Table of Contents

1. Problem Statement: Capacity management and the use of variable labour .......................................... 1
2. Literature Review.................................................................................................................................. 2
a. From the employer’s perspective ...................................................................................................... 3
b. From the employee’s perspective ..................................................................................................... 3
c. From perspective of customers ......................................................................................................... 4
4. Evaluation of the situation developing over the next five years ........................................................... 4
REFERENCES ............................................................................................................................................. 5

1. Problem Statement: Capacity management and the use of variable labour

The concept of capacity management is interesting and so prevalent, yet it has not got much
attention so far. It is an anonymous face that everyday walks among billions of people whose lives
involve doing something productive. The term capacity covers a wide range of area and relevant
participants involved from the highest-level executives in organizations and governments to
starving children without foods and clothes in third world countries. Thanks to capacity and the
effective utilization of capacity, human beings can build cars, govern people, and feed children
(Koontz, 2010).. There are numerous definitions of capacity, but only a few of them are able to
catch the true essence of what capacity is. Capacity is not only about the bandwidth of a network
or the amount of product that can be made on a machine. When looking at a company, capacity is
practically built up all of the organization’s resources that it uses to perform work. Buildings
provide the space in which we work. People provide the ability to think, manage, and perform
much of the work that is done in the firm. Equipment and information technology provide the tools
to use on a daily basis to create and use products, information, and data. The materials that an
enterprise possesses provide the capacity to create products. The money to which a firm has access
provides the ability to invest in the ownership, creation, and management of its assets. These basic
components, called capacity entities, are the fundamental units of capacity and are combined to
establish operations. A machine may require materials and labor for it to play out its tasks. Multiple
operations are integrated into the processes that the company uses to create the work products
necessary to function daily. An organization will, therefore, use its space such as offices,
production facilities, warehouses, and in other ways to housework that will be done. Managing
capacity in an organization is evaluated as one of the most undervalued, and, consequently badly
performed, activities in managing organization. The capacity of an organization embodies its
power to carry out work. This capacity demonstrates itself in various ways, including space, labor,
equipment, technology, and materials. We are likely to underestimate the significance of capacity
management because we do not fully understand what capacity management actually means with

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regard to its entirety. Capacity management is regarded as managing the amount of what the
organization has and uses to carry out work. Many organizations today face with a lot of big
problem concerning management. Managing labor is definitely one of such biggest issues.
Managing labour deals with getting work completed.The term labor capacity is used to indicate
the amount of labor employed by an organization to perform related tasks. From another
perspective, there is no doubt that labor is regarded as a resource which is very significant in any
organization. Additionally, there are different ways to manage labor capacity based on the scope
of time. Concerning the situation of UK, in spite of the fact that zero-hour contracts recently have
made up a small proportion with less than 5% of the other kinds of contract in the country, they
remain controversial in term of managing (CIPD, policy report 2015). Indeed, one important factor
that contributes to make the current issue can e grounded on the limited quality and coverage of
the available data. The fact is that it is much of challenge to refute claims made about zero-hours
contracts from relevant parties on all sides of the argument if the relevant evidence is found to be
incomplete or inconsistent. This essay aims at bringing about an inclusive picture on the problems
associated with managing capacity in term of labour in UK

2. Literature Review

This section provides a review of studies on capacity management from the perspective of high-
tech industry sector. Capacity simply is related to getting the processing abilities and limitations
evaluated. Although capacity management has been basically organized sector of the mainframe
operations since a long time, it was just recently that this area has been paid fully attention and
people started to actively involve it in the workstation arenas. In a study of Jack & Power (2009),
the reseacher affirmed that the necessity to collaborate with an immensely changing demand with
recent available capacity is evidently one of the most critical challenges that most senior managers
will have to deal with in many industries. In high-tech industry, for example, semiconductor,
consumer electronics, media communications, and pharmaceutical, an organization's capacity to
manage capacity is apparently the most basic element for its achievement in a long period of time.

