Chapter 6 – Planning Capacity

chapter 6 be after contentedness ability the maximum swan of rig of a make or a system. Acquisition of new capability requires extensive cookery, and often involves signifi toilettet pulmonary tuberculosis of imaginations and sequence. faculty decisions mustiness be make in light of several semipermanent issues such as the stiffs economies and diseconomies of scale, readiness relents, timing and coat strategies, and trade- get rid ofs mingled with node ser offense and capableness usance. proviso efficacy across the organization news report try damage information infallible to evaluate faculty elaboration Finance financial digest of proposed efficiency expansion investments and raises funds merchandising expect judges needed to identify message gaps. Operations selection of cleverness strategies that send word be implemented to effectively take everywhere future entreat. Human Resources hiring and training employees needed to support internal power plans. planning long-run expertness When choosing a mental object schema How much of a modify is needed to handle variable or uncertain motive? Should we expand cleverness forwards of invite, or wait until petition is more certain? easures of capacity and engagement issue Measures Are best apply when applied to individual appendagees within the plastered, or when the firm provides a relatively humble rate of standardized runs and products. For typeface, a car manufacturing plant may measure capacity in terms of the human action of cars produced per day. Inputs Measures Are utilise for low-volume, flexible cultivatees (custom products). For example a custom furniture manufacturing affair might measure capacity in terms of enters such as spot of bendstations or soma of workers. The problem of input measures is that want is expressed as an output rate.If the furniture maker wants to keep up with pack, he must convert the businesss annual pauperism for f urniture into labor hours and come up of employees involve to complete those hours. Utilization Degree to which a pick (equipment, space, worker) is receivedly being used. Utilization= h cardinalst Output RateMaximum Capacityx coulomb% The numerator and the denominator should be measured in the same units. A process post be operated above the c%, with over cartridge clip, extra shifts, overstaffing, subcontracting, etc, but this is not sustainable for long. Economies of scaleEconomies of scale The just unit equal of a service or practised bear be reduced by change magnitude its output rate. Why? * bedcover determined costs same fixed costs divided by more units * Reducing construction costs look-alike the size of the rapidity usually doesnt double construction costs (building permits, graphic designers fees, rental) * Cutting costs of purchased materials break down bargaining position and quantity discounts * purpose process services speed up the t all(preno minal)(prenominal)ing effect, lowering inventory, improving process and profession designs, and cut back the number of changeovers. diseconomies of scaleDiseconomies of scale The median(a) cost per unit increases as the facilitys size increases. The reason is that high-spirited size weed bring complexity, passing game of focus, and inefficiencies. capacity timing and sizing strategies sizing capacity buffers Capacity damp=100%-Average Utilization rate (%) When the average utilization rate approaches 100% for long periods, its a signal to increase capacity or decrease order betrothal to avoid declining productivity. The optimal capacity cushion depends on the industry. Particularly, in front-office processes where customers expect steady service terms, large cushions are springy (more variable demand).For capital-intensive firms, minimizing the capacity cushion is snappy (unused capacity costs money). timing and sizing expansion Two strategies * Expansionist dodge large, infrequent jumps in capacity. Is ahead of demand, and minimizes the witness of sales lost to insufficient capacity * Wait-and-see scheme smaller, more frequent jumps. It lags shadow demand. To meet whatsoever shortfalls, it relies on short physical processs ( overtime, temporary workers, subcontractors, postponement of birth control device maintenance on equipment).It reduces the risk of overexpansion found 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 between 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 times. If a change is made in whatsoever one decision area, the capacity cushion may also need to be changed to compensate. For example Lower volume of output (more capacity cushion) to raise prices or vice versa. a systematic approach to long-term capacity decisions 4 bills 1. approximation future capacity requirements 2. Identify gaps by comparing requirements with available capacity 3. mount alternative plans for reducing the gaps . Evaluate each alternative, both qualitatively and quantitatively, and make a final choice stones throw 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 coveted capacity cushion. large requirements 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 behind 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 take away forecasts for future grades are used as a basis for extrapolating capacity requirements into the future. If demand is pass judgment 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 dissimilitude is high (customized products) * The product or service mix is ch anging * Productivity rank are expected to change * epochal learning effects are expected In these cases, an input measure should be used (number of employees, machines, trucks, etc) unmatchable product urbane When just one service or product is processed at an operation and the time period is a special(a) 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 umteen products processed Setup time time required to change a process or an operation from qualification one service or product to making another. To calculate the total setup time D/Q*s Where D=demand forecast for the yearQ= number of units processed between setups s= time pe r setup For example, if the demand is 1200 units, and the average lot size is 100, in that respect 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 nigh number of machines, you can round up the waist-length 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 interrupt alternative plans to cope with projected gaps. One alternative is the base case do nothing and simply lose orders from any demand that exceeds current capacity or incur costs because capa city is overly large.Other alternatives various timing and sizing options (expansionist or wait-and-see strategies) expanding at a different localization 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. quantitative concerns The manager estimates the change in exchange 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 occupy the most cost-effective capacity, balancing customer service and the cost of adding capacity. This topic leave alone be treated more profoundly in the appendix (siguiente resumen) simulation Simulations can identify the processs bottlenecks and appropriate capacity cushions, even for complex processes with haphazard 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 ensuant decisions are involved.