capacity
throughput, or number of units a facility can hold, receive, store, or produce in a period of time.
design capacity
maximum theoretical output of a system in a given period under ideal conditions
effective capacity
what firm expects to acheive
utilization
actual output divided by design capacity x100
efficiency
actual output divided by effective capacity x100
Tactics for matching capacity to demand
1. making staffing changes
2. adjusting equipment
3. improving process to increase throughput
4. redesigning products to facilitate more throughput
5. adding process flexibility to better meet changing product preferences
6. closing facilities
demand management
scheduling customers
capacity management
scheduling workforce
capacity analysis
a means of determining throughput capacity of work stations or an entire production system
bottleneck
a limiting factor or constraint in a system
bottleneck time
the time of the longest process
throughput time
time it takes for a product to go through production process w/ no waiting.
Theory of constraints (TOC)
a body of knowledge that deals w/ anything that limits an organization's ability to achieve its goals
5 steps to managing contraints
1. identify constraints
2. develop a plan for over coming the constraints
3. focus resources on accomplishng step 2
4. reduce effects of constraints by offloading or expanding capacity
5. when one set of constraints is overcome, go back to step one and id
4 principles for bottleneck management
1. let the bottleneck set the pace (drum, buffer, rope)
2. lost time at bottleneck = lost time for whole system
3. increasing capacity of non bottleneck is a mirage
4. increasing the capacity of the bottleneck increases the capacity for the whole system
break-even analysis
a means of finding the point, in dollars and units at which cost=revenues
contribution
selling price - variable cost
net present value
a means of determining the discounted value of a series of future cash receipts
annuity
investment that generates a series of uniform and equal cash amounts