Running head: CAPSIM 1 CAPSIM 7 Capsim Case Study Student’s Name Institutional Affiliation Capsim Case Study Optimizing Limited Resources to Meet Demand The first step towards optimization of limited resources to meet the growing customer demand is to employ a cost-leadership strategy. Cost leadership strategies seek to gain a competitive edge over rivals by minimizing production costs through effective resource utilization to a level below the costs of rivals. In doing so the company is able to sell its products at low prices and still maximize profit (Griffin, 2013). The task of optimizing resources to meet growing demands can also be attained by developing operational excellence. Improving operational efficiency makes it possible to execute tasks in a more effective and resource-sensitive way. This can be done through de-layering of the organization, and increasing management spans of control (Hobbs, 2011).  Other strategies include deriving benefits form strategic sourcing and using technology to support business processes. Process excellence seeks to optimize the production processes to attain greater efficiency and effectiveness through the utilization of strategies such as lean and six sigma models. Spans and layers increase direct reporting and minimize management layers in order to reduce management overhead and flatten the organization. Further, the effective supply chain models enhance the efficiency of the company’s direct and indirect material spending (Hobbs, 2011).  Using digital technology helps to evaluate the current processes, consumer channels, and partner interactions for opportunities to utilize technology in order to automate manual work and replace manual interactions with digital ones. Maximum resource utilization requires efficient production processes. For instance, the processes should be balanced to ensure that all tasks are completed in a timely and speedy fashion (Hobbs, 2011).  There is also the need to physically locate machines and processes adjacent to each other in order to encourage efficient flow of products from one labor machine or employee to another with minimal motion so time is not wasted by moving products from one process to the next. The physical linking of resources is an important feature of producing products and the result can be superior organizational performance (Hobbs, 2011).  By optimizing resources that have been balanced, even different processes can generate products at the same rate. Special-order products can also be manufactured in the customer-quoted lead time even with extra value-added time needed for completing any specialized work content. Furthermore, timely marketing is important. Therefore, production prototypes should be placed in the hands of customers at the earliest possible timeframe (Hobbs, 2011).  The formal feedback loop practices can also be embraced to gather information from the field. Why Hiring More Employees is not Advisable The company shou ...

1. Running head: CAPSIM 1
CAPSIM 7
Capsim Case Study
Student’s Name
Institutional Affiliation
Capsim Case Study
Optimizing Limited Resources to Meet Demand
The first step towards optimization of limited resources to meet
the growing customer demand is to employ a cost-leadership
strategy. Cost leadership strategies seek to gain a competitive
edge over rivals by minimizing production costs through
effective resource utilization to a level below the costs of
rivals. In doing so the company is able to sell its products at
low prices and still maximize profit (Griffin, 2013). The task of
optimizing resources to meet growing demands can also be
attained by developing operational excellence. Improving
operational efficiency makes it possible to execute tasks in a
more effective and resource-sensitive way. This can be done
through de-layering of the organization, and increasing
management spans of control (Hobbs, 2011). Other strategies
include deriving benefits form strategic sourcing and using
technology to support business processes. Process excellence
seeks to optimize the production processes to attain greater
efficiency and effectiveness through the utilization of strategies

2. such as lean and six sigma models. Spans and layers increase
direct reporting and minimize management layers in order to
reduce management overhead and flatten the organization.
Further, the effective supply chain models enhance the
efficiency of the company’s direct and indirect material
spending (Hobbs, 2011). Using digital technology helps to
evaluate the current processes, consumer channels, and partner
interactions for opportunities to utilize technology in order to
automate manual work and replace manual interactions with
digital ones.
Maximum resource utilization requires efficient production
processes. For instance, the processes should be balanced to
ensure that all tasks are completed in a timely and speedy
fashion (Hobbs, 2011). There is also the need to physically
locate machines and processes adjacent to each other in order to
encourage efficient flow of products from one labor machine or
employee to another with minimal motion so time is not wasted
by moving products from one process to the next. The physical
linking of resources is an important feature of producing
products and the result can be superior organizational
performance (Hobbs, 2011). By optimizing resources that have
been balanced, even different processes can generate products at
the same rate. Special-order products can also be manufactured
in the customer-quoted lead time even with extra value-added
time needed for completing any specialized work content.
Furthermore, timely marketing is important. Therefore,
production prototypes should be placed in the hands of
customers at the earliest possible timeframe (Hobbs, 2011).
The formal feedback loop practices can also be embraced to
gather information from the field.
Why Hiring More Employees is not Advisable
The company should recognize that increasing the number of
employees in order to maximize production capacity is not a
wise decision. Hiring additional labor normally results in higher
costs for the HR department and for training and mentoring
(Collier & Evans, 2007). This is particularly true for the motor

