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Capacity Planning: Mcgraw-Hill/Irwin

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113 views

Capacity Planning: Mcgraw-Hill/Irwin

Uploaded by

Kader KARAAĞAÇ
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
You are on page 1/ 15

5-1 Capacity Planning

Chapter 5
Capacity
Planning

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-2 Capacity Planning

Capacity Planning

• Capacity is the upper limit or ceiling


on the load that an operating unit can
handle.
• The basic questions in capacity
handling are:
– What kind of capacity is needed?
– How much is needed?
– When is it needed?

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-3 Capacity Planning

Importance of Capacity Decisions

• Impacts ability to meet future demands


• Affects operating costs
• Major determinant of initial costs
• Involves long-term commitment
• Affects competitiveness
• Affects ease of management

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-4 Capacity Planning

Capacity

• Design capacity
– maximum obtainable output
• Effective capacity
– Maximum capacity given product mix,
scheduling difficulties, and other doses
of reality.
• Actual output
– rate of output actually achieved--cannot
exceed effective capacity.

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-5 Capacity Planning

Efficiency and Utilization

Actual output
Efficiency =
Effective capacity

Actual output
Utilization =
Design capacity

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-6 Capacity Planning

Efficiency/Utilization Example

Design capacity = 50 trucks/day


Effective capacity = 40 trucks/day
Actual output = 36 units/day

Actual output = 36 units/day


Efficiency = = 90%
Effective capacity 40 units/ day

Utilization = Actual output = 36 units/day = 72%

Design capacity 50 units/day

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-7 Capacity Planning

Determinants of Effective Capacity

• Facilities
• Products or services
• Processes
• Human
considerations
• Operations
• External forces

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-8 Capacity Planning

Some Possible Growth Patterns


Figure 5-1
Volume

Volume
Growth Decline

0 Time 0 Time

Cyclical Stable

Volume
Volume

0 0
Time Time
Operations Management, Seventh Edition, by William J. Stevenson
McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-9 Capacity Planning

Planning Service Capacity

• Need to be near customers


– Capacity and location are closely tied
• Inability to store services
– Capacity must me matched with timing of
demand
• Degree of volatility of demand
– Peak demand periods

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-10 Capacity Planning

Calculating Processing Requirements


Standard
Annual processing time Processing time
Product Demand per unit (hr.) needed (hr.)

#1 400 5.0 2,000

#2 300 8.0 2,400

#3 700 2.0 1,400


5,800

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-11 Capacity Planning

Cost-Volume Relationships

Figure 5-5a

Amount ($)

Fixed cost (FC)

0
Q (volume in units)
Operations Management, Seventh Edition, by William J. Stevenson
McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-12 Capacity Planning

Cost-Volume Relationships
Figure 5-5b

Amount ($)

0
Q (volume in units)
Operations Management, Seventh Edition, by William J. Stevenson
McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-13 Capacity Planning

Cost-Volume Relationships
Figure 5-5c

Amount ($)

0 BEP units
Q (volume in units)
Operations Management, Seventh Edition, by William J. Stevenson
McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-14 Capacity Planning

Assumptions of Cost-Volume Analysis

• One product is involved


• Everything produced can be sold
• Variable cost per unit is the same
regardless of volume
• Fixed costs do not change with volume
• Revenue per unit constant with volume
• Revenue per unit exceeds variable cost
per unit

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-15 Capacity Planning

Financial Analysis

• Cash Flow - the difference between


cash received from sales and other
sources, and cash outflow for labor,
material, overhead, and taxes.
• Present Value - the sum, in current
value, of all future cash flows of an
investment proposal.

Operations Management, Seventh Edition, by William J. Stevenson


McGraw-Hill/Irwin Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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