Chapter 10 Capacity Management
Capacity is determined by—facilities, equipment, and labor—how they are organized, and their efficiency as determined by specific work methods. Capacity viewed in 2 ways: 1.As the maximum rate of output per unit of time, or 2.As units of resource availability. Or Can be viewed as The PRODUCTION RATE, the NUMBER OF UNITS a facility can hold, receive, store, or transport in a period of time Key Capacity issues: What: can the facility, process, or equipment accommodate the existing goods and services and adapt to changing demand in the future? How large should facility, process, or equipment capacity be? When should capacity changes take place? Capacity decisions are based on: current and future demand; perceived opportunities for growth and profit. Capacity Definitions
“Design” capacity-The maximum possible output that a process or facility can achieve under ideal conditions Effective capacity-The maximum output that a process or firm can reasonably sustain under normal conditions (number of shifts, time for repairs & maintenance, etc.) Capacity utilization=Actual Output/Design Capacity
Efficiency=Actual Output/Effective Capacity
Capacity cushion = 100% - Efficiency%
Safety capacity OR the capacity cushion is an amount of capacity reserved for unanticipated events, such as demand surges, materials shortages, and equipment breakdowns. Setup Time is the time required to change a process or an operation from making one service or product to making another. Capacity expansion strategies require determining: Amount, time, Form of capacity changes. The Theory of Constraints (TOC) is a set of principles that focuses on increasing total process throughput by maximizing the utilization of all bottleneck work activities and workstations. Throughput: Production Rate – in the end: Amount of money generated per time period through actual output that becomes actual sales. Constraint: Anything that limits an organization from moving...
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