Classes 12 and 13 - Managing Capacity - Chapter 8

Classes 12 and 13 - Managing Capacity - Chapter 8 - BUS 370...

Info icon This preview shows pages 1–13. Sign up to view the full content.

View Full Document Right Arrow Icon
BUS 370: Chapter 8 Capacity Decisions Donavon Favre College of Management North Carolina State University
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Capacity Decisions Defining & measuring capacity Strategic versus tactical capacity Evaluating capacity alternatives Advanced perspectives Learning curves Waiting lines
Image of page 2
Measure of an organization’s ability to provide goods or services Jiffy Lube ==> Oil changes per hr. Law firm ==> Billable hours College ==> Student hrs. per semester Defining & measuring capacity
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Consider: Capacity for a PC Assembly Plant: (800 units shift./line)*(% Good)*(No. of lines)*(No. of Shifts) 1 or 2 shifts? 2 or 3 lines? Employee training? Controllable Factors Uncontrollable Factors Supplier problems? 98% or 100% good?
Image of page 4
Strategic vs. Tactical Capacity Strategic: 1 or more years out “Bricks & Mortar” Future technologies ==> GSK, IBM in RTP Tactical: 1 year or sooner Workforce level, inventory, etc. ==> Overtime, Sub-Contracting
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Capacity Time Strategic Capacity Planning “Bricks & mortar” decisions High-level planning High risk Tactical Planning Workforce, inventory, subcontracting decisions Intermediate-level planning Moderate risk Planning & Control Limited ability to adjust capacity Detailed planning Lowest risk Days or weeks out Months out Years out
Image of page 6
Capacity Strategies: When, how much, & how ? Lead Strategy Lag Strategy
Image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Evaluating capacity alternatives Economies of scale (EOS) Break-even points (BEP) Expected value analysis (EVA)
Image of page 8
Economies of Scale Total Cost for Fictional Line: Fixed cost + (Variable unit cost)*(x) = $200,000 + $4(x) Cost per unit for X=1? X=100,000?
Image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 5 15 25 35 45 55 65 75 Number of shipments Shipping costs Common Contract Private Common Carrier Contract Carrier Leasing Fixed cost None $5000 $21,000 Variable cost $750 $300 $50
Image of page 10
Total Cost Equation Table 8.3 Total cost of three capacity alternatives at different demand levels, Ellison Seafood Company Total cost equation 15 shipments (low demand) 40 shipments (medium demand) 75 shipments (high demand) Common Carrier: $0 + $750(X) $11,250 $30,000 $56,250 Contract Carrier: $5,000 + $300(X) $9,500 $17,000 $27,500 Leasing: $21,000 + $50(X) $21,750 $23,000 $24,750
Image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Expected value analysis j EV = = I i i i C P 1 [8-2] Where: j EV = Expected value of Capacity Alternative j i P = Probability of demand level i i C = Financial result (cost, revenue, or profit) at demand level i
Image of page 12
Image of page 13
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern