Capacity planning and control

1. TOPIC- CAPACITY CONTROL AND PLANNING
NAME- Kumar
Ujjwal
SEMINAR-PPE11S01
DEPARTMENT OF PRODUCTION
ENGINEERING

2. WHY CAPACITY PLANNING ?
 There is no company/ organization which has unlimited resources
 Always there is scarcity of resources.
 That’s where capacity planning comes in.
 So, we need to do the planning activity so that overall process is done in
the most cost efficient manner.
 We need to know the exact no. of people, component, material etc. to
smoothly carry out a process.

3. Productive Capacity
 Generally measured in physical unit, refers either to the maximum output
rate for products or services or to the amounts of key resources available
in each operating period.

4. Strategic Capacity Planning
 Capacity: That is the ability to hold, receive, store or accommodate
raw materials, finished products, customers, etc.
 Strategic Capacity Planning: is an approach for determining the overall
capacity level of capital intensive resources including facilities, equipment and
overall labor force size.
 Capacity used is the rate of output actually achieved.
 Best Operating Level is nominally the capacity, for which the process was designed,
so nominally this is designed for the process.

5.  Capacity Utilization Rate = capacity used / Best operating level
 Question:
During one week of production, a plant produced 83 units of a
product, it’s historic best utilization was 120 units per week, what
is the plant’s capacity utilization rate ?
 Soln.
Capacity Utilization Rate = 83/120
=0.69 or 69%
Capacity Utilization

6. Capacity Decisions
 Capacity: Max capability to produce
 Rated Capacity is theoretical
 Effective capacity includes efficiency and utilization.
 Capacity Efficiency is given by how well a machine or worker
performs compared to a standard output level.
 Capacity Load is standard hours of work assigned to a facility.

7. Dimension of Demand Effect on capacity requirements
Quantity How much capacity is needed?
Timing When should capacity be available?
Quality What kind of capacity is needed?
Location Where should capacity be installed?

8. How to measure capacity ?
 There is no best way to measure capacity.
 Output measures like cars per day are easier to understand.
 With multiple products, input measures work better.
Type of business Input measures of
capacity
Output measures of
capacity
Car manufacturer Labor hour Cars per shift
Hospital Available beds Patients per month
Pizza Parlor Labor hour Pizza per day

9. 0
0.5
1
1.5
2
2.5
3
3.5
0 100 200 300 400 500 600
Averageunitcostofoutput
Volume
Economies of scale Diseconomies of scale
Best operating level

10. How much capacity is best?
 The best operating level is the output that results in the lowest or the
minimum average unit cost.
 Economies of scale: where the cost per unit of output drops as the
volume of output increases.
It spreads the fixed cost.

11. Diseconomies of scale
 where the cost per unit rises as volume increase.
 often caused by congestion, overwhelming the process with too
much work in process and scheduling complexity.

12. Demand
Forecast
Calculate the
Rated
Capacity
Calculate the
Required
capacity
Determine
alternative
applications.
Evaluation of
capacity
program.
Choosing the
best program.
Quantitative
factors (cost,…
etc.)
Quality Factor
(skill, ..etc.)
Implementation
of best program.
Capacity Planning Process

13. Reference:
-NPTEL
- International Journal of Scientific & Engineering Research,
Volume 5, Issue 8, August-2014 ISSN 2229-5518

14. Thank You.