Ch 5 Flashcards
(24 cards)
The capability of a system to perform to its expected function; the upper limit or ceiling on the load that an operating unit can handle
Capacity
Achieve a match between the long-term supply capabilities of an organization and the predicted level of long-term demand
This is the goal of strategic planning
Operating costs that are too high
Overcapacity
Strained resources and possible loss of customers
Under capacity
Maximum output rate or service capacity an operation, process, or facility is designed for (assumes no down time)
Design capacity
Design capacity minus allowances such as personal time, maintenance, and scrap (planned down time)
Effective capacity/ demonstrated capacity
Rate of output actually achieved - cannot exceed effective capacity
Actual output
Why is measuring capacity in dollars problematic?
- Inflation/deflation
- currency exchange
Why can measuring capacity in “units produced” be problematic?
One unit may be more complex to manufacture than another
What is the common denominator in most industries?
Standard hours
What is the formula for efficiency?
Actual/Effective
What is the formula for utilization?
Actual/Design
What are strategies typcially based on predictions about?
Long-term demand patterns, technological change, competitor behavior
Extra capacity used to offset demand uncertainty
Capacity cushion
What is the formula for capacity cushion?
100% - utilization
Overall level of capacity requirements. Require forecasting demand over a time horizon and converting those needs into capacity requirements
Long-term considerations
Probable variations in capacity requirements. Less concerned with cycles and trends than with seasonal variations and other variations from average
Short-term considerations
What are three problems of service capacity planning?
1) The need to be near customers
2) The inability to store services
3) The degree of demand volatility
Strategies used to offset capacity limitations and that are intended to achieve a closer match between supply and demand
Service demand management strategies
An operation in a sequence of operations whose capacity is lower than that of the other operations; weakest link; capacity constraint
Bottleneck operations
If output rate is less than the optimal level, increasing the output rate results in decreasing average per unit costs
Economies of scale
If the output rate is more than the optimal level, increasing the output rate results in increasing average per unit costs
Diseconomies of scale
Something that limits the performance of a process or system in achieving is goals
Constraint
The volume of output at which total cost and total revenue are equal
Break-Even Point (BEP)
