Chapter 7 - Capacity and Constraint Management PDF

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IAF716 - Operations Management SUPPLEMENT Chapter 7 - Capacity and Constraint Management September 24, 2018 What is Capacity? ➔ Too little capacity = lose customers | Too much capacity = expensive ⇒ Capacity needs to be “just right” ➔ Capacity - is the number of units a facility can hold, recieve, store, or produce (aka the throughput) in a period of time. ◆ Determines Fixed Costs ◆ Determines if demand will be satisfied ◆ Capacity planning can be viewed in Three Time Horizons: (1) Long-Range Planning: > 1 year (2) Intermediate Range Planning -- aka aggregate planning: 3 to 18 months (3) Short-Range Planning -- aka scheduling: up to 3 months How to Determine Design Capacity, Effective Capacity, and Utilization? ➔ Design Capacity - the theoretical maximum output of a system in given period under ideal conditions ◆ Expressed as a rate, normally ➔ Effective Capacity - the capacity a firm can expect to achieve given current operating constraints, like product mix, methods of scheduling, maintenance, and standard of quality. ◆ Often lower than design capacity ➔ Utilization - actual output as a percent of design capacity ◆ UTILIZATION = ACTUAL OUTPUT / DESIGN CAPACITY ➔ Efficiency - actual output as a percent of effective capacity ◆ EFFICIENCY = ACTUAL OUTPUT / EFFECTIVE CAPACITY ➔ EXPECTED/ACTUAL OUTPUT = (EFFECTIVE CAPACITY)(EFFICIENCY) ◆ Sometimes rated to as rated capacity >> EXAMPLE ON PPT SLIDE 10 - 17 | EXAMPLE S2 Capacity ◆ Lessen demand by Increasing or raising prices, scheduling longer lead time >>the time between the initiation and completion of a production process.>Capacity = Total Unit (like hourly) / bottleneck...