What is Capacity?
Maximum rate of output
List some measures of capacity?
Output: Rates for different productsInputs: Machine hours available, seating capacity, # beds.
List the importance of Capacity Decisions?
1. Impacts ability to meet future demands2. Affects operating costs (under/over capacity)3. Major determinant of initial costs4. Involved long-term commitment5. Affects competitiveness (del speed/barrier to entry)6. Affects ease of management (capacity =?demand)
Examples of fluctuating demand?
Time of day>>Movies, Bowling alleysDays of week>>Repairing, Painting, U-HaulTimes of the month>>Financial Services, PaydaysSeasons of the year>>Roofing, income tax
Why is it easier to manage capacity and demand in manufacturing than services?
1. Processing time varies due to customer involvement2. Intangible service Output (qualitative & subjective)3. Time perishable capacity4. Service can't be inventoried
How do you manage capacity and demand?
Capacity: What type? (money, time, equipment, human, etc)How Much?When needed?Demand: ForecastSupply: Availability
Types of Capacity?
Human-Number, Skills-Level and mixFacilities-Single/multiple, main/satelliteEquipment-Computer system-Substitutions, modificationsTools-computerized notificationsMoney-credit card firms can carry limited receivablesTime-Hrs/day, days/week service providedAlternative Sources-subcontract or lease resources
Two Strategies for managing capacity?
1. Lead Strategy (flexibility)-Build in idle capacity-Expand in anticipation of increase in demand(Economics of small increases vs. a large increase FP&L)2. Lag Strategy (price)-Expand only after capacity has fallen below demand
Capacity increases in _____________?
Chunks or Increments
Define and Measure Capacity?
Design Capacity: maximum obtainable outputEffective Capacity: Max capacity given product mix, scheduling difficulties, and other doses of realityActual output: rate of output actually achieved -cannot exceed effective capacity.
Efficiency ratio?
Efficiency = Actual Output / Effective Capacity
Utilization Ratio?
Utilization = Actual Outpu / Design Capacity
Developing Capacity Alternatives?
Do nothingDesign flexibility into systemsDifferentiate between new and mature products or servicesTake a big picture approach (motel rooms/parking)Prepare to deal with capacity chunksSmooth out capacity requirementsIdentify optimal operating levels