Capacity utilization is crucial for profitability. Orderwinners(competitive dimensions):Price: low cost process Quality: high quality process Time: fast process/Flexibility: flexible pushing out the frontier(innovation)
Capacity, inventory and information (variability reduction) are substitute ways to meet demand.( OM Triangle) Inventory build up without variability
Scenario 1: Demand rate < Capacity, and no buffer inventory Throughput rate = Demand rate
Scenario 2: Demand rate > Capacity
Buffer inventory builds up at rate: Demand rate – Capacity Throughput rate = Capacity rate
Scenario 3: Demand rate < Capacity, buffer inventory exists Buffer inventory depletes at rate: Capacity – Demand rate Throughput rate = Capacity rate
Throughput rate is what actually happened.
Investment Analysis( National Cranberry)
Capacity investment should focus on the bottleneck
Can also invest in buffer/storage space.
Diminishing marginal returns on investment.
Capacity=1/cycle time, bottleneck determines the capacity
output rate=throughput rate. Input rate= demand rate
Little’s Law:Inventory(use of working capital)=Throughput rate (rate of revenue generation)* flow time(responsiveness,leadtim) As long as these quantities are measured in consistent units over a long period of time, this relationship holds. Throughput rate = minimum of demand rate and capacity rate
Bottleneck determines the capacity of process
Is the slowest resource, can change when resources are added. May depend on product mix. ///Shortening non bottleneck decreases flow time, improves responsiveness. No impact on capacity. Process selection (desired capability) vs. customer interfaces/process architectures:
Flexibility-make to order-job shop(operation structure)
Efficiency-make to stock-flow shop
Jobshop has low equipment specialization and high machine setup frequency match process to product throughout the product’s life cycle. Actual Utilization = Throughput rate / Capacity...
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