Transcript
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Strategic Capacity Management
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Strategic Capacity Planning Defined Capacity Utilization & Best Operating Level The Experience Curve Capacity Focus, Flexibility & Planning Determining Capacity Requirements Decision Trees Capacity Utilization & Service Quality
OBJECTIVES
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Strategic Capacity Planning
Capacity can be defined as the ability to hold, receive, store, or accommodate
Strategic capacity planning is an approach for determining the overall capacity level of capital intensive resources, including facilities, equipment, and overall labor force size
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Capacity Utilization
Where Capacity used
– rate of output actually achieved Best operating level
– capacity for which the process was designed
level operating Best
usedCapacity rate nutilizatioCapacity
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Best Operating Level
Example: Engineers design engines and assembly lines to operate at an ideal or “best operating level” to maximize output and minimize ware
Example: Engineers design engines and assembly lines to operate at an ideal or “best operating level” to maximize output and minimize ware
Underutilization
Best OperatingLevel
Averageunit costof output
Volume
Overutilization
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Example of Capacity Utilization
During one week of production, a plant produced 83 units of a product. Its historic highest or best utilization recorded was 120 units per week. What is this plant’s capacity utilization rate?
During one week of production, a plant produced 83 units of a product. Its historic highest or best utilization recorded was 120 units per week. What is this plant’s capacity utilization rate?
Answer: Capacity utilization rate = Capacity used .
Best operating level = 83/120 =0.69 or 69%
Answer: Capacity utilization rate = Capacity used .
Best operating level = 83/120 =0.69 or 69%
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The Experience
Curve
As plants produce more products, they gain experience in the best production methods and reduce their costs per unit
As plants produce more products, they gain experience in the best production methods and reduce their costs per unit
Total accumulated production of units
Cost orpriceper unit
Yesterday
Today
Tomorrow
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Learning curve technique
Learning Curve
Definition: The more often a worker does a particular type of job, the lesser time it takes to do the same job(Explanatory note: The per unit cost of production of a new item decreases as additional units of that product are manufactured)
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10
15
20
25
30
20 40 60 80 100 120 140 160
Units Produced
Ave
rage
Lab
our
hrs
requ
ired
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Capacity Flexibility
Flexible plants
Flexible processes
Flexible workers
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Capacity Planning: Balance
Stage 1 Stage 2 Stage 3Unitsper
month6,000 7,000 5,000
Unbalanced stages of productionUnbalanced stages of production
Stage 1 Stage 2 Stage 3Unitsper
month6,000 6,000 6,000
Balanced stages of productionBalanced stages of production
Maintaining System Balance: Output of one stage is the exact input requirements for the next stage
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Capacity Planning
Frequency of Capacity Additions
External Sources of Capacity
12Determining Capacity Requirements
1. Forecast sales within each individual product line
2. Calculate equipment and labor requirements to meet the forecasts
3. Project equipment and labor availability over the planning horizon
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Planning Service Capacity Vs. Manufacturing Capacity
Time: Goods can not be stored for later use and capacity must be available to provide a service when it is needed
Location: Service goods must be at the customer demand point and capacity must be located near the customer
Volatility of Demand: Much greater than in manufacturing
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Question BowlThe objective of Strategic Capacity
Planning is to provide an approach
for determining the overall capacity
level of which of the following?
a. Facilities
b. Equipment
c. Labor force size
d. All of the above
e. None of the above
Answer: d. All of the above
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Question Bowl
To improve the Capacity Utilization Rate we can
do which of the following?
a. Reduce “capacity used”
b. Increase “capacity used”
c. Increase “best operating level”
d. All of the above
e. None of the above
Answer: b. Increase “capacity used” (This increases the numerator in the Capacity Utilization Rate ratio, which is desirable.)
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Question BowlWhen we talk about Capacity Flexibility
which of the following types of flexibility
are included?
a. Plants
b. Processes
c. Workers
d. All of the above
e. None of the above
Answer: d. All of the above
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Question Bowl
When adding capacity to existing operations which of
the following are considerations that should be
included in the planning effort?
a. Maintaining system balance
b. Frequency of additions
c. External sources
d. All of the above
e. None of the above
Answer: d. All of the above
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Question Bowl
Which of the following is a term used to describe
the difference between projected capacity
requirements and the actual capacity
requirements?
a. Capacity cushion
b. Capacity utilization
c. Capacity utilization rate
d. All of the above
e. None of the above
Answer: a. Capacity cushion
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Question Bowl
In determining capacity requirements we must do
which of the following?
a. Address the demands for individual product lines
b. Address the demands for individual plants
c. Allocate production throughout the plant network
d. All of the above
e. None of the above
Answer: d. All of the above
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Question Bowl
In a Decision Tree problem used to evaluate
capacity alternatives we need which of the
following as prerequisite information?
a. Expect values of payoffs
b. Payoff values
c. A tree
d. All of the above
e. None of the above
Answer: b. Payoff values (Expected values are what is computed, not prerequisite to the analysis.)
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