18115_Chapter 11 capacity management.pptx

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 11.1
Chapter 11
Capacity management

Slide 11.2
Direct
Design Develop
Deliver
Operations
management
Capacity management
Capacity
management
The operation supplies... the
capacity to deliver products
and services
The market requires…
the availability of
products and services
Figure 11.1 A definition of capacity planning and control

Slide 11.3
In Chapter 11 – Capacity planning and control – Slack et
al. identify the following key questions…
What is capacity management?
How is capacity measured?
What are the ways of coping with demand fluctuation?
How can operations plan their capacity level?
How capacity management a queuing problem?
Key operations questions

Slide 11.4
 Capacity is in the static, physical sense means the
scale of an operation.
What is capacity?
 But this may not reflect the operation’s processing
capability.
 So we must incorporate a time dimension appropriate
to the use of assets.
 For example 24,000 litres per day
 10,000 calls per day
 57 patients per session
 Etc.

Slide 11.5
The objectives of capacity management
To provide an ‘appropriate’ amount of capacity at any
point in time.
The ‘appropriateness’ of capacity planning in any part of
the operation can be judged by its effect on…
Costs
Revenue
Working capital
Service level, in terms of…
 Quality
 Speed
 Dependability
 Flexibility

Slide 11.6
Objectives of capacity planning and control
Forecast demand
Time
Aggregated
output
Estimate of current capacity
Measure aggregate
capacity and demand
Identify the alternative
capacity plans
Choose the most
appropriate capacity plan
Figure 11.2 The steps in capacity management

Slide 11.7
Operation Input measure of capacity Output measure of capacity
Air-
conditioner
plant
Machine hours available Number of units per week
Hospital Beds available Number of patients treated per
week
Theatre Number of seats Number of customers
entertained per week
University Number of students Students graduated per year
Retail store Sales floor area Number of items sold per day
Airline Number of seats
available on the sector
Number of passengers per
week
Input and output capacity measures for different
operations
Table 11.1 Input and output capacity measures for different operations
Note: The most commonly used measure is shown in bold.

Slide 11.8
The nature of aggregate capacity
– rooms per night;
– ignores the numbers of guests in each room.
– tonnes per month;
– ignores types of alloy, gauge and
batch variations.
Aggregate capacity of a hotel:
Aggregate capacity of an aluminium
producer:

Slide 11.9
Climatic Festive Behavioural Political Financial Social
Causes of seasonality
Construction materials
Beverages (beer, cola)
Foods (ice-cream)
Clothing (swimwear, shoes)
Gardening items (seeds)
Fireworks
Travel services
Holidays
Tax processing
Doctors (influenza epidemic)
Sports services
Education services

Slide 11.10
Demand fluctuations in four operations
Figure 11.3 Aggregate demand fluctuations for four organizations
Sources: Shutterstock/Cuiphoto, Shutterstock/yuyangc, Shutterstock/Light & Magic, Shutterstock/Lucky Photo

Slide 11.11
Good forecasts essential for effective capacity planning
But so is an understanding of demand uncertainty because it allows you to
judge the risks to service level.
When demand uncertainty is high the risks to service level of under
provision of capacity are high.
Demand Time
Only 5% chance of demand
being lower than this
Demand
Time
Distribution of demand
Only 5% chance of demand
being higher than this

Slide 11.12
Loading time
Equipment
‘idling’
Speed
losses
Slow running
equipment
Net operating
time
Not worked
(unplanned)
Breakdown
failure
Set-up and
changeovers
Total operating
time
Availability
losses
Operating equipment effectiveness (OEE)
Availability rate = a
= total operating time
loading time
Performance rate = p
= net operating time
total operating time
Quality rate = q
= valuable operating time
net operating time
Quality
losses
Valuable
operating
time
Quality
losses
Figure 11.4 Operating equipment effectiveness

Slide 11.13
How capacity and demand are measured
Design capacity
საპროექტო /
ნომინალური
სიმძლავრე
168 hours
per week
Effective
capacity
რეალური
სიმძლავრე
109 hours
per week
Planned loss
of 59 hours
Actual output
ფაქტიური
გამოშვება – 51
hours per week
Avoidable loss – 58
hours per week
Efficiency
სიმძლ.ეთა
ქმედითობა
Actual output
Effective capacity
=
Utilization
Actual output
Design capacity
=
სიმძლ. გამოყენება

Slide 11.14
Ways of reconciling capacity and demand
Level capacity
Demand
Capacity
Chase demand
Demand
management
Capacity
Capacity
Demand Demand

