Learning Materials-Capacity Planning For Product And Services

Capacity PlanningFor Products and ServicesCapacity Planning* Capacity is the upper limit or ceiling on the load that an operating unit can handle.* The basic questions in capacity handling are:* What kind of capacity is needed?* How much is needed?* When is it needed?Importance of Capacity Decisions1. Impacts ability to meet future demands2. Affects operating costs3. Major determinant of initial costs4. Involves long-term commitment5. Affects competitiveness6. Affects ease of management7. Globalization adds complexity8. Impacts long range planningCapacity* 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* rate of output actually achieved--cannot & exceed effective capacity.Capacity PlanningDeterminants of Effective Capacity* Facilities* Product and service factors* Process factors* Human factors* Operational factors* Supply chain factors* External factorsStrategy FormulationThree primary strategies:* Leading capacity strategy-builds capacity in anticipation of future demand increases.* Following strategy - builds capacity when demand exceeds current capacity.* Tracking strategy - is similar to a following strategy, but it adds capacity in relatively small increments to keep pace with increasing demandStrategy FormulationCapacity strategy for long-term demand* Demand patterns* Growth rate and variability* Facilities .Cost of building and operating* Technological