Capacity Planning
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Transcript of Capacity Planning
LONG RANGE CAPACITY PLANNING
NUCLEAR POWER CORPORATION-INCREASING CAPACITY
India's nuclear power programme is poised to expand
rapidly
Efforts need to be made for the multiplication of
manufacturing capacity
NPCIL will embrace a variety of reactor technologies
Boiling Water Reactor (BWR)
Pressurised Heavy Water Reactor (under operation now),
Pressurised Water Reactor (PWR) and Fast Breeder
Reactor (FBR) (UNDER CAPACITY PLANNING)
DEFINITIONS OF CAPACITY
In general, production capacity is the maximum
production rate of an organization.
The Federal Reserve Board defines sustainable
practical capacity as the greatest level of output
that a plant can maintain …
within the framework of a realistic work
schedule
taking account of normal downtime
assuming sufficient availability of inputs to
operate the machinery and equipment in
place
MEASUREMENTS OF CAPACITY
Output Rate Capacity
Choice for high volume processes
For a facility having a single product or a few homogeneous
products
For a facility having a diverse mix of products, an aggregate
unit of capacity must be established
ORGANIZATION MEASURE
Automobile manufacturer Number of autos
Brewery Barrels of beer
Steel Power Tons of steel
Power company Megawatts of electrcity
CONTD….
Input Rate Capacity
Choice of low volume
Flexible processes
Commonly used for service operations
Output measures are difficult
ORGANIZATION MEASURE
Merchandising Square feet of display
Job shop Labor or machine hours
Hospitals Number of beds
Tax office Number of accountants
UTILIZATION
Degree to which equipment, space, or labour
Is currently being used
UTILIZATION = AVERAGE OUTPUT RATE *100
MAXIMUM CAPACITY
CONTD….
Pg 354
CONTD….
PEAK CAPACITY: Maximum output that
a process or facility that can achieve
under ideal conditions
EFFECTIVE CAPACITY: Maximum output
that a process or firm can
economically sustain under normal
conditions
CONTD….
Capacity Cushion
An additional amount of capacity added onto
the expected demand to allow for:
greater than expected demand
demand during peak demand seasons
lower production costs
product and volume flexibility
improved quality of products and
services
Capacity Cushion = 100% - Utilization
rate(%)
CONTD….
ECONOMIES OF SCALE Economies of scale: Average cost per
unit decreases as the volume increases
toward the best operating level
Why economies of scale can drive cost
down when output increases????
Fixed costs are spread over more units
Construction costs are reduced
Costs of purchase materials are cut
Process advantages are found
DISECONOMIES OF SCALE
Diseconomies of scale - Average cost
per unit increases as the volume
increases beyond the best operating
level
Reasons
Excessive size can bring complexity
Loss of focus
Inefficiencies that raise the average
unit cost of a product or service
ECONOMIES AND DISECONOMIES OF SCALE
Average UnitAverage UnitCost of Output ($)Cost of Output ($)
Annual Volume (units)Annual Volume (units)
Best Operating LevelBest Operating Level
EconomiesEconomiesof Scaleof Scale
DiseconomiesDiseconomiesof Scaleof Scale
STEPS IN THE CAPACITY PLANNING PROCESS
Estimate the capacity of the
present facilities.
Forecast the long-range future
capacity needs.
Identify and analyze sources of
capacity to meet these needs.
Select from among the alternative
sources of capacity.
TOOLS FOR CAPACITY PLANNING
Break-Even Analysis
Present-Value Analysis
Computer Simulation
Waiting Line Analysis
Linear Programming
Decision Tree Analysis
EXPANSION OF LONG-TERM CAPACITY
Subcontract with other companies
Acquire other companies, facilities, or
resources
Develop sites, construct buildings, buy
equipment
Expand, update, or modify existing
facilities
Reactivate standby facilities
Pg 372
PRESENTED BY :-
1. Niyati vats.