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CAPACITY PLANNING

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Capacity planning is central to long-term organizational success and involves both long and short-term plans. There are different types of capacity including production, design, effective, and maximum capacities. Effective capacity is most impacted by factors related to facilities, products, processes, human resources, operations, and external forces. When determining capacity needs, organizations must consider economies and diseconomies of scale and develop alternatives such as building flexibility, differentiating product maturity, taking a holistic view, and smoothing requirements over time.

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PRODUCTION AND OPERATIONS MANAGEMENT CAPACITY PLANNING
CAPACITY AMOUNT OF OUTPUT A SYSTEM IS CAPABLE OF ACHIEVING OVER A SPECIFIC PERIOD OF TIME. Capacity planning Capacity planning is central to the long-term success of an organization. Capacity plans are made at two levels: (i) Long-term capacity plans : which deal with investments in new facilities and equipments covering the requirements for at least two years into the future and (ii) Short-term capacity plans : which focus on work-force size, overtime budgets, inventories etc.
CAPACITY PLANNING A long term strategic decision that establishes a firms overall level resources. Three major capacity decisions are: i. How much capacity to be installed, ii. When to increase capacity and iii. How much to increase
TYPES OF CAPACITY 1) Production capacity: Maximum rate of production or output of an organization. (e.g., 100 cars per day etc .. ) 2) Design capacity: The maximum output that can possibly be attained. 3) Effective capacity: The maximum output given a product mix, scheduling difficulties, machine maintenance, quality factors, absenteeism etc. 4) Maximum capacity: The maximum output that a facility can achieve under ideal conditions. Also known as peak
DETERMINANTS OF EFFECTIVE CAPACITY Many decisions about design of the production system and operation of the production system may have an impact on capacity. The main factors relate to the following: (i) Facilities, (ii) Product or services, (iii) Process (iv) Human resource considerations, (v) Operations and (vi) External forces.
ECONOMIES AND DISECONOMIES OF SCALE Economies scale: The concept which states that the average unit cost of product can be reduced by increasing the rate of output. Best operating level: The annual output which results in the least average unit cost. Diseconomies of scale: Above a certain level of output, additional volume of output results in ever- increasing average unit costs. This phenomenon is referred to as diseconomies of scale.
DEVELOPING CAPACITY ALTERNATIVES To enhance capacity management, the following approaches to capacity alternatives could be developed: 1) Designing flexibility into the system 2) Differentiating between new and mature products or services 3) Taking a big-picture approach to capacity changes 4) Preparing to deal with chunks of capacity 5) Attempting to smooth out capacity requirements
CAPACITY PLANNING

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CAPACITY PLANNING

  • 1. PRODUCTION AND OPERATIONS MANAGEMENT CAPACITY PLANNING
  • 2. CAPACITY AMOUNT OF OUTPUT A SYSTEM IS CAPABLE OF ACHIEVING OVER A SPECIFIC PERIOD OF TIME. Capacity planning Capacity planning is central to the long-term success of an organization. Capacity plans are made at two levels: (i) Long-term capacity plans : which deal with investments in new facilities and equipments covering the requirements for at least two years into the future and (ii) Short-term capacity plans : which focus on work-force size, overtime budgets, inventories etc.
  • 3. CAPACITY PLANNING A long term strategic decision that establishes a firms overall level resources. Three major capacity decisions are: i. How much capacity to be installed, ii. When to increase capacity and iii. How much to increase
  • 4. TYPES OF CAPACITY 1) Production capacity: Maximum rate of production or output of an organization. (e.g., 100 cars per day etc .. ) 2) Design capacity: The maximum output that can possibly be attained. 3) Effective capacity: The maximum output given a product mix, scheduling difficulties, machine maintenance, quality factors, absenteeism etc. 4) Maximum capacity: The maximum output that a facility can achieve under ideal conditions. Also known as peak
  • 5. DETERMINANTS OF EFFECTIVE CAPACITY Many decisions about design of the production system and operation of the production system may have an impact on capacity. The main factors relate to the following: (i) Facilities, (ii) Product or services, (iii) Process (iv) Human resource considerations, (v) Operations and (vi) External forces.
  • 6. ECONOMIES AND DISECONOMIES OF SCALE Economies scale: The concept which states that the average unit cost of product can be reduced by increasing the rate of output. Best operating level: The annual output which results in the least average unit cost. Diseconomies of scale: Above a certain level of output, additional volume of output results in ever- increasing average unit costs. This phenomenon is referred to as diseconomies of scale.
  • 7. DEVELOPING CAPACITY ALTERNATIVES To enhance capacity management, the following approaches to capacity alternatives could be developed: 1) Designing flexibility into the system 2) Differentiating between new and mature products or services 3) Taking a big-picture approach to capacity changes 4) Preparing to deal with chunks of capacity 5) Attempting to smooth out capacity requirements