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Summary Capacity Planning Revision Poster
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Capacity Planning Revision Poster for ME20026 Manufacturing Operations and technology
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ME20026: CAPACITY AND INVENTORY PLANNING:DEFINITIONS: LONG TERM CAPACITY PLANNING: MEDIUM TERM CAPACITY PLANNING
Definition
Capacity Manufacturing operations must decide on the size of o Deciding the level of production in a time period at
o Maximum level of value-added activity over a the operations in terms of capacity which a manufacturing system should operate
period of time that the manufacturing process can Things that affect this decision
achieve under normal operating conditions o Capital available to the company Steps to planning the capacity of a manufacturing system
Design capacity o Economies and scale o Measure aggregate demand and capacity
o Maximum attainable output o Diseconomies of scale o Identify the alternative capacity plans
Effective capacity Economies of scale o Choose the most appropriate capacity plan
o Maximum capacity with product mix, scheduling o Decrements in unit cost with the increase of cost
challenges and other issues taken into account Diseconomies of scale Options for planning the capacity of a manufacturing
Actual output o Increments of unit cost resulting from increase of operation in the face of fluctuating demand
o Rate of output that is actually achieved can volume o Level capacity plan
never exceed effective capacity Example: Fluctuations are ignored
Utilisation Activity levels kept constant
o Indicator of how close the facility is functioning When non-perishable materials are processed but
with regards to its design capacity not immediately sold, they can be transferred to
Actual Output finished good inventory in anticipation of future
Utilisation= sales
Design Capacity o Chase demand plan
Attempt is made to match capacity closely to
Efficiency varying levels of forecasted demand
o Indicates how close the facility is functioning to E.g. hiring/firing or using part time staff
the effective capacity o Manage demand plan
Actual Output Attempt is made to change and level demand
Efficiency= through price manipulation
EffectiveCapacity E.g. promotions for off-season tickets
EFFECT OF QUALITY ON CAPACITY: Sometimes the available resources can produce
Best operating point is usually near 70% of the capacity Existence of defective products in the manufacturing process alternative products and services in off-peak times
increases the required capacity E.g. university halls of residence being used
o Company must produce more than the demand for conference accommodation in the summer
Equation to model capacity requirements with yield loss
M
B=
( 1−d 1) ( 1−d 2 ) …(1−d n)
B is the average number of produced parts
M is the number of good products made
n is the number of operations in the production process
ME20026: CAPACITY AND
d i is the average proportion of defective units at operation i INVENTORY PLANNING:
SHORT TERM CAPACITY OPTIONS: CAPACITY EXPANSION STRATEGIES:
This increases capacity on a short term basis Company may decide to move resources to different tasks as needed at the
Option Notes entrepreneurial stage.
Lease extra space If resource bottleneck is the result of lack of space, o In case of suppliers to companies, the production might shift to customers
temporarily this could resolve the constraint Services might be added to existing site
Company usually has to pay more money for a short o New machines and facilities purchased
term lease Duplicate existing services to additional sites
Relocate to more suitable e.g. larger premises
Authorise overtime Useful when the capacity shortfall is in human
Expansionist Wait-and-see
resources and the amount is not substantial
Constant overtime could hinder productivity Definition Capacity is increased before Capacity is only increased once
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