Capacity Planning


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  • For automobile example give nissan motors.
  • Example of job shop: photo copy shop
  • Outsourcing firm
  • Biocon till date has 6 blocks of building ( S1 to S6). They are acquiring a new project called as BMS and so they are constructing 3 new blocks namely s11,s12,s13. This BMS project is totally based on Drug Discovery . They have an Intital reqirement of 120 HPLC and they have also placed an order for it from Agilent technologies.
  • Capacity Planning

    2. 2. NUCLEAR POWER CORPORATION-INCREASING CAPACITY <ul><li>India's nuclear power programme is poised to expand rapidly </li></ul><ul><li>Efforts need to be made for the multiplication of manufacturing capacity </li></ul><ul><li>NPCIL will embrace a variety of reactor technologies </li></ul><ul><li>Boiling Water Reactor (BWR) </li></ul><ul><li>Pressurised Heavy Water Reactor (under operation now), </li></ul><ul><li>Pressurised Water Reactor (PWR) and Fast Breeder Reactor (FBR) (UNDER CAPACITY PLANNING) </li></ul>
    3. 3. DEFINITIONS OF CAPACITY <ul><li>In general, production capacity is the maximum production rate of an organization. </li></ul><ul><li>The Federal Reserve Board defines sustainable practical capacity as the greatest level of output that a plant can maintain … </li></ul><ul><ul><li>within the framework of a realistic work schedule </li></ul></ul><ul><ul><li>taking account of normal downtime </li></ul></ul><ul><ul><li>assuming sufficient availability of inputs to operate the machinery and equipment in place </li></ul></ul>
    4. 4. MEASUREMENTS OF CAPACITY <ul><li>Output Rate Capacity </li></ul><ul><li>Choice for high volume processes </li></ul><ul><li>For a facility having a single product or a few homogeneous products </li></ul><ul><ul><li>For a facility having a diverse mix of products, an aggregate unit of capacity must be established </li></ul></ul>ORGANIZATION MEASURE Automobile manufacturer Number of autos Brewery Barrels of beer Steel Power Tons of steel Power company Megawatts of electrcity
    5. 5. CONTD…. <ul><li>Input Rate Capacity </li></ul><ul><li>Choice of low volume </li></ul><ul><li>Flexible processes </li></ul><ul><ul><li>Commonly used for service operations </li></ul></ul><ul><ul><li>Output measures are difficult </li></ul></ul>ORGANIZATION MEASURE Merchandising Square feet of display Job shop Labor or machine hours Hospitals Number of beds Tax office Number of accountants
    6. 6. <ul><ul><li>UTILIZATION </li></ul></ul><ul><ul><li>Degree to which equipment, space, or labour </li></ul></ul><ul><ul><li>Is currently being used </li></ul></ul><ul><ul><li>UTILIZATION = AVERAGE OUTPUT RATE *100 </li></ul></ul><ul><ul><li>MAXIMUM CAPACITY </li></ul></ul>CONTD….
    7. 7. <ul><li>Pg 354 </li></ul>CONTD….
    8. 8. <ul><li>PEAK CAPACITY: Maximum output that a process or facility that can achieve under ideal conditions </li></ul><ul><li>EFFECTIVE CAPACITY: Maximum output that a process or firm can economically sustain under normal conditions </li></ul>CONTD….
    9. 9. <ul><li>Capacity Cushion </li></ul><ul><ul><li>An additional amount of capacity added onto the expected demand to allow for: </li></ul></ul><ul><ul><ul><li>greater than expected demand </li></ul></ul></ul><ul><ul><ul><li>demand during peak demand seasons </li></ul></ul></ul><ul><ul><ul><li>lower production costs </li></ul></ul></ul><ul><ul><ul><li>product and volume flexibility </li></ul></ul></ul><ul><ul><ul><li>improved quality of products and services </li></ul></ul></ul><ul><ul><ul><li>Capacity Cushion = 100% - Utilization rate(%) </li></ul></ul></ul>CONTD….
    10. 10. ECONOMIES OF SCALE <ul><li>Economies of scale : Average cost per unit decreases as the volume increases toward the best operating level </li></ul><ul><li>Why economies of scale can drive cost down when output increases???? </li></ul><ul><li>Fixed costs are spread over more units </li></ul><ul><li>Construction costs are reduced </li></ul><ul><li>Costs of purchase materials are cut </li></ul><ul><li>Process advantages are found </li></ul>
    11. 11. DISECONOMIES OF SCALE <ul><li>Diseconomies of scale - Average cost per unit increases as the volume increases beyond the best operating level </li></ul><ul><li>Reasons </li></ul><ul><li>Excessive size can bring complexity </li></ul><ul><li>Loss of focus </li></ul><ul><li>Inefficiencies that raise the average unit cost of a product or service </li></ul>
    12. 12. ECONOMIES AND DISECONOMIES OF SCALE Average Unit Cost of Output ($) Annual Volume (units) Best Operating Level Economies of Scale Diseconomies of Scale
    13. 13. STEPS IN THE CAPACITY PLANNING PROCESS <ul><li>E stimate the capacity of the present facilities. </li></ul><ul><li>F orecast the long-range future capacity needs. </li></ul><ul><li>I dentify and analyze sources of capacity to meet these needs. </li></ul><ul><li>S elect from among the alternative sources of capacity. </li></ul>
    14. 14. TOOLS FOR CAPACITY PLANNING <ul><ul><li>Break-Even Analysis </li></ul></ul><ul><ul><li>Present-Value Analysis </li></ul></ul><ul><ul><li>Computer Simulation </li></ul></ul><ul><ul><li>Waiting Line Analysis </li></ul></ul><ul><ul><li>Linear Programming </li></ul></ul><ul><ul><li>Decision Tree Analysis </li></ul></ul>
    15. 15. EXPANSION OF LONG-TERM CAPACITY <ul><li>Subcontract with other companies </li></ul><ul><li>Acquire other companies, facilities, or resources </li></ul><ul><li>Develop sites, construct buildings, buy equipment </li></ul><ul><li>Expand, update, or modify existing facilities </li></ul><ul><li>Reactivate standby facilities </li></ul>
    16. 16. <ul><li>Pg 372 </li></ul>
    17. 18. PRESENTED BY :- <ul><li>Niyati vats. </li></ul>