1. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Chapter 11 Capacity planning and control Source: Arup

2. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Objective 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 … Costs Revenue Working capital Service level Source: British Airways London Eye

3. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Capacity Management 06122418 Months Planning Horizon

4. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Facility Decision  How Much capacity is needed?  When is the capacity needed?  Where should the capacity be located?

5. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Objectives of capacity planning and control Forecast demand Time Aggregated output Estimate of current capacity Measure aggregate capacity and demand Identify the alternative capacity plans Choose the most appropriate capacity plan

6. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 The nature of aggregate capacity –rooms per night –ignores the numbers of guests in each room –tonnes per month – ignores types of alloy, gauge and batch variations Aggregate capacity of a hotel: Aggregate capacity of an aluminium producer:

7. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Causes of seasonality Construction materials Beverages (beer, cola) Foods (ice-cream, Christmas cake) Clothing (swimwear, shoes) Gardening items (seeds, fertilizer) Fireworks Travel services Holidays Tax processing Doctors (influenza epidemic) Sports services Education services Source: Alamy/Medical-on-line

8. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Demand fluctuations in four operations

9. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Ways of reconciling capacity and demand Demand Capacity Demand

10. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 How do you cope with fluctuations in demand? Absorb demand Change demand Adjust output to match demand Level capacity Chase demand Demand management Ways of reconciling capacity and demand

11. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Absorb demand Part finished Finished goods, or Customer inventory Queues Backlogs Have excess capacity Make to stock Keep output level Make customer wait Source: Madam Tussaud’s

12. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Adjust output to match demand HireFire Temporary labourLay-off Overtime Subcontract Short time Third-party work Source: Corbis/Photocuisine

13. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Change demand Change pattern of demand Develop alternative products and/or services Source: Empics

14. Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007 Moving a peak in demand can make capacity planning easier