3. vehicle manufacturing industry in which suspending the
workforce levels is never a feasible alternative. Increasing
employees also means an increase in labor costs and wage and
salary costs (Collier & Evans, 2007). However, there are other
less obvious disadvantages of increasing the number of
employees. For instance, the organization is bound to take time
and effort to acculturate new employees into the company.
There will also be administrative and personnel management
challenges and complexities that come with a high number of
employees (Collier & Evans, 2007). Another issue that the
company should take into consideration is the fact that hiring
more employees might result in a situation in which the
organization becomes subject to additional government
regulations. For instance, once a business hits a threshold of 25
percent employees, it might become subject to Title VII of the
Civil Rights Act, which places legal constraints on the
employment practices of the business, and requires more
paperwork to meet the federal reporting standards (Collier &
Evans, 2007). In the end, inefficiencies might increase,
resulting in poor performance and low productivity.
Why Forced Overtime should not be Utilized
While forced overtime is commonly utilized as a tool to
maximize productivity in order to meet the growing market
demand for products, it can be counterproductive to this goal.
Top on the list of the company’s mission is to ensure that there
is prudent utilization of financial resources through significant
reductions in costs. In normal situations, employees who
participate in overtime programs are often paid a higher hourly
rate versus their normal rate of pay for regular hours worked.
This cuts into all the additional profits that the company has
been receiving from increments in product and service outputs.
Mandatory overtime also results in employee burnout. This is
particularly true when it does not come out of their willingness
and desire to assist. When workers do not have a choice on how
many hours they work, they can feel demoralized and
dissatisfied with the organization. This might increase the

4. organization’s turnover rate, thereby crippling the company’s
overall goal of meeting the constantly rising demand for its
products. In addition, it might result in the loss of its most
highly talented, skilled, and experienced workers, thereby
increasing costs of regular recruitments and the training of new
talents. Further, the organization’s employees will be physically
and mentally fatigued during ordinary hours, thus reducing their
productivity.
Increased Investment in Automation
Although Tesla’s goal is to boost production from 50,000 to
500,000 cars yearly, the organization has not invested heavily in
automation. Today, Tesla has a robotics system that has the
capacity to produce 50,000 cars. Therefore, the company should
explore the significance of automation systems as a way to
speed up production and maximize profits (Hirano, 2016).
Indeed, automation can be an important tool in reducing
employee burnout, increasing output, and reducing operational
costs and time. Automated systems also support just-in-time
(JIT) manufacturing, which is a management model that is
employed in manufacturing that entails having the right items of
the right quality and quantity in the right place and at the right
time. The effective utilization of automated systems supports
JIT manufacturing, resulting in improved quality, productivity,
and efficiency. JIT manufacturing can be described as
comprising of three major elements: people, plants, and
automated systems, which must be incorporated into an
organization’s culture in order to offer a structure for focused
improvement (Hirano, 2016). Most importantly, automation can
be used by the organization to guarantee mass production and
improves service delivery to customers.
Need for Additional Production Equipment
The company requires additional production equipment in order
for it to increase output and the number of products that it
distributes to customers every year. Technological equipment
can guarantee its goal of generating products at a rate of ten
times its current pace. Additional equipment is required by the

5. organization as tools to increase mass production. The
equipment needed is machinery that can make the creation and
development of tangible physical products possible for the
business. This might require investments in technologies, and
engaging in innovative research and development initiatives.
The equipment should be developed with state of the art
technological concepts that have more elaborate operations that
make use of machinery and assembly lines. The task of
selecting a production scale model within an organization’s
capital implies that it is important to have this equipment.
Although the purchase and development of highly efficient
equipment can prove to be expensive in the short-term, it will
generate the economies of scale that the company desires
through mass production.
Ensuring Adequate Capacity
Adequate capacity can be attained through aggregate
production planning. This is particularly important in the
medium-term when the focus in capacity planning moves to the
balancing of the available capacity with demand. During this
period, the organization has opportunities for limited capacity
augmentation through increment use of existing capacity
through overtime and the introduction of an additional shift. In
addition, by contracting part of the work to external vendors,
the capacity inadequacies can be dealt with on a temporary
basis (Mahadevan, 2015). It is also tenable for the company to
modify the demand by shifting it from a peak period to a
nonpeak period. Various strategies are often present for
capacity planning with the use of these options. In particular,
these methods are referred to as aggregate production planning,
and can be used to realize adequate capacity. Capacity planning
in the short-term is often somewhat different. During this
period, the available capacity is often fixed (Mahadevan,
2015). As a result, the capacity program is restricted to
making effective utilization of available capacity and ensuring
that unforeseen developments such as equipment breakdowns
and poor planning methods do not result in keeping the capacity

