Chapter 5 - Capacity

Chapter 5 - Capacity - Chapter 5 Strategic Capacity...

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Chapter 5 Strategic Capacity Planning for Products and Services
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Capacity Planning Capacity The upper limit or ceiling on the load that an operating unit can handle. Capacity needs include Equipment Space Employee skills
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Strategic Capacity Planning Goal To achieve a match between the long-term supply capabilities of an organization and the predicted level of long-run demand. Overcapacity operating costs that are too high Undercapacity strained resources and possible loss of customers
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Capacity Planning Questions Key Questions: What kind of capacity is needed? How much capacity is needed to match demand? When is it needed? Related Questions: How much will it cost ? What are the potential benefits and risks ? Are there sustainability issues? Should capacity be changed all at once, or through several smaller changes? Can the supply chain handle the necessary changes?
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Capacity Decisions Are Strategic Capacity decisions impact the ability of the organization to meet future demands. affect operating costs. are a major determinant of initial cost. often involve long-term commitment of resources. can affect competitiveness. affect the ease of management. are more important and complex due to globalization. need to be planned for in advance due to their
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Measures of Capacity Business Inputs Outputs Auto manufacturing Labor hours, machine hours Number of cars per shift Steel mill Furnace size Tons of steel per day Oil refinery Refinery size Gallons of fuel per day Farming Number of acres, number of cows Bushels of grain per acre per year, gallons of milk per day Restaurant Number of tables, seating capacity Number of meals served per day Theater Number of seats Number of tickets sold per performance Retail sales Square feet of floor space Revenue generated per day
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Design capacity Maximum output rate or service capacity an operation, process, or facility is designed for. Effective capacity Design capacity minus allowances such as personal time, maintenance, and scrap. Actual output
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This note was uploaded on 03/29/2012 for the course ECON 101 taught by Professor Schneider during the Spring '11 term at Kansas State University.

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Chapter 5 - Capacity - Chapter 5 Strategic Capacity...

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