Capacity Planning. Capacity Capacity (I): is the upper limit on the load that an operating unit can...
-
Upload
ada-jefferson -
Category
Documents
-
view
224 -
download
1
Transcript of Capacity Planning. Capacity Capacity (I): is the upper limit on the load that an operating unit can...
Capacity Capacity PlanningPlanning
CapacityCapacity CapacityCapacity ( (II):): is the upper limit on the load that is the upper limit on the load that
an operating unit can handle.an operating unit can handle. CapacityCapacity ( (IIII): ): the upper limit of the quantity of a the upper limit of the quantity of a
product (or product group) that an operating unit product (or product group) that an operating unit can produce can produce (= the maximum level of output)(= the maximum level of output)
CapacityCapacity ( (IIIIII): t): the amount of resource inputs he amount of resource inputs available relative to output requirements at a available relative to output requirements at a particular timeparticular time
The basic questions in capacity The basic questions in capacity planningplanning are: are: What kind of capacity is needed?What kind of capacity is needed? How much is needed?How much is needed? When is it needed?When is it needed? How does productivity relate to capacity?How does productivity relate to capacity?
1.1. Impacts ability to meet future Impacts ability to meet future demandsdemands
2.2. Affects operating costsAffects operating costs (fixed or (fixed or variable)variable)
3.3. Major determinant of initial costsMajor determinant of initial costs4.4. Involves long-term commitmentInvolves long-term commitment5.5. Affects competitivenessAffects competitiveness6.6. Affects ease of managementAffects ease of management7.7. Impacts long range planningImpacts long range planning
Importance of Capacity Importance of Capacity DecisionsDecisions
Examples of Capacity Examples of Capacity MeasuresMeasures
Type of Measures of CapacityOrganization Inputs Outputs
Manufacturer Machine hoursper shift
Number of unitsper shift
Hospital Number of beds Number ofpatients treated
Airline Number of planesor seats
Number ofseat-miles flown
Restaurant Number of seats Customers/timeRetailer Area of store Sales dollarsTheater Number of seats Customers/time
CapacityCapacity Design capacityDesign capacity
maximum output rate or service capacity maximum output rate or service capacity an operation, process, or facility is an operation, process, or facility is designed fordesigned for
= = maximum obtainable outputmaximum obtainable output = best operating level= best operating level
Effective capacityEffective capacity Design capacity minus allowances such as Design capacity minus allowances such as
personal time, maintenance, and scrappersonal time, maintenance, and scrap (leftover)(leftover)
Actual outputActual output = Capacity used = Capacity used rate of output actually achievedrate of output actually achieved. It . It cannot cannot
exceed effective capacity.exceed effective capacity.
Capacity Capacity Efficiency and Efficiency and Capacity Capacity UtilizationUtilization
Actual outputEfficiency =
Effective capacity
Actual outputUtilization =
Design capacity
Actual output Actual output 6 6 tons/week
EfficiencyEfficiency = = == = = 7575%%
Effective capacity Effective capacity 8 8 tons/week
Actual outputActual output 6 6 tons/week UtilizationUtilization = = ==
= = 6060%% Design capacity Design capacity 10 10 tons/week
Numeric Numeric ExampleExample
Design capacity = 10 tons/week
Effective capacity = 8 tons/week
Actual output = 6 tons/week
Determinants of Determinants of Effective CapacityEffective Capacity
FacilitiesFacilities,, layoutlayout Product and service factorsProduct and service factors Process factorsProcess factors Human factorsHuman factors Policy (shifts, overtime)Policy (shifts, overtime) Operational factorsOperational factors Supply chain factorsSupply chain factors External factorsExternal factors
Key Decisions of Key Decisions of Capacity PlanningCapacity Planning
1.1. Amount of capacity neededAmount of capacity needed
2.2. Timing of changesTiming of changes
3.3. Need to maintain balanceNeed to maintain balance
4.4. Extent of flexibility of facilitiesExtent of flexibility of facilities
Capacity CushionCapacity Cushion level of capacity in excess of the average
utilization rate or level of capacity in excess of the expected demand.
