According to an article authored by Yayla-Kll et al., multi-product firms account for 91 per cent of

According to an article authored by Yayla-Küllü et al., multi-product firms account for 91 per cent of the output in US manufacturing and they often make short- to medium-term adjustments in their product-lines. For many of these product-line decisions, supply capacity constraints must be taken into account when making product-line decisions. The authors provide the following examples of supply capacity constraints. Many furniture manufacturers produce custom and standard furniture using the same fixed capacity. In another example, the available capacity of a flexible machine (machining time) is allocated between high-and low-quality products where a higher-quality product requires slower machining speeds thereby taking a longer time to produce. The authors also provide an example of a firm in Finland that produces both mass-produced and customtailored suits in its factory where a custom-tailored suit uses more of the available limited factory time compared with a mass-produced suit. The cruise line industry is another example where differentiated product lines are the norm. They provide a wide range of staterooms ranging from small rooms to large luxurious suites. In this industry, supply capacity is limited because it takes time to refurbish existing ships or build new ships. In another example, airlines offer differentiated products such as economy, business and first-class seats. For airlines, changing the product mix by changing the seating configuration in an aircraft is a common short- to medium-term solution to increasing profitability without making investments for new aircrafts.
In all of the above-mentioned examples ignoring supply capacity while deciding the product line can be sub-optimal. The authors point out that many firms often do not determine product-line decisions taking supply capacity constraints into account and provide evidence that shows when resources are limited firms’ product lines should be determined by considering the margin per unit capacity.
Questions:
1 Provide examples of firms in the retail and merchandising sectors where supply capacity constraints should be taken into account when making product mix decisions.
2 What are the scarce/limiting factors that apply in the examples cited above?