Capacity Planning with reference to McDonlds
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CAPACITY PLANNING
with reference to McDonalds
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Hi, friends I am Ronald’s
Yes, I am here to tell you about my
story
Story of McDonald
My Team members are:Sai Praveen Piyush SinghAnkit VermaAnand Batra
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CAPACITY
Capacity is the upper limit on the load that an operating unit can handle.• The basic questions in capacity
handling are:• What kind of capacity is needed?• How much is needed? • When is it needed?
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CAPACITY PLANNING• Capacity planning is the process of
determining the production capacity needed by an organization to meet changing demands for its products.
• In the context of capacity planning, “capacity" is the maximum amount of work that an organization is capable of completing in a given period of time.
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• A discrepancy between the capacity of an organization and the demands of its customers results in an inefficiency, either in under-utilized resources or unfulfilled customers.
• The goal of capacity planning is to minimize this discrepancy.
• Capacity can be increased through introducing new techniques, equipment and materials, increasing the number of workers or machines, increasing the number of shifts, or acquiring additional production facilities.
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Mc Donalds• McDonald's is the world's leading food service
retailer with more than 33,000 restaurants in 118 countries serving more than 67 million customers each day.
• In India, it operates under two parent franchisees Hardcastle Restaurants Pvt. Ltd – West and South Vikram Bakshi's Connaught Plaza Restaurants
Private Limited – North and East• McDonald's India is a leader in the food retail
space, with a presence of more than 250 restaurants serving more than 6.5 lakh customers daily in India.
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McDonalds (Sonipat)
• Located at Ansal Plaza Mall, Kundli, Sonipat 131001
• Operation Hours – (8a.m-11p.m)• 115 covers• 1 Restaurant Manager , 2 Astt.
Manager• 1 Relationship Executive ,1 Crew
Trainer• 25 crews
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FACTORS AFFECTING CAPACITY PLANNING
• Product Design Every product has its own unique recipe
• Process Design Process of a making of product should be time effective but quality cannot be reduced
• Product Variety Product having less variation can be processed together to reduce overall time
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• Product QualityTest & Inspection are made in order to keep a check on quality of product.
• Product SchedulingScheduling that keeps the product flow well balanced and synchronized
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ECONOMIES OF SCALE
Economies of scale results in lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.
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DISECONOMIES OF SCALEDiseconomies of scale result in rising long run average costs which are experienced 1) When a firm expands2) When govt. policies changes
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Capacity strategies
• Lead strategy-the company increases its production capacity in advance of anticipated increases in demand.
• Lag strategy-the company responds to actual increases in demand by boosting capacity after the operation is running at full steam.
• Match strategy-the company matches the demand and supply.
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McDonalds’ capacity strategy
• The company uses lead strategy
• Bun inventory- 2 days advance• FCD(Fried chilled dried) inventory- 3
days advance• Coke inventory- 15 days advance
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DESIGNED AND ACTUAL CAPACITY
Design capacity is the maximum theoretical output of a system
Actual capacity is the rate of output actually achieved.
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DESIGN CAPACITY• McAloo tikki• Prepration time = 42s• Prepration time (hrs.)=
42/3600=0.0116667hrs• Operating Hours =15• Total McAloo tikki in a
day=15/0.0116667
=1286(approx.)
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UTILIZATION
• Utilization is the percent of design capacity achieved
• Actual Output = 352 • Utilization = Actual Output/ Design Capacity
352/1286 =27 %
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CAPACITY PLANNING FRAMEWORK
• Estimating Total Requirements• Estimating Labor and Machine
Requirements• Computing Capacity Availability• Comparison of Availability and
Requirements• Process Mapping and Capacity
Analysis
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COMPUTING TOTAL REQUIREMENTS
No. of working days in the outlet(Nd ) = 7No. of working hours per day (h) = 15 hrs.System Availability (WEEKLY) = 7x15= 105 hrs.
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ESTIMATING LABOUR REQUIREMENTS
• Labor requirements depends fully on sales
• Requirements will vary in the following ways
• Peak Time (1pm- 4pm) & (7pm-10pm)
Expected Guest Count- 400• Weekends Expected Guest Count- 600• Holidays• Fridays
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RESOURCE AVAILABLITY• No. of Workers Available (NL) = 25• Absenteeism (a) = 2%• Workers Capacity = Nd X h X NL X (1-
a/100)
(weekly) = 7 X 15 X 25 X (98/100)
= 2572 hrs.
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ESTIMATING MACHINE REQUIREMENTS
• Machine requirements are totally depend on Product Variants
• Burgers• French Fries• Coke• Ice-cream• Cold Coffee & Ice Tea • McPuff Pizza
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RESOURCE AVAILABILITY
• No. of Machines Available (Nm) = 17• Machine Capacity= Nd X h X Nm
(weekly) =7 X 15 X 17 = 1785 hrs.
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PROCESS MAPING
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VEG-LINE for making Burgers
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HYPOTHETICAL PROBLEM• The outlet is small and it is not able to handle the
crowd. • The plant has two options- to expand the outlet, to
open a new outlet in the locality.• The marketing research says the probability of
success if we expands the outlet is 80%, with a cost of 50 lakhs, the revenue generated would be 1 crore. In case of failure the loss would be 30 lakhs.
• The probability of success if we open a new outlet in the locality would be 60%, with a cost of 90 lakhs, the revenue generated would be1.4 crores. In case of failure the loss would be 40 lakhs.
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DECISION TREE
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DECISION• EMV at node 1• (0.8 x 1) + (0.2 x -0.3) = 74 lakhs
• EMV at node 2• (0.6 x 1.4) + (0.4 x -0.4) = 68 lakhs
• Decision at node A is to EXPAND the plant as it will get more profit.
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LEARNINGS • It helped us to ensure that current &
future capacity and performance aspects of the business requirements are provided in cost effective manners.
• It helped us in understanding the importance of decision –tree in order to select the most effective & efficient method of capacity expansion.
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