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Lecture 6 - Outline 1 Lecture 6: Capacity Planning (Chapter 6) & Waiting Lines (Supplement C) - Planning Long-Term Capacity - Capacity Timing and Sizing Strategies - A Systematic Approach to LT Capacity Decisions - Why Waiting Lines Form - Uses of Waiting-Line Theory - Structure of Waiting-Line Problems - Probability Distributions - Using Waiting-Line Models to Analyze Operations - Littles Law - Decision Areas for Management Planning Capacity - Capacity is the maximum rate of output of a process or system - Accounting, finance, marketing, operations, purchasing, and human resources all need capacity information to make decisions - Capacity planning is done in the long-term and the short-term - Questions involve the amount of capacity cushion and expansion strategies Measures of Capacity Utilization z Output measures of capacity z Input measures of capacity z Utilization Lecture 6 - Outline 2 Capacity and Scale - Economies of scale o Spreading fixed costs o Reducing construction costs o Cutting costs of purchased materials o Finding process advantages - Diseconomies of scale o Complexity o Loss of focus o Inefficiencies Capacity Timing and Sizing - Sizing capacity cushions - Capacity cushions are the amount of reserve capacity a process uses to handle sudden changes Capacity cushion = 100% Average Utilization rate (%)- Expansionist strategies - Wait-and-see strategies - Combination of strategies Lecture 6 - Outline 3 Linking Capacity z Capacity decisions should be linked to processes and supply chains throughout the organization z Important issues are competitive priorities, quality, and process design Systematic Approach 1. Estimate future capacity requirements 2. Identify gaps by comparing requirements with available capacity 3. Develop alternative plans for reducing the gaps 4. Evaluate each alternative, both qualitatively and quantitatively, and make a final choice Step 1 is to determine the capacity required to meet future demand using an appropriate planning horizon Output measures based on rates of production Input measures may be used when Product variety and process divergence is high The product or service mix is changing Productivity rates are expected to change Lecture 6 - Outline 4 Significant learning effects are expected For one service or product processed at one operation with a one year time period, the capacity requirement, M, is Setup times may be required if multiple products are produced Problem 1 (EXAMPLE 6.1): A copy center in an office building prepares bound reports for two clients. The center makes multiple copies (the lot size) of each report. The processing time to run, collate, and bind each copy depends on, among other factors, the number of pages. The center operates 250 days per year, with one 8-hour shift. ... View Full Document

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