Essay About Extra Production Capacity And New Factory

Genetech Han
Recommendation 1The building of CCP3 : Estimate plant building process 6 years (cover all the process). The case provided that we need at least 5 years to pass all the process. On the other hand, it is too risky to estimate that our new factory will be able finish exactly 5 years and the opportunity cost for not meeting the demand is high. We are trying to avoid our capacity and demand gap to be too close to each other. We also need extra production capacity to support the stability of the company in case unpredictable event happens. The new CCP3 will consists of 2 production lines, each line consists of 4 tanks of 25,000. Total capacity will be 200,000 liters.  In which will give our factory more competitive advantage, flexibility of production adjustment. The new facility will be mainly produce high volumes product for example, Avastin, Rituxan. For the our smaller facility such as Porrino, we will optimize the usage of this factory to be only for those drugs with lower demand. As our company is based on the innovations of new medicine, we need to ensure that we have enough flexibility to adapt our production line to suits the future market opportunities, production of new products and also to have enough flexibility in our production capacity if we have to upgrade a certain production line with better technology. CCP3 will help us to satisfy the hugh variation in the capacity requirements in the future.[pic 1]  [pic 2][pic 3]Capacity and  market demand forcast until year 2020Excess capacity : In the year 2009 we have hugh excess capacity. By terminating the contract might not be the best idea due to many reasons. Terminating the contract could cause the company to pay extra money fine to the factory. I suggest that in the year 2009 we reduce the production batches of CCP2 to be from 15 batches to be 10 batches. The following year we keep using the full capacity of our CCP2. This will allow us to reduce the excess production by app. 500kg  which will allow us to follow the standard of having the capacity over demand requirement by 25%.