Lesson 4 - Capacity Planning Flashcards
(23 cards)
Capacity
upper limit or ceiling on the load that an operating unit can handle.
Goal: match long-term supply capabilities with predicted
level of long-term demand
Overcapacity
too high operating cost
Undercapacity
loss of customers, strained resources
Design Capacity
maximum output rate an operation /process/facility is designed for. (Under
ideal conditions)
Effective Capacity
Design Capacity minus allowances such as personal time (lunch break,…), and maintenance (more realistic)
Actual output
cannot exceed effective and is sometimes even lower due to machine breakdowns, quality problems, shortages
Efficiency
(Actual Output/Effective Capacity )*100% -> can sometimes be misleading, for
example if effective is low compared to design, you might expect great efficiency while you
don’t use resources very effectively
Determinants of Capacity
Facilities (design, location, size and expansion possibility), Products or Services
(standardization & uniformity), Processes (output quality, quantity capability), Human
considerations (motivation, skill & experience required, management policy(overtime)),
operational factors (shortages of components required, scheduling problems), supply chain
(effect on suppliers), external forces (quality & performance standards)
Utilization
(Actual Output/Design Capacity)*100% -> increasing utilization depends on
increasing effective capacity through correcting quality problems, improve bottlenecks
Strategy Formulation - Leading
build capacity in anticipation of future demand increases (might be good for long
lead times)
Strategy Formulation - Following
build capacity when demand exceeds current capacity
Strategy Formulation - Tracking
similar but adds capacity in small increments to keep pace with increasing
demand
Forecasting
Planning decisions involve short-term (variations in requirements due to seasonal or other
fluctuations) and long-term considerations (level of capacity: facility size)
bottleneck
operation in a sequence of operations whose
capacity is lower than capacities of other operations, whose capacity then limits the system’s
capacity
Cost-Volume Analysis
focus on relation between cost, revenue and volume of output
Fixed Cost
remain constant regardless of volume (heating, rental cost,S&A)
Variable Cost
vary directly with volume of output (material&labour costs)
Break-even-point
volume at which TC=TR
Indifference point
quatitity at which decision maker would be indifferent
between two competing alternatives (where both profits are same)
Step costs
Costs that increase stepwise as volume increases: possibly
multiple break-even points
Total Cost
VC+FC
Profit
RQ-(FC+vQ)
Waiting-Line Analysis
Balance costs of having customers wait and cost of providing additional capacity
