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POM - J. Galván 1 PRODUCTION AND OPERATIONS MANAGEMENT Ch. 8: Capacity Planning.

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Presentation on theme: "POM - J. Galván 1 PRODUCTION AND OPERATIONS MANAGEMENT Ch. 8: Capacity Planning."— Presentation transcript:

1 POM - J. Galván 1 PRODUCTION AND OPERATIONS MANAGEMENT Ch. 8: Capacity Planning

2 POM - J. Galván 2 Definition and Measures of Capacity Capacity: Designed Capacity: Effective capacity or utilization: Rated Capacity: The maximum output of a system in a given period The maximum capacity that can be achieved under ideal conditions The percent of design capacity actually expected Maximum usable capacity of a particular facility RC = (Capacity)(Utilization)(Efficiency)

3 POM - J. Galván 3 Measure of planned or actual capacity usage of a facility, work center, or machine Measure of planned or actual capacity usage of a facility, work center, or machine Utilization Expected c apacity Capacity Planned hours to beused Total hours available Utilization

4 POM - J. Galván 4 Measure of how well a facility or machine is performing when used Measure of how well a facility or machine is performing when used Efficiency Actual output Effectivecapacity Actual output in units Standard output in units Average actual time Standard time Efficiency

5 POM - J. Galván 5 Forecast Demand Compute Needed Capacity Compute Rated Capacity Evaluate Capacity Plans Implement Best Plan Qualitative Factors (e.g., Skills) Select Best Capacity Plan Develop Alternative Plans Quantitative Factors (e.g., Cost) Capacity Planning Process

6 POM - J. Galván 6 WHY PLANNING CAPACITY?

7 POM - J. Galván 7 TYPICAL QUESTIONS How many machines should be purchased? How many workers should be hired? Consequences of a 20% increase in demand? How many counters should be opened to maintain customer wait below 10 minutes? How many assembly stations are needed to maintain backorders below 20? How often will all 6 operating rooms be full? How will congestion at Logan change if a 5th runway is built?

8 POM - J. Galván 8 Add Facilities Add long lead time equipment Schedule Jobs Schedule Personnel Allocate Machinery Subcontract Add Equipment Add Shifts Add Personnel Build or Use Inventory Long Range Planning Intermediate Range Planning Short Range Planning Modify CapacityUse Capacity * * *Limited options exist CAPACITY ALTERNATIVES

9 POM - J. Galván 9 Theory of Constraints 1.Identify the system bottleneck(s) 2.Exploit the bottleneck(s) 3.Subordinate all other decisions to step 2 4.Elevate the bottleneck(s) 5.Do not let inertia set in 4-9

10 POM - J. Galván 10 Capacity Bottlenecks Inputs To customers (a) Operation 2 a bottleneck 50/hr /hr 4-10

11 POM - J. Galván 11 (b) All operations bottlenecks 231 Inputs To customers 200/hr Capacity Bottlenecks 4-11

12 POM - J. Galván 12 Capacity Cushion Reserve capacity used to deal with sudden increases in demand Reserve capacity used to deal with sudden increases in demand (100% - Average Utilization %) (100% - Average Utilization %) Primary Disadvantage Primary Disadvantage unused capacity costs money unused capacity costs money

13 POM - J. Galván 13 Output rate (patients per week) Economies & Diseconomies of Scale 250-bed hospital Average unit cost (dollars per patient) 500-bed hospital Economies of scale 750-bed hospital Diseconomies of scale

14 POM - J. Galván 14 Capacity Strategy Expansionist Strategy Expansionist Strategy Looking to capture strong economies of scale Looking to capture strong economies of scale Positive learning Positive learning Time Capacity Planned Capacity Expected Demand

15 POM - J. Galván 15 Capacity Strategy Build-to-Forecast Strategy Build-to-Forecast Strategy Trying to match capacity and demand Trying to match capacity and demand Time Capacity Planned Capacity Expected Demand

16 POM - J. Galván 16 Capacity Strategy The Maximize Utilization Strategy The Maximize Utilization Strategy Maintains little or no capacity cushion Maintains little or no capacity cushion Time Capacity Planned Capacity Expected Demand

17 POM - J. Galván 17 Systematic Approach to Capacity Decisions 1. Estimate Capacity Requirements 2. Identify Gaps 3. Develop Alternatives 4. Evaluate Alternatives

18 POM - J. Galván 18 Capacity Decisions Estimate Capacity Requirements ItemClient XClient Y Annual demand forecast (copies) (D) Standard processing time (hour/copy)(p) Average lot size (copies per report)(Q) Standard setup time (hours)(s) Example 4.1 [Dp + (D/Q)s] product [Dp + (D/Q)s] product n N[1 – (C/100)] M = 4-18

19 POM - J. Galván 19 ItemClient XClient Y Annual demand forecast (copies) Standard processing time (hour/copy) Average lot size (copies per report) Standard setup time (hours) [2000(0.5) + (2000/20)(0.25)] client X + [6000(0.7) + (6000/30)(0.4)] client Y (250 days/year)(1 shift/day)(8 hours/shift)(1.0 – 15/100) M = Capacity Decisions 4-19 Estimate Capacity Requirements Example 4.1 Used capacity: 85%

20 POM - J. Galván 20 ItemClient XClient Y Annual demand forecast (copies) Standard processing time (hour/copy) Average lot size (copies per report) Standard setup time (hours) M = = machines Capacity Decisions 4-20 Estimate Capacity Requirements Example 4.1

21 POM - J. Galván 21 Models Waiting-Line Models Often used in Capacity Planning Often used in Capacity Planning Balances customer service & the cost of extra capacityBalances customer service & the cost of extra capacity Use probability distributions to estimate: Use probability distributions to estimate: Avg.Customer Delay Avg.Customer Delay Avg. Length of Waiting Lines Avg. Length of Waiting Lines Work Center Utilization Work Center Utilization

22 POM - J. Galván 22 Simulation A tool that helps identify: A tool that helps identify: Process BottlenecksProcess Bottlenecks Capacity CushionsCapacity Cushions More effective for More effective for complex waiting-line complex waiting-line problems problems

23 POM - J. Galván 23 Capacity Capacity Decisions Simulation Figure 6.5(a)

24 POM - J. Galván 24 Figure 4.8 Capacity Decisions Simulation 4-24

25 POM - J. Galván 25 Vary staffing Vary staffing Change equipment & processes Change equipment & processes Change methods Change methods Redesign the product for faster processing Redesign the product for faster processing Capacity Management ¨Vary prices ¨Vary promotion ¨Change lead times (e.g., backorders) ¨Offer complementary products Demand Management Managing Existing Capacity

26 POM - J. Galván 26 Complementary Products Time (Months) Sales (Units) Light clothes Heavy clothes Total 0 1,000 2,000 3,000 4,000 5,000 JMMJSNJMMJSNJ

27 POM - J. Galván 27 Matching Capacity to Demand Demand Management Demand Management vary prices vary prices change lead times change lead times encourage/discourage business encourage/discourage business Capacity Management Capacity Management adjust staffing adjust staffing adjust equipment and processes adjust equipment and processes change methods to facilitate production change methods to facilitate production redesign the product to facilitate production redesign the product to facilitate production


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