Strategic capacity planning is a great process design tool that allows an organization to evaluate its extended supply chain and its cost-effectiveness, which can drive its capital expenditures and strategies to build a world-class supply chain to compete against other organizations (Citrin, n. d.). Riordan Manufacturing Inc. does have a capacity plan to support both the design capacity and the supply chain for the organization. However, it is important that the company evaluates its labor related costs in China, a probable relocation to Shanghai, increased costs of international trade and transportation, and raw material costs to ensure efficiency and cost-effectiveness of the process design and supply chain.
In an effort to make the new location in China profitable, Riordan needs a long-term strategic capacity plan that would help the company determine the capacity level of facilities, equipment, and labor force size (University of Phoenix, 2004). An imbalance of capacity can result in low return on assets, morale damaging layoffs, expensive facility closures, lost sales, and eroding customer loyalty. In this case, the shipment of the raw materials and finished products from Hangzhou Port to Shanghai Port to their final destinations could be costly. Riordan’s human resource’s information system has been ineffective for the current generation of technology systems needed to conduct operations. An interlinked information system would be a better choice for Riordan to handle the needs of the human resource department. The new system would facilitate the outsourcing of human resource’s processes that would help Riordan focus on production of goods.
Citrin, S. (n. d. ). Capacity Planning: A Tactical Decision with Strategic Impact. Retrieved from http://www.insight-mss.com/_whitepapers/?file=CapacityArticle020703.htm University of Phoenix. (2004). Riordan Manufacturing Virtual Organization [Computer Software]. Retrieved from University of Phoenix, Simulation, OPS571 – Operations Management website.