3_DS412_Capacity_Planning

3_DS412_Capacity_Planning - Capacity Planning Click to edit...

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Click to edit Master subtitle style Capacity Planning 11 Sada Soorapanth Decision Sciences
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Capacity Planning Capacity is the upper limit or ceiling on the load that an operating unit can handle 22 Examples: factory, store, university, machine, worker
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Importance of Capacity Decisions Impacts ability to meet future demands Affects operating costs Major determinant of initial costs Usually involves long-term commitment Affects competitiveness & ease of management 33
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Time Horizons Short term (over days or weeks) Overtime, addition or elimination of shifts, subcontracting Long term (over months or years) Add machines/processing stations, expand facility, build new facility, shutdown existing facility, outsource 44
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Defining and Measuring Capacity Design capacity Effective capacity Actual output 55
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Measuring System Effectiveness Efficiency Utilization 66
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Example: Measuring Capacity Compute the efficiency and the utilization of the vehicle repair shop: Design Capacity = 50 trucks per day Effective Capacity = 40 trucks per day Actual output = 36 trucks per day 77
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Capacity Strategy A capacity strategy takes into account many factors including: Firm’s core business plan Forecasted patterns of demand Costs of constructing and operating new facilities New process technology Competitor’s strategy 88 * Nahmias, Production and Operations Analysis 4th ed.
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Evaluating Capacity Alternatives Economic considerations Will an alternative be economically feasible? What will the operating& maintenance cost be? How soon can we have it? Will it be compatible with present operations? Public perceptions Change of technology Construction or relocation of facilities 99
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Techniques for Evaluating Capacity Break-even analysis (Supp. 7) Waiting-line analysis (Module D) Decision analysis (Module A) Financial analysis (Supp. 7) 1010
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Break-Even Analysis Technique for evaluating process & equipment alternatives Objective: Find the point ($ or units) at which total cost equals total revenue Fixed costs: constant regardless of output volume Rental, property taxes, equipment, administrative Variable costs: vary with output volume Materials and labors 1111
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Assumptions: break- even analysis All information is known with certainty. Everything produced can be sold.
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This note was uploaded on 09/10/2011 for the course DS 412 taught by Professor Eng during the Spring '07 term at S.F. State.

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3_DS412_Capacity_Planning - Capacity Planning Click to edit...

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