What are the advantages and disadvantages of membrane structures.pptx
03. 333333333333333333333Capacity Planning.ppt
1. Capacity Planning
Capacity refers to an upper limit or ceiling on the
load that an operating unit can handle
The basic questions are:
• What kind of capacity is needed?
• How much is needed?
• When it is needed?
Impact on the ability of the organization to meet future
demands for products & services
Major determinant of initial cost – greater the capacity,
larger the investment
Can affect competitiveness – excess capacity or flexible
capacity
Affects the ease of management
2. Design Capacity: maximum attainable output
Effective Capacity: maximum possible output with
scheduling difficulties, machine maintenance & so on
Utilization is always less than efficiency
capacity
Effective
output
Actual
Efficiency
capacity
Design
output
Actual
n
Utilizatio
Capacity Planning
3. Determinants of Effective Capacity
Facilities
• Design – including size & provision of expansion
• Location – transportation cost, distance to market, labor supply
• Layout – smoothness of flow, as will as lighting & ventilation
Capacity Planning
Product / services
• Design – easier the design, easier to produce
• Product Mix – varieties of product reduce capacity
Process
• Quantity – obvious determinant of capacity
• Quality – low quality will require inspection & rework
4. Determinants of Effective Capacity
Human Factor
• Job content
• Training/Experience
• Motivation
• Compensation
Capacity Planning
Operational
• Scheduling differences in equipment capabilities
• Materials management – shortage of materials/ complaints
• Quality assurance – in process & incoming materials
External
• Product standard – can restricts increasing capacity
• Safety regulations
• Unions
5. Capacity Requirement
Long term – relates to overall level of capacity e.g., facility size
Short term – relates to probable variations e.g., seasonal, random
Determined by forecasting demand over a time horizon, and then
converting those forecasts into capacity requirement
Trend
- How long
- Slope of trend
Deviations are important as they can place severe strain to satisfy
demand at sometimes & yet result in idle capacity at other times
Capacity Planning
6. Developing Capacity Alternatives
Design flexibility into systems
Provisions for future expansions in the original design
Capacity Planning
Differentiate between new and matured products/services
Matured product/services tends to be more predictable
Prepare to deal with capacity chunks
Capacity increases are often acquired in fairly large chunks
Attempt to smooth out capacity requirement
Need to identify products which can offset each other
Identify the optimal operation level
In terms of unit cost of output
7. Evaluating Alternatives
Cost volume Analysis
Total cost VC
FC
TC
Variable cost U
Q
VC *
Total revenue R
Q
TR *
Total Profit
FC
U
R
Q
)
(
*
TC
TR
P
U
R
FC
P
Q
U
R
FC
Q
For breakeven
Financial Analysis
• Pay back period
• Net present value
• Internal rate of return
Capacity Planning