8-Capacity management

Question 1

What is capacity management about?

Answer 1

It’s about understanding the nature of demand and supply.

Question 2

What do we need to understand capacity?

Answer 2

To understand capacity we need to measure it.

Question 3

What are the assumptions contained in measuring capacity?

Answer 3

-capacity depends on service and product mix.
-capacity depends on the duration of the product
-capacity depends on the specification of the product (key elements vs. non relevant elements)

Question 4

What happens when the targeted capacity isnt achieved in reality?

Answer 4

Capacity leakage is occuring, and it can be due to:
-predictable variations (inspections, trainings…)
-unpredictable variations (delays, quality problems…)

OEE: a x p x q (availability, performance, quality)

Question 5

How do you set base capacity level?

Answer 5

Base capavity level is set and then adjusted conveniently.
consider:
-Relative importance of performance objectives
-output perishability
-variations in supply/demand

Question 6

How can we manage demand-capacity mismatches?

Answer 6

we can adjust capacity or try to adjust demand:

-level capacity plan: set base level and assume losses due to demand variations.

-chase demand plan: adjust capacity according to demand forecasts.

-demand management: try to modify demand according to your capacity. (price differentiation, market stimulation, contrain consumer access to the product…)

-yield management: collection of strategies to ensure max revenues (coping with overbooking/underbooking, offering cheaper prices at lower demand periods)

Question 7

How can we evaluate alternative capacity plans?

Answer 7

With cummulative representations.
for capacity plans to meet demand, cummulative production line has to be always above cummulative demand line.

Question 8

How can we see if capacity management is successful?

Answer 8

evaluate:
-costs
-revenues
-customer satisfaction
-working capital