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Factors That Influence Capacity

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57 views5 pages

Factors That Influence Capacity

Uploaded by

tpequit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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FACTORS THAT INFLUENCE CAPACITY

 Demand Forecasting: Predicting customer demand for capacity planning.

 Production Technology: Efficiency of operations impacting company's capacity.

 Market Demand: Customer needs determining necessary capacity.

 Competition: Competitive landscape shaping capacity decisions.

UTILIZATION
- Measure of planned or actual capacity usage of a facility, work center, or machine

ACTUAL OUTPUT/DESIGN CAPACIY OR PLANNED HOURS TO BE USED/TOTAL HOURS AVAILABLE

EFFIECIENCY
- Measure of how well a facility or machine is performing when used

ACTUAL OUTPUT/EFFECTIVE CAPACITY ACTUAL OUTPUT IN UNITS/STANDARD OUTOUT IN UNITS

DETERMINANTS OF EFFECTIVE CAPACITY

 Facilities
 Product and Service Factors
 Process Factors
 Human Factors
 Operational Factors
 Supply Chain Factors
 External Factors

STEPS IN CAPACITY PLANNING

 Estimate future capacity requirements.


 Evaluate existing capacity and facilities and identify gaps.
 Identify alternatives for meeting requirements.
 Conduct financial analyses of each alternative.
 Assess key qualitative issues for each alternative.
 Select the alternative to pursue that will be best in the long term.
 Implement the selected alternative.
 Monitor results.

SERVICE CAPACITY PLANNING

- Service capacity planning can present a number of challenges related to:

The need to be near customers: Convenience

The inability to store services: Cannot store services for consumption later

The degree of demand volatility: Volume and timing of demand and Time required to service individual customers
DEVELOPING CAPACITY ALTERNATIVES

- Things that can be done to enhance capacity management:

 Design flexibility into systems


 Take stage of life cycle into account
 Take a “big-picture” approach to capacity changes
 Prepare to deal with capacity “chunks”
 Attempt to smooth capacity requirements
 Identify the optimal operating level
 Choose a strategy if expansion is involved

EVALUATION OF ALTERNATIVES

 Break Even Analysis


 Cash Flow and NPV Analysis
 Decision Theory
 Waiting Line Analysis
 Simulation

BREAK EVEN ANALYSIS

 Technique for evaluating process & equipment alternatives


 Objective: Find the point Pho or units) at which total cost equals total revenue
 Assumptions
 Revenue & costs are related linearly to volume
 All information is known with certainty
 No time value of money

 Fixed costs: costs that continue even if no units are produced: depreciation, taxes, debt, mortgage payments,
salaries, etc
 Variable costs: costs that vary with the volume of units produced: labor wages, materials, portion of utilities

DECISION THEORY

DECISION ENVIRONMENT

Certainty - Environment in which relevant parameters have known values


Risk - Environment in which certain future events have probable outcomes

Uncertainty - Environment in which it is impossible to assess the likelihood of various future events
DECISION MAKING UNDER UNCERTAINTY

 Decisions are sometimes made under complete uncertainty: No information is available on how likely the various
states of nature are.
 Decision Criteria:
 Maximin- Choose the alternative with the best of the worst possible payoffs
 Maximax- Choose the alternative with the best possible payoff
 Laplace- Choose the alternative with the best average payoff
 Minimax regret- Choose the alternative that has the least of the worst regrets
DECISION MAKING UNDER RISK
 Decisions made under the condition that the probability of occurrence for each state of nature can be estimated
 A widely applied criterion is expected monetary value (EMV)
 EMV
 Determine the expected payoff of each alternative, and choose the alternative that has the best
expected payoff
 This approach is most appropriate when the decision maker is neither risk averse nor risk seeking

Expected value of perfect information: the difference between the expected payoff under certainty and the expected payoff
under risk

PROCESS STRATEGY

 Process – value creation activities


 Process strategy – organization’s approach for producing goods or providing services
 Objective
 Meet or exceed customer requirements
 Meet cost & managerial goals
 Has long-run effects
 Production efficiency
 Product & volume flexibility
 Cost & quality
PROCESS
 Job Shop
 Batch Processing
 Repeat Processing
 Continuous Processing
REPETITIVE FOCUSED STRATEGY

REPETITIVE FOCUS-CONSIDERATIONS

 Product focused process that uses modules


 More structured than process-focused, less structured than product focused
 Enables quasi-customization
 Using modules, it enjoys economic advantage of continuous process, and custom advantage of low-volume, high-
variety model

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