1. capacity planning and control
chapter -11

2. What is capacity?
Capacity is the maximum amount of work that an operation can do over a specific period of time.
Two important questions while considering the capacity:
How much?
How long?

3. Capacity of an organization consists of many elements:
Facilities
Equipments
Human Resource
Skills
So, make a balance between capacity and demand is the most important function of operations management.
To conclude we can say capacity is the maximum amount of work that an organization can do is capacity.

4. Any organizations operate below their maximum capacity
Any organizations operate below their maximum capacity! Discuss the reasons behind this.
There is insufficient demand
Policy for responding to new demand quickly as new order comes.
One part of the operation is capacity ceiling or maximum capacity, so the other is below capacity.

5. Three different types of capacity strategies
Long-term capacity strategy
Medium-term capacity strategy
Short-term capacity strategy
Long-term capacity planning strategy
Changing the main production facilities. It can be adding new or deleting the old.
For example new plant, factory, capital intensive machines e.t.c

6. 2.Medium-term capacity planning strategy
It happen between 2-18 months usually. Here the output is changed by increasing number of machines or operating hours. 3. Short-term Capacity planning strategy This happens over a short time. According to the changes in demand, necessary adjustments are made. For example hotels or restaurents.

7. What you mean by aggregate demand and capacity?
A medium term capacity planning, that calculates different services and products together to get a broad view of demand and capacity. For example hotel think about demand and capacity in terms of rooms per night, without thinking about the number of guests in each room and their requirements.

8. Objectives of planning and control
Cost effectiveness – overcapacity means high cost
Revenue generation - capacity equals or higher than demand means no revenue lost.
Schedule working capital – if inventory before demand the fund is wasted.
Increase quality - by hiring new staff for new demand may affect quality.
Increase speed – arranging surplus capacity so no queing.
Increase dependability - the more capacity closer to demand less dependability for delivery.
Increase flexibility – volume flexibility increased by extra capacity.

9. What are the three important steps involved in capacity planning and control?
1.Measure aggregate demand and supply 2.Identify the alternative capacity plans 3. Choose the most appropriate capacity plan.

10. Measuring demand and capacity
Forecasting the demand
Forecasting is important for planning and control. Without the forecasting or estimate of future demand, it is impossible to plan for the future capacity.
But the forecast or prediction should have 3 qualities.
1.Forecasting should be expressed in terms, which are useful for capacity planning.
For example in units such as machine hour per year, space required, how many hours, how much et.c

11. 2.Should be accurate as possible wrong forecast making planning useless. For example recruiting new staff after the forecast will end up in wasting money.
3.Should give the indication about the potential or possible uncertainty. How much difference can be expected in actual demand? It has to be clear. For example if the change from average demand is predicted a mange in a supermarket can arrange the staff for the peak and lean period.

12. Demand seasonality and supply seasonality
Demand seasonality means demand changes according to various factors: Climate Festive Behavioral Political Financial Social For example hotel demand changes according to season.

13. Seasonality of supply
The inputs changes according to different factors. For example agricultural products supply is decided by climate. Measuring capacity Can be done in two ways : Output capacity measure – how much from operation Input capacity measure –how much for operation

14. Design capacity and effective capacity
Design capacity is the capacity of the process as it is designed to be. For example when you buy a motor bike the fuel efficiency promise will be higher than that reality. Effective capacity is the actual or useful capacity of operation. Why there is difference in design capacity and effective capacity? 1.Maintenance 2.Changeover 3.Stoppings Utilization The ratio of actual output from a process or facility.

15. How can capacity be measured accurately
By reducing changeover set-ups
Re-examining preventive maintenance
Allocate work in different manner
Overall equipment effectiveness
Method of judging effectiveness of equipments.

16. The alternative capacity plans
Three methods for this: Level capacity plan Chase capacity demand plan Demand management

17. Level capacity plan
Level capacity plan – where capacity is kept constant, the operation either tolerating the under use of the capacity or its inability to serve all demand, or alternatively (if it is capable of it) making to stock for future periods when demand will exceed capacity.
For example aluminum production

18. Chase demand plan
– where capacity is frequently adjusted in an attempt to match it to demand at any point in time. This can be done a number of ways such as using overtime, varying the size of the workforce(hire&fire), using part-time staff, or subcontracting(Ben).
For example customer service

19. Managing demand
– where demand is influenced or changed in order to bring it closer to capacity at any point in time. Discounts Sale-offs For example airlines.( Moon cake ) Two methods for this: Alternative products and services - develop alternative products. For example universities halls used for wedding or conferences. Greetings cards for all seasons Yield management – methods to make sure that an operation maximizes the potential to generate profit Examples : airlines and hotel by overbooking, discount, varying service type. In fact many organizations use some combination of these three pure strategies.

20. Choosing a capacity planning and control approach
We have three capacity plans and now the task is to choose the one that suits your organization. Before adopting any plan an organization must be aware of the consequences. So the organization must decide what changes must be brought into the output rate and facilities.

21. There are two methods to find this out:
Cumulative representation
Queuing theory
Cumulative representation is a graphical presentation method used in capacity planning.
In this method demand and capacity are clearly indicated, where operational managers can easily find out high demand season and low, and make necessary operation changes.
So here ability of operations to store the finished goods as inventory is essential.

22. Queuing theory or waiting line management
It is used in the case of service operations and perishable goods, because there is no chance for stocking or inventory. In cumulative representation the focus is to make sure the production is above the demand line. Here demand is treated as it comes, thereby queuing happens. Customer preceptions of queing page 349