flexibility, and sustainable operations.
Lastly, the concept of opportunity cost ties into decisions about capacity. Every choice made in the use of capacity involves relinquishing the possibility of an alternative use of those resources which might have been profitable under different circumstances.