Certified Production & Operations Manager (POM) Practice Exam

Which strategic decision concerns how much of a product to produce?

1. Quality management

2. Process design

3. Capacity planning

4. Location strategy

The correct answer is: Capacity planning

Capacity planning is fundamentally concerned with determining how much of a product to produce in order to meet customer demand effectively. This strategic decision is critical for balancing production costs with service levels. It involves evaluating current and future production capabilities, considering factors like production rates, workforce size, and equipment availability. Proper capacity planning ensures that an organization can meet demand without overproducing, which can lead to excess inventory and increased holding costs, or underproducing, which may result in lost sales and dissatisfied customers. By aligning production capacity with expected demand, businesses can optimize resource allocation and enhance operational efficiency. Other strategic decisions, while significant, address different aspects of operations management. Quality management focuses on maintaining the standards of the product and ensuring that processes are in place to achieve these standards. Process design impacts the workflow and the methods used to produce goods, influencing efficiency and effectiveness but not directly answering how much to produce. Location strategy pertains to where business operations will take place and is more about logistical considerations than production volume.