# Ch 9 - TheroleofOM 1 Chapter9...

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1 The role of OM

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Chapter 9.  Xun Li October 19, 2011
3 Learning Objectives 1) Capacity Planning* 2) Making Capacity Planning Decisions* 3) Decision Trees*** 1) The Element of a Decision Tree 2) Expected Value of an optimal policy

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LO1:  Capacity Planning Definitions (pp.304) Capacity  The maximum output rate that can be achieved by a facility. Capacity Planning The process of establishing the output rate that can be achieved by a  facility. Two levels of Capacity Planning (pp.304) 4
LO1:  Capacity Planning Measuring Capacity The definition “capacity” seems simple, but  there is no universal way to measure it! 5 Type of Business Input Measures of Capacity Output Measures of Capacity Car manufacturer Labor hours Cars per shift Hospital Available beds Patients per month Pizza parlor Labor hours Pizzas per day Retail store Floor space in square feet Revenue per foot

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LO1:  Capacity Planning Measuring Capacity Input-oriented vs. Output-oriented Output-oriented measures are easier to understand (e.g. # of  cars/ Hour) but perform poorly when multiple outputs are  involved or different products are involved Design Capacity vs. Effective Capacity Design Capacity:  The maximum output rate under  _______ (theoretical) conditions. Effective Capacity:  The maximum output under _______  (realistic) conditions. 6
LO1:  Capacity Planning Effectiveness of Capacity Use (pp.307) Measures how much of the available capacity is actually  being used Use either effective or design capacity as the  denominator ( 29 100% capacity rate output actual n Utilizatio =

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Page 8 Example of Computing Capacity Utilization:  In the bakery example the  design and effective capacity are 30 and 20 custom cakes per day,  respectively. Currently the bakery is producing 28 cakes per day. What is the  bakery’s capacity utilization relative to both design and effective capacity?  93% (100%) 30 28 (100%) capacity design output actual n Utilizatio 140% (100%) 20 28 (100%) capacity effective output actual n Utilizatio design effective = = = = = = The current utilization is only slightly below its design  capacity and considerably above its effective capacity The bakery can only operate at this level for a short period of  time
Review A clinic has been set up to give flu shots to the elderly in a large city.  The design capacity is 50 seniors per hour, and the effective capacity is

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Ch 9 - TheroleofOM 1 Chapter9...

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