6. idle.
There are various strategies that the organization can employ to
ensure sufficient capacity in production. For instance, the
location of its facilities should be one of the major factors that
Tesla should take into account when considering adequate
capacity. The task of putting up production facilities with
adequate capacity entails initial investment. In particular, the
company should take a strategically right option that needs to
be weighed against all available options. These decisions should
be sued to inform the future decisions on probable capacity
expansions plans (Mahadevan, 2015). For instance, the
company should consider issues such as the availability of raw
materials and access to the marking important decisions.
References
Collier, D. A., & Evans, J. R. (2007). Operations Management:
Goods. Services and Value
Chains, 2nd ed..Madison, OH: Thompson South-Western.
Griffin, R. W. (2013). Fundamentals of management. Boston:
Cengage Learning.
Hirano, H. (2016). JIT Implementation Manual--The Complete
Guide to Just-In-Time
Manufacturing: Volume 2--Waste and the 5S's. New York: Crc
Press.
Hobbs, D. P. (2011). Applied lean business transformation: a
complete project management
approach. New Jersey: J. Ross Publishing.
Mahadevan, B. (2015). Operations management: Theory and
practice. London: Pearson.
1Mini Case Studies
Production
Can Tesla achieve

7. economies of scale
and keep its promise?
Mini Case Studies 2
Production: Can Tesla achieve
economies of scale and keep
its promise?
With more than 350,000 pre-orders for its first mass market
car, the Tesla Model 3 Sedan, Tesla Motors will need to boost
production to 500,000 cars by 2018. That’s 10 times the
50,000 cars it produced in 2015.
The pre-sale numbers would seem extraordinary, but Tesla
has been ‘extraordinary’ from the beginning, fueled by the
vision of CEO Elon Musk and a cultural determination to
revolutionize the car industry.
Electric vehicles make a come-back
Electric vehicles were popular in the late 19th and early 20th
centuries until Henry Ford began
mass-producing gasoline-fueled cars with internal combustion
engines. It took high oil prices,
environmental concerns, and advances in battery technology in
the late 20th century to bring

8. electric cars back into the mainstream.
Now, with these changes in the market, the major car companies
including Ford, GM,
BMW, Toyota, Honda, and Nissan have released electric or
electric/gasoline hybrid cars to
accommodate for these changes. Yet these new innovations were
conservatively tied to
existing models, attempting to retrofit and revise existing
models to a newer format. On
the other hand, in 2013, Tesla, a small automotive start-up
from California, began not only
winning several design awards, but also proving a profitable
model for electric cars that might
challenge the traditional car companies. Tesla opened a new
market segment: luxury electric
cars with a longer battery life, longer range, that were designed
to excite discerning motorists
and sold through its own stores, not dealerships. It wasn’t
offering the battery version of a
gas-powered car with fewer extras, but a new sought-after trend
in upscale motoring.
Tesla making good on affordable car promise
When Tesla made its first profit in 2013, Elon Musk said his
company’s goal had always been

9. to mass-produce fully electric cars at a price affordable to the
average consumer, and would
do it “within five years.” Musk was standing by his product
life-cycle strategy – entering at the
high end where customers will pay more, then driving down
costs and building volume.
Improving battery technology leading to increase driving range
will lower costs in coming
years. Additionally, suppliers have begun demonstrating that
they can revamp their own
production and reduce the cost of parts leading to more efficient
manufacturing. Indeed, Tesla
claims it is steadily cutting the number of worker hours
necessary to build each car in lieu
3
of robotic automation and more efficient design processes.
Tesla isn’t stopping there either,
as they expand their overall capacity, by pumping money into a
Gigafactory and additional
production capacity in order to be ready to fill orders with
significantly higher volume than
before. Altogether, these factors strongly tip future balance of

10. the market in Tesla’s favor.
Challenges ahead
The traditional car making giants, however, are not sitting idly
by while Tesla muscles into
their space. Improved battery technology itself is replicable,
plus they already have experience
in mass-manufacturing. Recognizing the value of experience,
Tesla hired a long time Audi
executive to lead its vehicle production team – a departure from
the company’s practice of
hiring from the technology and energy industries.
Perhaps Tesla’s biggest advantage is the strong support it
enjoys from its investors. By mid-
2016 Tesla’s market cap was $32 billion with sales of just over
50,000 vehicles in 2015. GM’s
market cap was $50 billion, less than twice Tesla’s, and it sold
9.8 million cars. As 247wallst.
com said, “Something is wrong with this picture.”
Forbes calls Tesla’s share price “a cult-like valuation”, and
critics suggest that without
generous U.S. Government loans and subsidies that the company
has received, it may not
survive.

11. Tesla’s performance in the next few years will prove whether
the beliefs of the Tesla faithful
are well founded, or whether the challenge of economies of
scale for mass market vehicles
was too tough for the new market entrant.
Musk was standing by his product life-cycle
strategy – entering at the high end where
customers will pay more, then driving down costs
and building volume.