This literature review utilizes total planning for the collection and allocation of resources to fulfill
customer’s requirement through a specific time period total. The short product lifecycles in high
tech make such an approach very suitable. A couple of works in this classification explore capacity
growth. Bradley and Arntzen (1999), make a notice that organizations accomplish better money
related outcomes by enhancing their ability and generation or stock choices at the same time. They
show their outcome utilizing a contextual analysis carried out at an electronic firm. With the
expanding pace of mechanical advancement and the expanding expense of manufacturing
equipment, numerous organization are indecisive to react to economic cycles by changing their
own resource limit. Consequently, capacity outsourcing has turned into a integral investment of
capacity (Mason et al., 2002). In the paper of Atamturk and Hochbaum (2001), a four-way
approach to make balance among capacity, production, subcontracting, and inventory levels over
a finite horizon was proposed on capacity and choices of goods obtained from by contract from an
outside supplier . Kouvelis and Milner (2002), on the other hand, recommend two-organize supply
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chains, and they the effect of supply or demand vulnerability was examined on capacity and
outsourcing choices. They withdrew a conclusion that greater supply uncertainty encourages
verticle integration, because the OEMs have forces to make interests in their suppliers. This is to
ensure that the supply will be reliable and not be interrupted unexpectedly

Taylor and Plambeck (2003) consider 'rational contracts' between a high tech firm and a provider.
The firm occasionally presents innovative products, and the supplier needs to put resources into
ability to deliver components for the product. Rational (incomplete) contracts are required when
capacity investment must occur before the new product is completely characterized. In orther
words, relational contracts determine informal agreements between parties and how they will
perform those agreements. Within this setting, the high-tech firm may guarantee to buy at a cost
of the capacity so that the supplier has motivation to expand capacity investment.

3. The benefits of using zero hours and short hours contracts

a. From the employer’s perspective

Zero-hour contracts are attractive propositions for employers because they get many benefits from
this kind of contracts. To begin with, zero-hour contracts enable an employer to amplify the
flexibility of their workforce to change more effectively in accordance with variation in demand.
This is in particular an appealing proposition for employers during the decline in economic. In
case an employer has access to the groups labour easily through a growth on zero-hours contracts,
then levels among staffs in term of labour devision can be modified to better match the demand.
Consequently, expenses on bills of salary can be diminished. As a result, zero-hours contracts
enable employers to shift the burden of differing demand onto the workforce. This is easier in
today's flexible labour market where employment opportunities are limitted and employers can
recruit without much effort. It is additionally simpler in low-paid, low-skilled segments of the
economy in which employers are regularly (however not continually) competing on cost and price
as opposed to on service quality.

Secondly, zero-hours contracts enable employers to effectively manage risk. Utilizing an extent of
one's workforce on a zero-hours contract can, for instance, enable a business to adjust to servere
fluctuations in demand, by pushing down substantial quantities of staff at a stroke.

Thirdly, the zero-hour or short hour contracts enable employers to diminish the starting expenses
related with selecting and training staff. Having a substantial pool of available sources in term of
trained workers implies that the growth in demand can be suited without the need to make contract
and train at additional cost or to pay fees to an office.

b. From the employee’s perspective

Short-hour contracts can work successfully as this kind of contract fulfill and are not constrained
by any legislation, which make it mandatory to work a measure of 50 hours a week then receive a
payment (Gillies, 2013).The zero-hour or short hour contracts characterized by its adaptability

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enables representatives to settle on their own choices, if pertinent of when they would begin their
work. Besides, zero-hour contracts enabled representatives to pick up an expansion wage where
they could be adaptable on chosing reasonable hours. Bloisi (2007) expressed that adaptability in
offical hours, in a long perid of time, can possitively influence on job satisfaction and lessen
employees’ absence needs. Consequently, this could spur the employees to work harder and they
work with a attitude of the appreciation of the adaptability being advertised. Another advantage of
zero-hour and short-hour contracts was that the employees did not have a set tax rate. The worker
could acquire in a few months where they would not be taxed on their salary. When relating back
to a total state, workers can't settle on these decisions as these are directed by the legislature or the
government (Pennycook et al, 2013)

c. From perspective of customers

Althought the zero or short hour contracts make a 'win-win' circumstance, in which workers get
stability regard to professional and money related aspects, and the employers are able to manage
costs and explore the employers' needs on progressing, these sorts of agreements may sometimes
bring about unhappiness or dissatisfactions of customers. This is on account of the fact that those
agreements are regularly connected with the poor customer benefits due to a change of qualified
staff inside an organization. On the one hand, in a few circumstances, there is no exception that
the customers are likley to regard the workers with poorly managed one. On the other hand, in a
few other occurrences, as with all types of employment, customers may view workers as being
ineffectively managed. Consequently, there is an expectation of customers regarding obvious
clearness around the nature of this kind of contracts and how they are supposed to work.

