Super study guide2 MIS 373

Topics: Costs, Variable cost, Fixed cost Pages: 2 (2143 words) Published: February 11, 2015
Chapter5

Capacity: The upper limit or ceiling on the load that an operating unit can handle Capacity needs include:
Equipment; Space; Employee skills

Strategic Capacity Planning:
- Goal: To achieve a match between the long-term supply capabilities and the predicted level of long-term demand
Overcapacity: operating costs that are too high
Undercapacity: strained resources and possible loss of customers

Key Questions of Capacity Planning:
What kind of capacity is needed?
How much is needed to match demand?
When is it needed?
Related Questions:
1.How much will it cost? 2.What are the potential benefits and risks? 3.Should capacity be changed all at once, or through several smaller changes? 4.Can the supply chain handle the necessary changes?

Capacity Decisions Are Strategic:
Capacity decisions:
1.impact the ability of the organization 2.to meet future demands 3.major determinant of initial cost
4.(often) involve long-term commitment of resources
5.affect operating costs
6.affect the ease of management
7.affect competitiveness

Design capacity:
Maximum output rate or service capacity an operation, process, or facility is designed for. Effective capacity:
Design capacity minus inefficiencies such as operational factors, personal time, maintenance, scrap etc. - cannot exceed design capacity. Actual output: Rate of output actually achieved—cannot exceed effective capacity.

Measuring System Effectiveness:

Determinants of Effective Capacity
1. Facilities
Size, expansions, layout, transportation costs, distance to market, labor supply, energy sources 2. Product and service factors
(non) uniformity of output, product/service mix
3. Process factors
Productivity, quality, setup-time
4. Human factors
Tasks, variety of activities, training, skills, learning, experience, motivation, labor turnover 5. Policy factors
Overtime, second/third shifts
6. Operational factors
Scheduling, inventory, purchasing, materials,...
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