extra demand intended to offset uncertainty C. cushion = (designed capacity / capacity
used) - 1 High cushion is needed:
service industries service industries high level of uncertainty in demand (in terms of both volume and high level of uncertainty in demand (in terms of both volume and
product-mix)product-mix) to permit allowances for vacations,to permit allowances for vacations, holidays, supply of materials holidays, supply of materials
delays, equipment breakdowns, etc.delays, equipment breakdowns, etc. if subcontracting, overtime, or the cost of missed demand is very if subcontracting, overtime, or the cost of missed demand is very
highhigh
Steps for Capacity Steps for Capacity PlanningPlanning
1.1. Estimate future capacity Estimate future capacity requirementsrequirements
2.2. Evaluate existing Evaluate existing and futureand future capacitycapacity
3.3. Identify alternativesIdentify alternatives
4.4. Conduct Conduct financial analysisfinancial analysis
5.5. Assess key qualitative issuesAssess key qualitative issues
6.6. Select one alternativeSelect one alternative
7.7. Implement alternative chosenImplement alternative chosen
8.8. Monitor resultsMonitor results (feedback) (feedback)
Sources of UncertaintySources of Uncertainty
ManufacturingManufacturing Customer deliveryCustomer delivery Supplier performanceSupplier performance Changes in demandChanges in demand
The „The „Make or BuyMake or Buy” ” problemproblem
1.1. Available capacityAvailable capacity
2.2. ExpertiseExpertise
3.3. Quality considerationsQuality considerations
4.4. Nature of demandNature of demand
5.5. CostCost
6.6. RiskRisk
Developing Capacity Developing Capacity AlternativesAlternatives
1.1. Design flexibility Design flexibility intointo systems systems
2.2. Take stage of life cycle into accountTake stage of life cycle into account ((complementary productcomplementary product))
3.3. Take a “big picture” approach to Take a “big picture” approach to capacity changescapacity changes
4.4. Prepare to deal with capacity “chunks”Prepare to deal with capacity “chunks”
5.5. Attempt to smooth out capacity Attempt to smooth out capacity requirementsrequirements
6.6. Identify the optimal operating levelIdentify the optimal operating level
Economies of ScaleEconomies of Scale Economies of scaleEconomies of scale
If the output rate is less than the If the output rate is less than the optimal level, increasing output rate optimal level, increasing output rate results in decreasing average unit costsresults in decreasing average unit costs
Diseconomies of scaleDiseconomies of scale If the output rate is more than the If the output rate is more than the
optimal level, increasing the output rate optimal level, increasing the output rate results in increasing average unit costsresults in increasing average unit costs
Evaluating AlternativesEvaluating AlternativesProduction units have an optimal rate of output for minimal cost.
Minimum cost
Av
era
ge
co
st
per
un
it
0 Rate of output
Minimum average cost per unit
Evaluating AlternativesEvaluating Alternatives II.II.
Minimum cost & optimal operating rate are functions of size of production unit.
Av
era
ge
co
st
per
un
it
0
Smallplant Medium
plant Largeplant
Output rate
Need to be near customersNeed to be near customers Capacity and location are closely tiedCapacity and location are closely tied
Inability to store servicesInability to store services Capacity must be matched with timing Capacity must be matched with timing
of demand of demand Degree of volatility of demandDegree of volatility of demand
Peak demand periods Peak demand periods
Planning Planning ServiceService CapacityCapacity
