7/31/2019 Operation Management Presention

1/20

CAPACITY PLANNING AND

CONTROL

PRESNTED BYM.SHEZAD AFRIDI

MBAITM/F09

7/31/2019 Operation Management Presention

2/20

Capacity PlanningDefinitions

7/31/2019 Operation Management Presention

3/20

What is Capacity Planning & Control?

The process of determining the production capacityneeded by an organization to meet changing demands

for its products. Wikipedia

Capacity planning "capacity" is the maximum amount of workthat an organization is capable of completing in a given period

of time

Systematic determination of resource requirements for the

projected output, over a specific period.

Business dictionary.com

`

7/31/2019 Operation Management Presention

4/20

Forward planning to relate production needs to anticipated

demand. Commerce Dictionary.

No single measure of capacity will be applicable in every

situation. (Shim and Siegel, 1999, )

Capacity is the amount of work that can be done in a specifiedtime period.

Capacity is defined as the capability of a worker, machine,

work center, plan, or organization to produce output per periodof time.

Ninth edition of the APICS dictionary

7/31/2019 Operation Management Presention

5/20

Capacity Planning

The basic questions in capacity planning

are:

What type of capacity is needed?

How much is needed?

When is it needed?How does productivity relate to

capacity?

7/31/2019 Operation Management Presention

6/20

Capacity Flexibility: Having the abilityto respond rapidly to demand volumechanges and product mix changes.

Flexible plantsFlexible processes

Flexible workers

7/31/2019 Operation Management Presention

7/20

Capacity Planning

Is the process of monitoring production output,comparing it with capacity plans, and takingcorrective action when needed.

Capacity Management

Is responsible for determining the capacity

needed to achieve the priority plans as well asproviding, monitoring, and controlling thatcapacity so the priority plan can be met.

.

7/31/2019 Operation Management Presention

8/20

Capacity required

Is the capacity of a system or resource needed toproduce a desired output in a given time period.

A term closely related to capacity required is load.

This is the amount of released and planned work

assigned to a facility for a particular time period.

It is the sum of all the required capacities.

7/31/2019 Operation Management Presention

9/20

Ways of Coping with demand fluctuation

Three options that can be considered for coping with the

demand fluctuations.

Level Capacity PlanAn approach to medium-term capacity management that

attempts to keep output from an operation or its capacity,constant irrespective of demand.Chase demand Plan

An approach to medium-term capacity management thatattempts to adjust output and/or capacity to reflect

fluctuations in demand.Demand Management

An approach to medium-term capacity management that aattempts to change or influence demand to fit available

capacity .

7/31/2019 Operation Management Presention

10/20

How is Capacity measured?

The usage of capacity is measured by the factors utilization andefficiency. A more recent measure is that of overall equipmenteffectiveness (OEE).

Overall equipmenteffectiveness (OEE)A method of judging the effectiveness of how operations equipmenis used.

7/31/2019 Operation Management Presention

11/20

Immediate Capacity

The amount of production capacity that can be made

available in the short-term. This is the maximum

potential capacity - assuming that it is used

productivity.

Effective Capacity

An important concept. Not all productive capacity isactually used or usable. It is important for production

mangers to understand what capacity is actually

achievable.

7/31/2019 Operation Management Presention

12/20

Long term capacity PlanningInvolving the firms major production facilities.

Issues are interrelated with location decisions.

Technology and transferability of the process toother products also related.

It may be desirable to add additional plant spacor construct a new a new facility.

7/31/2019 Operation Management Presention

13/20

ShortTerm Capacity PlanningConcerns with issues of scheduling, labor shifts &

balancing resource capacities.

Goal is to handle unexpected shifts in demand in an

efficient economic manner.

Time for short term planning frequently few days

but may run as long six months.

Commonly used method to increase capacity in

the short term is working overtime.

7/31/2019 Operation Management Presention

14/20

14

Measuring CapacityDesign capacity: The maximum output rate or service capacity an

operation, process, or facility is designed for.

Effective capacity: Design capacity minus allowances such as

personal time, maintenance, and scrap.

7/31/2019 Operation Management Presention

15/20

Steps for Capacity Planning

Estimate future capacity requirementsEvaluate existing capacity

Identify alternatives

Conduct financial analysis

Assess key qualitative issues

Select one alternative

Implement alternative chosen

Monitor results

7/31/2019 Operation Management Presention

16/20

Determinants of Effective CapacityFacilities

Design

Location

Layout

Environment

Product/service

Design

Product or service mixProcess

Quantity capabilities

Quality capabilities

Human factors

Job contentJob design

Training and experience

Motivation

Compensation

Learning ratesAbsenteeism and labor turnover

Policy

OperationalScheduling

Materials management

Quality assurance

Maintenance policiesEquipment breakdowns

Supply chain

External factors

Product standards

Safety regulations

Unions

Pollution control standards

7/31/2019 Operation Management Presention

17/20

Developing Capacity Alternatives

Design flexibility into systems. The long-term

nature of many capacity decisions and the risks

inherent in long-term forecasts suggest potential

benefits from designing flexible systems.Take stage of life cycle into account. Capacity

requirements are often closely linked to the stage

of the life cycle that a product or service is in.

Take a big-picture (i.e., systems) approach to

capacity changes. When developing capacity

alternatives, it is important to consider how parts

of the system interrelate.

7/31/2019 Operation Management Presention

18/20

How can operations control their capacity level?

By considering the capacity decision as a

dynamic decision which periodically updates the

decisions and assumptions upon which decisions

are based.

7/31/2019 Operation Management Presention

19/20

Capacity Strategy FormulationAssumptions and Predictions

the growth rate and variability of demand,

the costs of building and operating facilities of various sizes,

the rate and direction of technological innovation,

the likely behavior of competitors,

availability of capital and other inputs.

Key decisions of capacity planning relate to:

The amount of capacity needed.

The timing of changes.

The need to maintain balance throughout the system.

The extent of flexibility of facilities and the workforce.

7/31/2019 Operation Management Presention

20/20

THANK YOUANY

???????????????????????????