Presentation on theme: "Capacity planning and control"— Presentation transcript:
1 Capacity planning and control Chapter 11Capacity planning and controlPhotodisc. Photolink
2 Capacity planning and control Operations strategyDesignImprovementCapacity planning and controlPlanning and controlThe operation supplies… the capacity to deliver products and servicesThe market requires… the availability of products and services
3 Key operations questions In Chapter 11 – Capacity planning and control – Slack et al. identify the following key questions:What is capacity planning and control?How are demand and capacity measured?What are the alternative ways of coping with demand fluctuation?How can operations plan and control their capacity level?How can queuing theory be used to plan capacity?
4 What is capacity?Capacity in the static, physical sense means the scale of an operation.However, this may not reflect the operation’s processing capability.Hence, we must incorporate a time dimension appropriate to the use of assets.For example, 24,000 litres per day;10,000 calls per day;57 patients per session;Etc.
5 The objectives of capacity planning and control To provide an ‘appropriate’ amount of capacity at any point in time.The ‘appropriateness’ of capacity planning in any part of the operation can be judged by its effect on…CostsRevenueWorking capitalService level.
6 The Objectives of capacity planning and control (Continued) Measure aggregate capacity and demand.Identify the alternative capacity plans.TimeAggregated outputChoose the most appropriate capacity plan.Forecast demandEstimate of current capacity
7 The nature of aggregate capacity Aggregate capacity of a hotel:rooms per night;ignores the numbers of guests in each room.Aggregate capacity of an aluminium producer:tonnes per month;ignores types of alloy, gauge and batch variations.
10 Distribution of demand Good forecasts are essential for effective capacity planningBut, so is an understanding of demand uncertainty because it allows you to judge the risks to service level.Only 5% chance of demand being higher than thisDistribution of demandDemandTimeDemandTimeOnly 5% chance of demand being lower than thisWhen demand uncertainty is high, the risks to service level of under provision of capacity are high.
11 Operating equipment effectiveness (OEE) Not worked (unplanned)Breakdown failureSet-up and change-oversTotal operating timeAvailability lossesLoading timeAvailability rate = a= Total operating timeLoading timePerformance rate = p= Net operating timeTotal operating timeEquipment ‘idling’Speed lossesSlow running equipmentNet operating timeQuality rate = q= Valuable operating timeNet operating timeQuality lossesValuable operating timeQuality losses
12 How capacity and demand are measured EfficiencyActual outputEffective capacity=Design capacity168 hours per weekEffective capacity109 hours per weekPlanned loss of 59 hoursActual output – 51 hours per weekAvoidable loss – 58 hours per weekUtilizationActual outputDesign capacity=
13 Ways of reconciling capacity and demand Level capacityChase demandDemand managementDemandDemandDemandCapacityCapacityCapacity
14 Ways of reconciling capacity and demand (Continued) How do you cope with fluctuations in demand?Absorb demandAdjust output to match demandChange demandDemand managementLevel capacityChase demand
15 Absorb demand Absorb demand Have excess capacity Keep output level Make to stockMake customer waitPart finishedQueuesFinished goods, orBacklogs.Customer inventory
16 Adjust output to match demand HireFireTemporary labourLay-offOvertimeShort timeSubcontract3rd party work
17 Change demand Change demand Change pattern of demand. Develop alternative products and/or services.
18 Moving a peak in demand can make capacity planning easier
19 Capacity planning and control as a dynamic sequence of decisions Actual demand and actual capacityPeriod t – 1OutcomeHow much capacity next period?Current capacity estimatesUpdated forecastsPeriod tDecisionHow much capacity next period?Current capacity estimatesUpdated forecastsPeriod t + 1DecisionShortagesqueuesinventoryActual demand and actual capacity?CostsRevenuesWorking capitalCustomer satisfaction,etc.OutcomeShortagesqueuesinventoryCapacity levelCostsRevenuesWorking capitalCustomer satisfaction,etc.
20 Forecast in aggregated units of output per month Demand for a manufacturing operation’s output8000700060005000Forecast in aggregated units of output per month4000300020001000JFMAMJJASONDMonths
21 But will not satisfy demand at all points throughout the year For capacity planning purposes demand is best considered on a cumulative basis. This allows alternative capacity and output plans to be evaluated for feasibility60But will not satisfy demand at all points throughout the year50Producing at average demand40Producing at average demand allows inventory to be accumulatedForecast cumulative aggregated output (thousands)3020104080120160200240Cumulative operating days
22 Cumulative representations Cumulative capacityCumulative demandUnable to meet ordersCapacity and demandBuilding stockTime
23 Simple queuing systemLow variability – narrow distribution of process timesTimeHigh variability – wide distribution of process timesTime
24 Simple queuing system (Continued) Distribution of arrival timesDistribution of processing timesServer 1Server 2Server mSource of customersRejectingBalkingRenegingQueue or ‘waiting line’Served customersBoundary of system