Chapter 6 – Planning Capacity

chapter 6 cookery cogency capability the maximum station of siding of a cultivate or a system. Acquisition of new readiness requires extensive provision, and often involves signifi masst consumption of imaginativenesss and prison term. capableness decisions essential be do in light of several long issues such as the inviolables economies and diseconomies of scale, electrical capableness modifys, timing and surface strategies, and trade- discharges mingled with customer ser criminality and capacitance practice session. supply cognitive content across the organization story succeed address information requisite to evaluate aptitude amplification Finance financial epitome of proposed message expansion investments and raises funds marketing acquire depends needed to identify dexterity gaps. Operations selection of competency strategies that spate be implemented to effectively put together future necessary. Human Resources hiring and training emplo yees needed to support internal qualification plans. planning semipermanent capability When choosing a power dodge How much of a dampen is needed to handle variable or uncertain call for? Should we expand capacity in front of subscribe to, or wait until strike is more(prenominal) certain? easures of capacity and practice session end product Measures Are best utilised when applied to individual dish outes within the stiff, or when the firm provides a relatively teeny amount of standardized improvements and products. For archetype, a car manufacturing plant may banner capacity in terms of the bite of cars produced per day. Inputs Measures Are use for low-volume, flexible actes (custom products). For example a custom furniture ecclesiastic might measure capacity in terms of inputs such as identification digit of lickstations or human body of workers. The problem of input measures is that lease is expressed as an output rate.If the furniture maker wants to keep up with conduct, he must convert the line of credits annual demand for furniture into labor hours and number of employees take to adjoin those hours. Utilization Degree to which a imagery (equipment, space, worker) is modernly being used. Utilization= medium Output RateMaximum Capacityx ampere-second% The numerator and the denominator should be heedful in the same units. A process spate be operated above the light speed%, with all over judgment of conviction, extra shifts, overstaffing, subcontracting, etc, but this is not sustainable for long. Economies of scaleEconomies of scale The fair(a) unit woo of a service or ingenuous derriere be reduced by change magnitude its output rate. Why? * paste doctor costs same fixed costs divided by more units * Reducing construction costs double the size of the speediness usually doesnt double construction costs (building permits, architects fees, rental) * Cutting costs of purchased materials offend bargaining positio n and quantity discounts * conclusion process advantages speed up the larn effect, lowering inventory, improving process and business line designs, and reduce the number of changeovers. diseconomies of scaleDiseconomies of scale The clean cost per unit increases as the facilitys size increases. The reason is that uppity size slew bring complexity, spillage of focus, and inefficiencies. capacity timing and surface strategies sizing capacity electrical shocks Capacity cushion=100%-Average Utilization rate (%) When the average utilization rate approaches 100% for long periods, its a signal to increase capacity or decrease order adoption to avoid declining productivity. The optimal capacity cushion depends on the industry. Particularly, in front-office processes where customers expect dissipated service snips, large cushions are racy (more variable demand).For capital-intensive firms, minimizing the capacity cushion is brisk (unused capacity costs m maviny). timing and s izing expansion Two strategies * Expansionist system large, infrequent jumps in capacity. Is ahead of demand, and minimizes the break of sales lost to insufficient capacity * Wait-and-see strategy smaller, more frequent jumps. It lags butt joint demand. To meet whatsoever shortfalls, it relies on short routines (extra time, temporary workers, subcontractors, postponement of safe maintenance on equipment).It reduces the risk of overexpansion ground on overly optimistic demand forecasts, obsolete technology, or inaccurate assumptions regarding the competition. This strategy fits the short-term outlook but can erode market share over the long run. Timing and sizing of expansion are related if demand is increasing and the time in the midst of increments increases, the size of the increments must also increase. An intermediate strategy can be follow the leader, so nobody gains a competitive advantage for being ahead of demand, and everyone shares the agony of overcapacity in the other case. inking capacity and other decisions Capacity cushions in the long run original the organization against uncertainty, as do resource flexibility, inventory, and longer customer lead clock. If a change is made in either one decision area, the capacity cushion may also need to be changed to compensate. For example Lower volume of occupation (more capacity cushion) to raise prices or vice versa. a systematic approach to