1. C A P A C I T Y Dr. Dewi Nusraningrum, M.Si

2. CAPACITY PLANNING - Capacity is the maximum rate of output for a facility. - Capacity planning is central to the long-term success of a organization. - Too much capacity can be as agonizing as too little. MEASURE OF CAPACITY Output measures are the usual choice for line flow processes. Input measures are the usual choice for flexible flow processes. Capacity planning requires a knowledge of current capacity and its utilization. Average output rate Utulization = x 100% Maximum capacity Peak capacity = the maximum output that a process or facility can achieve under ideal conditions. Effective capacity = the maximum output that a process or firm can economically sustain under normal conditions.

3. Economies and Diseconomies of Scale Output rate (patients per week) Economies of scale Diseconomies of scale 500-bed hospital 250-bed hospital 750-bed hospital Average unit cost (dollars oer patient)

4. CAPACITY STRATEGIES Sizing capacity cushions : amount of reserve capacity that firm maintains to handle sudden increases in demand or temporary losses of production capacity; it measures the amount by which the average utilizayion falls below 100 percent. Timing and sizing expansion : the second issue of capacity strategy is when to expand and by how much. Two extreme strategies : expansionist strategy and wait-and-see strategy Time Capacity Planned unused capacity Forecast of capacity required Capacity increment Time between increments Time Capacity Planned use of short-term options Forecast of capacity required Capacity increment Time between increments (a) Expansionist strategy(b) Wait-and-see strategy

5. Linking capacity and other decisions : Capacity decision should be closely linked to strategies and operations throughout the organization. Examples : Competitive priorities, Quality management, Capital intensity, Resource flexibility, Inventory, Scheduling. Systematic Approach to Capacity Decisions 1. Estimate future capacity requirements : The foundation for estimating long-term capacity needs is forecasts of demand, productivitry, competition, and tecnological changes that extand well into the future. 2. Identify gaps by comparing requirements with available capacity : a capacity gap is any difference (positive or negative) between projected demand and current capacity. 3. Develop alternative plans for filling the gaps : One alternative, called the base case, is to do nothing and simply lose orders from any demand that exceeds current capacity. Other alternatives are various timing and sizing options for adding new capacity, including the expansionist and wait-and-see strategies. 4. Evaluate each alternative, both qualitatively and quantitatively, and make a final choice : Qualitative, concerns manager has to look at how each alternative fits the overall capacity strategy and other aspects of business not covered by financial analysis. Quantitative, manager estimates the changes in cash flows for each alternative over the forecast time horizon, compared to the base case.

6. Expand Don’t expand Tools for capacity planning Waiting Line Methode : Tend to develop in front of a work center, such as an airport ticket counter, a machine center or central computer. This method provides formulas for estimating important characteristic of waiting line, such as average customer waiting time and average facility utilization, for different facility designs. Decision Trees : Valuable for evaluating capacity expansion alternatives when demand is uncertain and sequential decisions are involved. Decision Trees For Capacity Expansion (Payoffs in thousands of dollars) 1 2 ($148) Small expansion Large expansion ($109) ($148) ($135) $40 $220 High demand (0.60) Low demand (0.40) High demand (0.60) Low demand (0.40) $70 $90 $135