10 Capacity Management 2015-1

7/24/2019 10 Capacity Management 2015-1

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CAPACITY MANAGEMENT

(Text Chapter 7 Supplement)


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CAPACITY OVERVIEW

Scale decision (How big?)

Operating Capacity decision (How much?)

The ability o an organisation to meet demand

(produce! ser"e! accommodate! hold! etc#)


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DEFINING CAPACITY

$%aximum sustainable output& in some commonunits

Or

'n terms o resources a"ailable or predeined

classes o customers mar*ets+lternati"ely

'n terms o resources re,uired (%achines!-eople! %aterials! Supply .istribution) toade,uately meet demand!

.istinguish between -ea* and /ormal


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GETTING CAPACITY RIGHT

' Shortall0 -oor ser"ice

0 1oss o customers

0+llow entry o

competitors

0 23T?

' 4xcess0 O"erin"estment

0 1ac* o control

0 5lut

0 23T?

Tradeo between Cost o 4xcess capacity (Cx)

6s# Cost o Shortall in capacity (Cs)


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Capacity Cushions


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CAPACITY CUSHIONS

'n"entories

-roduction resources (machines! space etc#)

Cash (earmar*ed or expediting! ,uic*purchases! resource mobilisation etc#)

Tradeo between esponse! 8lexibilityCommitment! and Costs in"ol"ed

Si9e o cushion depends on Cx Csratio (may

e"en ha"e "e cushion)


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Appoach!s to Capacity E"pansion

(a)(a) Leading demand withLeading demand withincremental expansionincremental expansion

De

mand

De

mand

ExpectedExpecteddemanddemand

NewNewcapacitycapacity

(b)(b) Leading demand withLeading demand withone-step expansionone-step expansion

De

mand

De

mand



(d)(d) Attempts to have an averageAttempts to have an averagecapacity with incrementalcapacity with incrementalexpansionexpansion

Demand

Demand NewNew

capacitycapacity ExpectedExpecteddemanddemand

(c)(c) Lagging demand withLagging demand withincremental expansionincremental expansion

Demand

Demand



Fi#u! S$%&Fi#u! S$%&


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'EST OPERATING (EVE(

3nderutili9ation

'!st Op!atin#

(!)!*

A)!a#!

unit cost

o+ output

Vo*u,!

O"erutili9ation


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Econo,i!s an- Dis!cono,i!s o+ Sca*!

4conomieso scale

.iseconomieso scale

:!;


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Econo,i!s )s% Dis!cono,i!s

@hy 4conomies

2etter reco"ery oixedperiod costs

esource dedication with

ewer changeo"ers! longerruns etc#

Speciali9ation and s*ill

Choice o better processes

and technologies

4conomies o procurement

@hy .iseconomies

Congestion O"eruse

2ureaucrati9ation

6ulnerability to ris*

ise in scarce resource costs

.istribution


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CAPACITY AT SYSTEM (EVE(

'n theory! at least one resource should be ullyutili9ed! and all others scaled accordingly

%ost systems ha"e nonuniorm utili9ationsA

0 -erectly balanced design may not be easible

0 -reerred operating le"el may "ary across resources

0 Capacity gets wasted due to statistical luctuations!

imperect yield! brea*downs! ineiciency etc#

0 .emand! product mix and low complexities aect

capacity


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%% MORE CAPACITY TERMS

-ea*0 %aximum possible output (speciy duration o pea*)

/ormal

0 +t which would ordinarily li*e to wor*

System0 @hen multiple resources interact through

imbalances! mix issues! low complexities etc#

+ctual0+ctually reali9ed ater yield! brea*downs! ineiciency!

intererence and other problems


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Capacity Cushion Ti,in# / Si0in#

-roacti"e 4xpansionist0 1eads demand

0 -otential to dri"e mar*et

eacti"e @ait and See0 1ags demand

0 %aximi9e utili9ation

-lan and 2uild to orecast0+lternate between 1ead B 1ag

0+nd try to match demand supply closely


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CAPACITY 'Y TIME HORI1ON

1ong ange (: years)0 High in"estments! long lead time! hard to re"erse

%edium ange (Typically ew months : year)

0 %edium in"estments! %oderate lead timeD typicallythrough +nnual budget! Hire 8ire Subcontract

Short ange (E: month scheduling le"el)

0+dFustments at incremental costA OT! outing etc#

.einitions o 1ong %edium Short term may"ary with industries! technologies etc#

10 Capacity Management 2015-1

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