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Capacity Management
Capacity
Capacity Management
Long-range
planning
Add facilities
Add long lead time equipment
Intermediaterange planning
Subcontract
Add equipment
Add shifts
Short-range
planning
*
Add personnel
Build or use inventory
Schedule jobs
Schedule personnel
Allocate machinery
Modify capacity
Use capacity
Capacity Management
Capacity Management
Capacity Management
Example
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week,
3 - 8 hour shifts
Design capacity =
Utilization =
Efficiency =
Efficiency of new line = 75%
Expected Output =
MBA 512E Production and Operations Management
Capacity Management
1. Forecast sales
within each
individual product
line
2. Calculate
equipment and
labor requirements
to meet the
forecasts
Capacity Management
3. Project
equipment and
labor availability
over the planning
horizon
25 - room
roadside motel
50 - room
roadside motel
Economies of
scale
25
MBA 512E Production and Operations Management
75 - room
roadside motel
Diseconomies of
scale
50
Number of Rooms
Capacity Management
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Capacity
Planned unused
capacity
Capacity
increment
Time between
increments
Time
Capacity Management
Capacity
Planned use of
short-term options
Forecast of
capacity required
Capacity
increment
Time between
increments
Time
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Managing Demand
Demand exceeds capacity
Curtail demand by raising prices, scheduling longer lead time
Long term solution is to increase capacity
Capacity Management
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Sales in units
4,000
3,000
2,000
Jet ski
engine
sales
1,000
JFMAMJJASONDJFMAMJJASONDJ
Time (months)
MBA 512E Production and Operations Management
Capacity Management
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Sales in units
4,000
Snowmobile
motor sales
3,000
2,000
Jet ski
engine
sales
1,000
JFMAMJJASONDJFMAMJJASONDJ
Time (months)
MBA 512E Production and Operations Management
Capacity Management
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Sales in units
4,000
Snowmobile
motor sales
3,000
2,000
Jet ski
engine
sales
1,000
JFMAMJJASONDJFMAMJJASONDJ
Time (months)
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Capacity Management
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Capacity Management
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Waiting-line models
Useful in high customer-contact processes
Simulation
Useful when models are too complex for
waiting-line analysis
Decision trees
Useful when demand is uncertain and
sequential decisions are involved
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Capacity Management
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Capacity Management
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Capacity Management
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Capacity Management
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Capacity Management
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A Three-Station Assembly
Line
2 min/unit
4 min/unit
3 min/unit
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1
Throughput rate
Cycle Time
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Capacity Management
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Capacity Analysis
Two identical sandwich lines
Lines have two workers and three operations
All completed sandwiches are wrapped
Bread
15 sec/sandwich
Fill
Toast
20 sec/sandwich
40 sec/sandwich
Order
Wrap
30 sec/sandwich
37.5 sec/sandwich
Bread
15 sec/sandwich
Fill
Toast
20 sec/sandwich
40 sec/sandwich
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Capacity Analysis
Bread
15 sec
Fill
20 sec
Toast
40 sec
Order
Wrap
30 sec
37.5 sec
Bread
15 sec
Fill
20 sec
Toast
40 sec
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Theory of Constraints
Five-step process for recognizing and managing
limitations
Step 1: Identify the constraint
Step 2: Develop a plan for overcoming the
constraints
Step 3: Focus resources on accomplishing Step 2
Step 4: Reduce the effects of constraints by
offloading work or expanding capability
Step 5: Once overcome, go back to Step 1 and find
new constraints
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Capacity Management
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Bottleneck Management
1. Release work orders to the system at the pace of
set by the bottleneck
2. Lost time at the bottleneck represents lost time
for the whole system
3. Increasing the capacity of a non-bottleneck
station is a mirage
4. Increasing the capacity of a bottleneck increases
the capacity of the whole system
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machining
assembly
machining
Capacity Management
pack and
ship
29
assembly
machining
pack and
ship
Process Data:
machining: Set up 80 min. 4 min per unit processing.
Batch size 200. Identical lines.
assembly: Manual by two workers (no set up). Each
hammer requires 40 min processing. 34 workers available.
pack and ship: 30 min set up, 2 min per unit processing.
Lot sizes of 100.
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Capacity Management
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Capacity Management
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WIP = 10
Lead time = 20 minutes
Throughput rate = 1 units/ 2 mins
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2nd part
arrives
1st part
processing
3rd part
arrives
2nd part
processing
10
1st part
departs
MBA 512E Production and Operations Management
3rd part
processing
18 20
2nd part
departs
Capacity Management
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30
3rd part
departs
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1st part
arrives
2nd part
arrives
1
30 hours
8 hour/unit
10 hours
80%
0 hours
8 hours
Parts waiting
in queue
2
same
12, 9, 3
same
same
1 hour
9 hours
3rd part
arrives
2nd part
processing
10
12
1st part
departs
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21 24
2nd part
departs
30
3rd part
departs
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1
30 hours
8 hour/unit
10 hours
80%
0 hours
8 hours
1st part
arrives
13.5 hours
2
same as 1
12, 9, 3
same
same as 1
1 hours
9 hours
2nd part
arrives
3
same as 1
same as 1
13.5, 6.5 Same average !!!
same as 1
0.5 hours
Again, same
8.5 hours
utilization
but . . .
6.5 hours
3rd part
arrives
Part 3 waiting
in queue
1st part
processing
2nd part
processing
8 10
1st part
departs
MBA 512E Production and Operations Management
13.5
20
3rd part
processing
21.5
2nd part
departs
Capacity Management
29.5
3rd part
departs
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Example Summary
SCENARIO
Planning Horizon
Processing time
Inter-arrival time
Utilization
Average queue time
Average lead time
1
30 hours
8 hour/unit
10 hours
80%
0 hours
8 hours
2
same as 1
12, 9, 3
same as 1
same as 1
1 hours
9 hours
3
same as 1
same as 1
13.5, 6.5
same as 1
0.5 hours
8.5 hours
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Arrival
Arrival
frequency
frequency
(demand)
(demand)
Throughput time
and capacity
utilisation
9 mins
30
20
10515 10515
Processing
time
Processing
time
minsmins mins
mins
Utilization
Utilization
33.33
50
100
%%
% %% QQQQ====0infinity
0>0
Utilization===100
<100%
High
time
Process throughput
length of queue
Average
(or inventory)
X
Low utilization but short
throughput times
X
Reduce process
variability
Low
20%
40%
60%
80%
100%
Capacity utilization
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Decreasing
variability
10 20 30 40 50 60 70 80 90 100
Utilization
Short waiting
time but low
utilization
Y
10 20 30 40 50 60 70 80 90 100
Utilization
(b) Managing process capacity
variability.
Capacity Management
and/or
39
References
Operations Management for Competitive Advantage, 11th
Edition, by Chase, Jacobs, and Aquilano, 2005, N.Y.: McGrawHill/Irwin.
Heizer, J. and Render, B., Operations Management, 9/E,
Prentice Hall, 2009, ISBN-10: 0136073662
Krajewski, Lee J., Larry P. Ritzman; Manoj K. Malhotra,
Operations Management: Processes and Supply Chains, Tenth
Edition, Global Edition | 978-0-273-76683-4
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