long-term capacity decisions 4 measuring rods 1. regard future capacity requirements 2. Identify gaps by comparing requirements with available capacity 3. gird alternative plans for reducing the gaps . Evaluate to all(prenominal) one alternative, both qualitatively and quantitatively, and make a final choice look 1 estimate capacity requirements A processs capacity requirement is what its capacity should be for some future time period to meet the demand of the firms customers (external or internal), given the firms want capacity cushion. larger r equirements are practical for processes or workstations that could potentially be bottlenecks in the future, and management may even plan for longer cushions than normal. Capacity requirements can be expressed in * Output measure * Input measureEither way, the cosmos for the estimate is forecasts of demand, productivity, competition, and technological change. The further ahead you look, the more chance you have of qualification an inaccurate forecast. Using output measures ingest forecasts for future twelvemonths are used as a basis for extrapolating capacity requirements into the future. If demand is expect to double in the next 5 years, then the capacity requirements also double. For example Actual demand 50 customers per day expected demand = 100 customers per day desirable cushion = 20%. So capacity should be (100)/(1-0. )=125 customers per day. Using input measures Output measures may be insufficient in these situations * Product variety and process contrast is high (custom ized products) * The product or service mix is changing * Productivity pass judgment are expected to change * real learning effects are expected In these cases, an input measure should be used (number of employees, machines, trucks, etc) peerless product touch When just one service or product is processed at an operation and the time period is a contingent year, the capacity requirement (M) is M=DpN1-C100D=demand forecast for the year (number of customers served or units produced) p=processing time (in hours per costumer served or unit produced) N=Total number of hours per year during which the process operates C=desired capacity cushion (expressed as a percent) M=number of input units required and should be calculated for each year in the time horizon many an(prenominal) products processed Setup time time required to change a process or an operation from making one service or product to making another. To calculate the total setup time D/Q*s Where D=demand forecast for the ye arQ= number of units processed between setups s= time per setup For example, if the demand is 1200 units, and the average lot size is 100, on that point are 1200/100=12 setups per year. Accounting for both processing and setup times for multiple products, we get M=Dp+DQsproduct 1+Dp+DQsproduct 2++Dp+DQsproduct nN1-C100 When M is not an whole number and we are talking approximately number of machines, you can round up the fractional part, unless it is cost efficient to use short-term options, such as overtime or stockouts.But if we are talking about number of employees and we get 23. 6, we can use 23 employees and use a little overtime (in this case, 60% of a full-time person). step 2 identify gaps A capacity gap is any difference (positive or negative) between projected capacity requirements (M) and current capacity. step 3 develop alternatives bump alternative plans to cope with projected gaps. One alternative is the base case do nothing and simply lose orders from any demand th at exceeds current capacity or incur costs because capacity is as well as large.Other alternatives various timing and sizing options (expansionist or wait-and-see strategies) expanding at a different lieu and using short term options. For reducing capacity, the alternatives include closing plants, laying off employees, reducing days or hours of operations. step 4 evaluate the alternatives Evaluate qualitatively and quantitatively. Qualitative concerns The manager looks at how each alternative fits the overall capacity strategy and other aspects of the business not cover by the financial analysis (uncertainties about demand, competitive reaction, technological change, and cost estimates).Some of these factors cant be quantified and must be assessed on the basis of judgment and experience. duodecimal concerns The manager estimates the change in interchange flows for each alternative over the forecast time horizon compared to the base case. tools for capacity planning waiting-line models Are useful in high customer-contact processes. Waiting-line models use probability distributions to provide estimates of average customer wait time, average length of waiting lines, and utilization of the work center.Managers can use this information to acquire the most cost-effective capacity, balancing customer service and the cost of adding capacity. This topic depart be treated more late in the appendix (siguiente resumen) simulation Simulations can identify the processs bottlenecks and catch capacity cushions, even for complex processes with ergodic demand patterns and predictable flows in demand during a typical day. decision trees A decision tree can be particularly valuable for evaluating different capacity extension alternatives when demand is uncertain and ordered decisions are involved.