Slide 11.15
How do you cope with
fluctuations in demand?
Absorb
demand
Change
demand
Adjust output
to match
demand
Level
capacity Chase
demand
Demand
management
Ways of reconciling capacity and demand (Continued)

Slide 11.16
Absorb
demand
Part finished
Finished goods, or
Customer inventory
Queues
Backlogs
Have
excess
capacity
Make to
stock
Keep output
level
Make
customer
wait
Absorb demand

Slide 11.17
Adjust output to
match demand
Hire Fire
Temporary labour Lay-off
Overtime
Subcontract
Short time
3rd party work
Adjust output to match demand

Slide 11.18
Change
demand
Change pattern of demand
Develop alternative products and/or services
Change demand

Slide 11.19
Moving a peak in demand can make capacity planning
easier
Figure 11.9 A mixed capacity plan for the woollen knitwear factory

Slide 11.20
Shortages
Queues
Inventory
Actual
demand
and actual
capacity
Period t − 1
Outcome
How much
capacity
next
period?
Current
capacity
estimates
Updated
forecasts
Period t
Decision
How much
capacity
next
period?
Current
capacity
estimates
Updated
forecasts
Period t + 1
Decision
Capacity
level
Shortages
Queues
Inventory
Costs
Revenues
Working capital
Customer satisfaction
Etc.
Actual
demand
and actual
capacity?
Costs
Revenues
Working capital
Customer satisfaction
Etc.
Outcome
Capacity planning and control as a dynamic sequence of
decisions

Slide 11.21
Demand for a manufacturing operation’s output
8,000
Forecast
in
aggregated
units
of
output
per
month
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
J F M A M J J A S O N D
Months

Slide 11.22
For capacity planning purposes demand is best considered on a cumulative
basis. This allows alternative capacity and output plans to be evaluated for
feasibility.
Forecast
cumulative
aggregated
output
(thousands)
60
50
40
30
20
10
0
0 40 80 120 160 200 240
Cumulative operating days
But will not satisfy demand at
all points throughout the year
Producing at
average demand
Producing at average demand
allows inventory to be accumulated
Demand for a manufacturing operation’s output
(Continued)

Slide 11.23
Cumulative representations
Cumulative demand
Time
Building
stock
Unable to
meet orders
Capacity
and
demand
Cumulative capacity

Slide 11.24
Time
Time
Low variability –
narrow distribution
of process times
High variability –
wide distribution of
process times
Simple queuing system
Figure S11.1 Low and high arrival variation

Slide 11.25
Boundary
of system
Queue or
‘waiting line’
Served
customers
Rejecting Baulking Reneging
Server 1
Server 2
Server m
Distribution of
arrival times
Distribution of
processing times
Simple queuing system (Continued)
Source of
customers
Figure 11.14 The general form of the capacity decision in queuing systems

Slide 11.26
Operation Arrivals Processing capacity
Bank Customers Tellers
Supermarket Shoppers Checkouts
Hospital clinic Patients Doctors
Graphic artist Commissions Artists
Custom cake
decorators
Orders Cake decorators
Ambulance service Emergencies Ambulances with crews
Telephone switchboard Calls Telephonists
Maintenance
department
Breakdowns Maintenance staff
Table 11.2 Examples of operations which have parallel processors

Slide 11.27
Short-term outlook for volume
Decreasing below current
capacity
Level with current
capacity
Increasing above
current capacity
Long-term
outlook
for
volume
Decreasing
below
current
capacity
Level
with
current
capacity
Increasing
above
current
capacity
Reduce capacity (semi)
permanently. For
example, reduce staffing
levels, reduce supply
agreements.
Plan to reduce capacity
(semi) permanently. For
example, freeze
recruitment, modify
supply agreements.
Increase capacity
temporarily. For example,
increase working hours,
and/or hire temporary staff,
modify supply agreements.
Reduce capacity
reduce staff working
hours, modify supply
agreements.
Maintain capacity at
current level.
Increase capacity (semi)
permanently. For
example, hire staff,
increase supply
agreements.
Reduce capacity
reduce staff working
hours, but plant to recruit,
modify supply
agreements.
Plan to increase capacity
above current level, plan
to increase supply
agreements.
Increase capacity
increase working hours,
and/or hire temporary staff,
modify supply agreements.
Capacity management – long and short-term outlook
Figure 11.16 Capacity management strategies are partly dependent on the long- and short-term outlook for
volumes

18115_Chapter 11 capacity management.pptx

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