4. Evaluation of the situation developing over the next five years

From my own perspective, a zero hours contract can still be an important tool utilized positively
by numerous organizations. In this way, with the following five years, there is still space for those
sorts of agreement to grow with prosperity. Also, it is not likely of the conviction that the UK
government will have the capacity to successful stop the utilization of zero-hour or short hour
contracts. Organizations, especially, in high tech segment will surely continue utilizing zero and
short hour contract as a group, or as a fall-back.

On the one hand, the UK is currently experiencing a downturn in its economic. This will be a
motivation and the main driver of an increased use of zero-hours contracts. With an uncertain
demand and a vague pace of economic recovery, many private sector employers tend to become
more reliant on zero-hours contracts to manage their business during the economic downturn.
What is more, more and more pressures are put on public with monetary burden of have also forced
public sector employers look for approaches to decrease expenses. In the process of eliminating
the guaranteed block volumes of paid care to suppliers, the use of zero-hours contracts is
considered as a means to manage risk. As a result there is more obvious evidence to suggest that
the use of such agreements is significant in making sure that a high percentage of all high-tech

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workers are now employed on zerohours contracts (Bessa et all, 2013). It is is pretty easy to see
why a great number of employers are turning to use zero-hours or short hours contracts, and this
will likely last with 5 years or more, particularly in the world hard economic today. While zero
hour contracts gain prominent characterized by its maximum flexibility, employers using those
contacts are allowed to more successfully adjust to a great variation. This is helpful in demanding,
managing risk, reducing the money for recruitment and training. What is more, in some situations,
zero hour contracts help avoid particular employment obligations. Therefore, this kind of contract
will be continued to be used in the next five years or more.

REFERENCES
- Atamturk, A. and Hochbaun D.S, (2001) “Capacity acquisition, subcontracting, and lot
sizing,” Management Science, Vol. 47, No. 8, pp. 1081–1100.
- Bessa, Forde, Moore and Stuart (2013), The National Minimum Wage, earnings and hours
in the domiciliary care sector, Low Pay Commission
- Bloisi, W. (2007). An Introduction to Human Resource Management. Berkshire: McGraw-
Hill Education
- Bradley, J.R. and B.C. Arntzen, (1997), “The simultaneous planning of production,
capacity and inventory in seasonal demand environments,” Operations Research, Vol. 47,
No. 6, pp. 795–806
- Gillies, A, J. (2013). ‘Zero-hour contracts’, ‘labour flexibility’ and other euphemisms of
the neoliberal agenda. [ONLINE]Available at:
https://allanjjgillies.wordpress.com/2013/08/07/zero-hour-contracts-labour-flexibility-
and-othereuphemisms-of-the-neoliberal-agenda/ [Accessed 25 April 2017]
- Jack, E. P., & Powers, T. L. (2009). A review and synthesis of demand management,
capacity management and performance in health-care services. International Journal Of
Management Reviews, Vol 11, No 2, pp 149-174
- Kouvelis, P. and J.M. Milner, (2002), “Supply chain capacity and outsourcing decisions:
The dynamic interplay of demand and supply uncertainty,” IIE Transactions, Vol. 34, No.
8, pp. 717–728
- Koontz, H. (2010). Essentials of Management: An International Perspective. 8th edition.
New Delhi: Tata McGraw-Hill
- Mason, S.J., M.H. Cole, B.T. Ulrey, and L. Yan, (2002), “Improving electronics
manufacturing supply chain aqility through outsourcing,” J. of Physical Dist. and Log.
Man., Vol. 32, No. 7, pp. 610–620.
- Pennycook, M. Cory. G and. Alakeson, V. (2013). A Matter of Time: The rise of zero-
hours contracts. [ONLINE] Available at: http://www.resolutionfoundation.org/wp-

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 content/uploads/2014/08/A_Matter_of_Time__The_rise_of_zerohours_contracts_final_1.
pdf [Accessed 25 April 2017].
- Taylor, T.A. and Plambeck, E.L. (2003), “Supply chain relationships and contracts: The
impact of repeated interactions on capacity investment and procurement,” Working paper,
Stanford University, Stanford, CA.