Production Smoothing And Organizational Design

Cover Production Smoothing And Organizational Design
Production Smoothing And Organizational Design
Jay R Galbraith
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They designed their mines, however, to produce only the minimum amount of coal as determined by the seasonal and business cycle fluctuations. In Figure 1, the sales pattern shows a seasonal variation. The firm faced with this pattern would design its Sales/Mo, Designed Capacity Time Figure 1 Productive Capacity Designed to Meet Minimum Sales Requirements capacity as shown and purchase from others an amount indicated by the shaded portion. The result is that the integrated firm can acquire equip...ment specific to rates of output and guarantee continuous utilization of capacity. The large non-vertically integrated coal firms have reacted - 16 - similarly. The demand is not directly controlled by the firm in this case. The coal companies have acquired twenty year requirements contracts from public utilities, However, this differs from vertical integration only in legal definition.
The problem with using subcontracting or outside purchases to meet peak demands was mentioned earlier in the paper.


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