Some examples ofSome examples ofmanaging changes managing changes
inin demanddemand
Adapting capacity to Adapting capacity to demand through changes in demand through changes in
workforceworkforceDEMAND
PRODUCTION RATE (CAPACITY)
Adaptation with Adaptation with inventoryinventory
DEMAND
CAPACITY
Inventory accumulation
Inventory reduction
Adaptation with Adaptation with subcontractingsubcontracting
DEMAND
PRODUCTION (CAPACITY)
SUBCONTRACTING
Adaptation with Adaptation with complementary productcomplementary product
DEMAND
PRODUCTION (CAPACITY)
DEMANDPRODUCTION (CAPACITY)
Seminar exercisesSeminar exercises
Designed capacity in calendar Designed capacity in calendar timetime
CCDD= N ∙ s= N ∙ snn ∙ s ∙ shh ∙ m ∙ mnn ∙ 60 ∙ 60 (mins / planning (mins / planning periodperiod) )
CCDD= designed capacity (mins / planning period)= designed capacity (mins / planning period) NN = number of = number of calendarcalendar days days in the planning period in the planning period
(365)(365) ssnn= = maximummaximum number of shiftsnumber of shifts in a day in a day (= 3 if dayshift (= 3 if dayshift
+ swing shift + nightshift)+ swing shift + nightshift) sshh= number of hours in a shift = number of hours in a shift
(in a 3 shifts system, it is 8 per shift)(in a 3 shifts system, it is 8 per shift) mmnn= number of homogenous machine groups= number of homogenous machine groups
Designed capacity,Designed capacity, with given with given work schedulework schedule
CCDD= N ∙ s= N ∙ snn ∙ s ∙ shh’’ ∙ m ∙ mnn ∙ 60 ∙ 60 (mins / planning (mins / planning periodperiod) )
CCDD= designed capacity (mins / planning period)= designed capacity (mins / planning period) NN = number of = number of working daysworking days in the planning period in the planning period
(≈ 250 wdays/yr)(≈ 250 wdays/yr) ssnn= = number of shiftsnumber of shifts in a day (= 3 if dayshift + swing in a day (= 3 if dayshift + swing
shift + nightshift)shift + nightshift) sshh= number of hours in a shift (in a 3 shifts system, it = number of hours in a shift (in a 3 shifts system, it
is 8)is 8) mmnn= number of homogenous machine groups = number of homogenous machine groups
Effective capacityEffective capacity in working in working minutesminutes
CCEE = = CCDD - t- tallowancesallowances (mins / planning (mins / planning period) period)
CCDD= designed capacity= designed capacity
ttallowancesallowances = allowances such as personal = allowances such as personal time, maintenance, and scrap (mins / time, maintenance, and scrap (mins / planning period)planning period)
The resources we can The resources we can calculatecalculate with with
in product mix decisionsin product mix decisionsb = b = ∙ ∙ CCEE
bb = expected capacity = expected capacityCCEE = effective capacity= effective capacity
= performance= performance percentagepercentage
How many can we produce of a How many can we produce of a good, that needs 5 minutes/unit, good, that needs 5 minutes/unit, the preparation needs 30 minutes the preparation needs 30 minutes and and = 90%, = 90%, CCEE = 10000 mins?= 10000 mins?
= (0,9*10000-30)/5= 1794 pieces= (0,9*10000-30)/5= 1794 pieces
ExerciseExercise 1.1 1.1Set up the product-resource matrix using the following data!Set up the product-resource matrix using the following data!
RRPP coefficients: a coefficients: a1111: 10, a: 10, a2222: 20, a: 20, a2323: 30, a3: 30, a344: 10: 10 The planning period is 4 weeks (there are no holidays in it, The planning period is 4 weeks (there are no holidays in it, and no work on weekends) and no work on weekends) Work schedule: Work schedule:
RR11 and and RR22: 2 shifts, each is 8 hour long: 2 shifts, each is 8 hour long RR33: 3 shifts: 3 shifts
