What is capacity?
Capacity of an operation is the max level of value added activity over a period of time
that the process can achieve under normal operating conditions
Can be an input: number of seats at hospital
Can be an output: litres of beer/week at brewery
What is utilisation?
What is efficiency?
What is capacity planning?
Utilisation: measure of the number of hours worked by equipment
Efficiency: comparing actual output to level of output expected
Capacity planning: the task of setting the effective capacity of the operation so that it can respond to demand
What are the challenges for capacity planning?
Capacity depends on everything
Requires large investment
Measuring and valuing capacity shortfall is not obvious
Capacity investment involves planning under uncertainty
What are the capacity sizing drivers?
Safety capacity cost
What are the main factors which restrict capacity
Lost time (planned)
Lost time (unplanned)
What is the impact of reducing set up time
Smaller batch sizes are economical
Cost of setup labour is reduced
Production capacity is increased on bottlenecks
Reduce scale of potential quality problems
Explain what the
and Quality rate is.
Use these to explain what the overall equipment effectiveness is
What are the long term capacity planning strategies?
Smoothing with inventory
What are the four options for medium-term capacity planning?
Level capacity plan: processing capacty set at uniform level, regardless of fluctuations in forecast demand
Chase demand: attempts to match capacity closely to varying levels of forecast demand
Optimal capacity plan: balances the costs of levelling and varying the capacity
Demand management: change demand to suit capacity
What are the advantages of a level capacity plan?
- Same number of staff
- Finished goods transferred to inventory
- Suitable for non-perishable goods
- Stable employment
- High utilisation
- High productivity, low unit costs
- Inventory costs
- Decision making
- High over utilisation levels for service operations
What are the ways to manage demand?
Yield management (varying service types: class)
Price as a controlling mechanism
Introduce counter-cyclical product
What are the various factors in short term capacity planning?
Manage order mix
Schedule downtime appropriately