CAPACITY PLANNING

with reference to McDonalds

Hi, friends I am Ronald’s

Yes, I am here to tell you about my

story

Story of McDonald

My Team members are:Sai Praveen Piyush SinghAnkit VermaAnand Batra

CAPACITY

Capacity is the upper limit 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?

CAPACITY PLANNING• Capacity planning is the process of

determining the production capacity needed by an organization to meet changing demands for its products.

• In the context of capacity planning, “capacity" is the maximum amount of work that an organization is capable of completing in a given period of time.

• A discrepancy between the capacity of an organization and the demands of its customers results in an inefficiency, either in under-utilized resources or unfulfilled customers.

• The goal of capacity planning is to minimize this discrepancy.

• Capacity can be increased through introducing new techniques, equipment and materials, increasing the number of workers or machines, increasing the number of shifts, or acquiring additional production facilities.

Mc Donalds• McDonald's is the world's leading food service

retailer with more than 33,000 restaurants in 118 countries serving more than 67 million customers each day.

• In India, it operates under two parent franchisees Hardcastle Restaurants Pvt. Ltd – West and South Vikram Bakshi's Connaught Plaza Restaurants

Private Limited – North and East• McDonald's India is a leader in the food retail

space, with a presence of more than 250 restaurants serving more than 6.5 lakh customers daily in India.

McDonalds (Sonipat)

• Located at Ansal Plaza Mall, Kundli, Sonipat 131001

• Operation Hours – (8a.m-11p.m)• 115 covers• 1 Restaurant Manager , 2 Astt.

Manager• 1 Relationship Executive ,1 Crew

Trainer• 25 crews

FACTORS AFFECTING CAPACITY PLANNING

• Product Design Every product has its own unique recipe

• Process Design Process of a making of product should be time effective but quality cannot be reduced

• Product Variety Product having less variation can be processed together to reduce overall time

• Product QualityTest & Inspection are made in order to keep a check on quality of product.

• Product SchedulingScheduling that keeps the product flow well balanced and synchronized

ECONOMIES OF SCALE

Economies of scale results in lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.

DISECONOMIES OF SCALEDiseconomies of scale result in rising long run average costs which are experienced 1) When a firm expands2) When govt. policies changes

Capacity strategies

• Lead strategy-the company increases its production capacity in advance of anticipated increases in demand.

• Lag strategy-the company responds to actual increases in demand by boosting capacity after the operation is running at full steam.

• Match strategy-the company matches the demand and supply.

McDonalds’ capacity strategy

• The company uses lead strategy

• Bun inventory- 2 days advance• FCD(Fried chilled dried) inventory- 3

days advance• Coke inventory- 15 days advance

DESIGNED AND ACTUAL CAPACITY

Design capacity is the maximum theoretical output of a system

Actual capacity is the rate of output actually achieved.

DESIGN CAPACITY• McAloo tikki• Prepration time = 42s• Prepration time (hrs.)=

42/3600=0.0116667hrs• Operating Hours =15• Total McAloo tikki in a

day=15/0.0116667

=1286(approx.)

UTILIZATION

• Utilization is the percent of design capacity achieved

• Actual Output = 352 • Utilization = Actual Output/ Design Capacity

352/1286 =27 %

CAPACITY PLANNING FRAMEWORK

• Estimating Total Requirements• Estimating Labor and Machine

Requirements• Computing Capacity Availability• Comparison of Availability and

Requirements• Process Mapping and Capacity

Analysis

COMPUTING TOTAL REQUIREMENTS

No. of working days in the outlet(Nd ) = 7No. of working hours per day (h) = 15 hrs.System Availability (WEEKLY) = 7x15= 105 hrs.

ESTIMATING LABOUR REQUIREMENTS

• Labor requirements depends fully on sales

• Requirements will vary in the following ways

• Peak Time (1pm- 4pm) & (7pm-10pm)

Expected Guest Count- 400• Weekends Expected Guest Count- 600• Holidays• Fridays

RESOURCE AVAILABLITY• No. of Workers Available (NL) = 25• Absenteeism (a) = 2%• Workers Capacity = Nd X h X NL X (1-

a/100)

(weekly) = 7 X 15 X 25 X (98/100)

= 2572 hrs.

ESTIMATING MACHINE REQUIREMENTS

• Machine requirements are totally depend on Product Variants

• Burgers• French Fries• Coke• Ice-cream• Cold Coffee & Ice Tea • McPuff Pizza

RESOURCE AVAILABILITY

• No. of Machines Available (Nm) = 17• Machine Capacity= Nd X h X Nm

(weekly) =7 X 15 X 17 = 1785 hrs.

PROCESS MAPING

VEG-LINE for making Burgers

HYPOTHETICAL PROBLEM• The outlet is small and it is not able to handle the

crowd. • The plant has two options- to expand the outlet, to

open a new outlet in the locality.• The marketing research says the probability of

success if we expands the outlet is 80%, with a cost of 50 lakhs, the revenue generated would be 1 crore. In case of failure the loss would be 30 lakhs.

• The probability of success if we open a new outlet in the locality would be 60%, with a cost of 90 lakhs, the revenue generated would be1.4 crores. In case of failure the loss would be 40 lakhs.

DECISION TREE

DECISION• EMV at node 1• (0.8 x 1) + (0.2 x -0.3) = 74 lakhs

• EMV at node 2• (0.6 x 1.4) + (0.4 x -0.4) = 68 lakhs

• Decision at node A is to EXPAND the plant as it will get more profit.

LEARNINGS • It helped us to ensure that current &

future capacity and performance aspects of the business requirements are provided in cost effective manners.

• It helped us in understanding the importance of decision –tree in order to select the most effective & efficient method of capacity expansion.