Homogenous machines: Homogenous machines: 1 for 1 for RR11 2 for 2 for RR22 1 for 1 for RR33
Maintenance time: only for Maintenance time: only for RR33: 5 hrs/week: 5 hrs/weekPerformance rate: Performance rate:
90% for 90% for RR11 and and RR33 80% for 80% for RR22
Solution (bSolution (bii) )
RRii = = N ∙ sN ∙ snn ∙ s ∙ shh ∙ m ∙ mnn ∙ 60 ∙ 60 ∙ ∙ N=(number of weeks) N=(number of weeks) ∙ ∙ (working days per week)(working days per week)
RR11 = 4 = 4 weeksweeks ∙ ∙ 5 5 working daysworking days ∙ ∙ 2 2 shiftsshifts ∙ ∙ 8 8 hours per shifthours per shift ∙ ∙ 60 60 minutes per hourminutes per hour ∙ ∙ 1 1 homogenous machinehomogenous machine ∙ ∙ 0,9 0,9 performance performance = = = 4 = 4 ∙ ∙ 5 5 ∙ ∙ 2 2 ∙ ∙ 8 8 ∙ ∙ 60 60 ∙ ∙ 1 1 ∙ ∙ 0,9 = 17 280 0,9 = 17 280 minutes per minutes per planning periodplanning period
RR22 = 4 = 4 ∙ ∙ 5 5 ∙ ∙ 2 2 ∙ ∙ 8 8 ∙ ∙ 60 60 ∙ ∙ 2 2 ∙ ∙ 0,8 = 38 720 0,8 = 38 720 minsmins
RR33 = (4 = (4 ∙ ∙ 5 5 ∙ ∙ 3 3 ∙ ∙ 8 8 ∙ ∙ 60 60 ∙ ∙ 1 1 ∙ ∙ 0,9) – (5 0,9) – (5 hrs per weekhrs per week maintenancemaintenance ∙ ∙ 60 60 minutes per hourminutes per hour ∙ ∙ 4 4 weeksweeks) = 25 920 – ) = 25 920 – 1200 = 24 720 1200 = 24 720 minsmins
SolutionSolution (RP matrix) (RP matrix)
PP11 PP22 PP33 PP44 b (b (mins/ymins/y))
RR11 1010 17 28017 280
RR22 2020 3030 30 72030 720
RR33 1010 24 72024 720
ExerciseExercise 1.2 1.2 Complete the corporate system matrix with the Complete the corporate system matrix with the
following marketing data:following marketing data: There are long term contract to produce at least:There are long term contract to produce at least:
50 P150 P1 100 P2100 P2 120 P3120 P3 50 P450 P4
ForForeecasts says the upper limit of the market is:casts says the upper limit of the market is: 10 000 units for P110 000 units for P1 1 500 for P21 500 for P2 1 000 for P31 000 for P3 3 000 for P43 000 for P4
Unit prices: P1=100, P2=200, P3=3Unit prices: P1=100, P2=200, P3=3330, P4=1000, P4=100 Variable costs: Variable costs: RR1=5/min, 1=5/min, RR2=8/min, 2=8/min, RR3=11/min3=11/min
SolutionSolution (CS matrix) (CS matrix)
PP11 PP22 PP33 PP44 b (mins/y)b (mins/y)
RR11 1010 17 28017 280
RR22 2020 3030 30 72030 720
RR33 1010 24 72024 720
MIN (MIN (pcs/ypcs/y)) 5050 100100 120120 5050
MAX (pcs/y)MAX (pcs/y)
10 10 000000 1 5001 500 1 0001 000 3 0003 000
priceprice 100100 200200 330330 100100
Contr. Marg.Contr. Marg. 5050 4040 9090 -10-10
What is the optimal product What is the optimal product mix to maximize revenues?mix to maximize revenues?
PP11= = 17 280 / 10 = 1728 < 10 00017 280 / 10 = 1728 < 10 000
PP22: : 200/20=10200/20=10
PP33: : 330/30=11330/30=11
PP44=24 720/10=2472<3000=24 720/10=2472<3000
PP22= 100= 100 PP33= = (30 720-100∙20-120∙30)/30= (30 720-100∙20-120∙30)/30=
837<MAX837<MAX
What if we want to What if we want to maximize profit?maximize profit?
The only difference is in The only difference is in PP44 because because of its negative contribution margin.of its negative contribution margin.
PP44=50=50
ExerciseExercise 2 2
PP11 PP22 PP33 PP44 PP55 PP66 b (hrs/y)b (hrs/y)
RR11 66 2 0002 000
RR22 33 22 3 0003 000
RR33 44 1 0001 000
RR44 66 33 6 0006 000
RR55 11 44 5 0005 000
MIN (pcs/y)MIN (pcs/y) 00 200200 100100 250250 400400 100100
MAX (pcs/y)MAX (pcs/y) 2000020000 500500 400400 10001000 20002000 200200
p (HUF/pcs)p (HUF/pcs) 200200 100100 400400 100100 5050 100100
cm (HUF/pcs) cm (HUF/pcs) 5050 8080 4040 3030 2020 -10-10
SolutionSolution
Revenue max.Revenue max. PP11=333=333
PP22=500=500
PP33=400=400
PP44=250=250
PP55=900=900
PP66=200=200
Contribution max.Contribution max. PP11=333=333
PP22=500=500
PP33=400=400
PP44=250=250
PP55=966=966
PP66=100=100