Does Protective Capacity Assist Managers in Competing Along Time-Based Dimensions?

The article presents results of a computer simulation experiment which investigated the use of protective capacity as a means to reduce production cycle times and inventory holdings for a production line. In the 1980s, quality was the primary focus for competition in many businesses. Many authors believe that in the 1990s, the primary focus will shift to time- based factors. Prior to the use of Just-in-Time (JIT) systems, the principal method for assuring rapid delivery of products was to use inventory. Therefore, managers pursuing the JIT approach reduce inventory holdings, which in turn exposes operating problems they wish to eliminate. Furthermore, the JIT system often requires a lengthy implementation period. One reason managers opera ting in JIT environments use protective capacity is to avoid !the need for extra inventory. By allowing some extra capacity, the inventory required to maintain the output of a line is reduced. Another reason for use is the desire to quickly accommodate customer demand changes. Goldratt, a well-known economist took a very strong stance on the necessity of protective capacity.