7S: Capacity Flashcards
Capacity: max rate of output. No. of units a facility can hold, receive, store or produce in a period.
Design Capacity: theoretical max output under ideal conditions.
Effective Capacity: firm can expect to achieve.
Measures of System Performance:
Utilization: actual output % of design capacity
Efficiency: actual output % of effective capacity
Capacity Considerations: 4
- forecast demand accurately
- match tech advancements and sales volume
- find optimum operating size (facility size)
- build for change - flexibility
Managing Demand
Demand Exceeds Capacity: raise prices, long lead times
Capacity Exceeds Demand: price reductions, aggressive marketing
Matching Capacity to Demand:
- staffing changes
- equipment adjustments
- process improvements
- redesign products
- flexibility of processes
How are Capacity plans Developed?
- Estimate future Capacity Requirements
- Identify gaps by comparing requirements with available capacity
- Develop alternate plan for filling gaps
- Evaluate each alternative, quantitatively and qualitatively
NB** Capacity:
- determines capital requirements & large portion of fixed costs
- determines if demand will be satisfied or facilities idle
Facilities too large: portions unused, add cost
Facilities too small: customers and markets lost
Factors Affecting Capacity Decisions:
External:
- Government regulations
- Union agreements
- Supplier capabilities
Internal:
- Product and service design
- Personnel and jobs
- Plant layout and process flow
- Equipment capabilities
- Materials management
- Quality control systems
- Management capabilities
Bottleneck Analysis And Theory of Constraints
Bottleneck: limiting factor in a system
Bottleneck time
Throughput time
Theory of Constraints: drum-buffer-rope method
Theory of Constraints (5-step):
- Identify constraint
- Develop a plan for overcoming
- Focus resources and that plan
- Reduce effects of constraints
- Repeat
4 Principles of Bottleneck Management:
- Release work orders to system at pace set by bottleneck.
- Lost time at bottleneck represents lost time for whole system.
- Increasing capacity of non-bottleneck station is a mirage.
- Increasing capacity of a bottleneck increases capacity of whole system.
Break even analysis
Expected monetary value
Strategy driven investment
Limitations of NPV
