CAPACITY / INVENTORY PLANNING Flashcards
Define capacity?
The maximum level of value added activity over a period of time that the manufacturing process can achieve under normal operating conditions.
Define design capacity / effective capacity / actual output?
Design: max attainable output (think ideal efficiency)
Effective: max capacity with product mix, scheduling issues taken into account (think exergy)
Actual output - self explanatory
What are the equations for Utilisation and Efficiency?
Utilisation = actual output / design capacity. (think 1st law efficiency)
Efficiency = actual output / effective capacity (think 2nd law efficiency)
What is the best operating point in terms of design capacity?
Around 70% of the design capacity.
Difference between output and input capacity?
Output capacity - e.g amount of beer produced in a brewery. Counts the finished units from the process. Useful for low variety/customisation
Input capacity - e.g beds available in a hotel. Measure of the key input into the process. Useful for when capacity is quite fixed.
Different ways of defining capacity will be used in different scenarios.
Describe long term capacity planning and how is it affected?
- Manufacturing firms must decide on the size of the operation
- Affected by the available capital and economies / diseconomies of scale
Define economies of scale?
The decrease in unit cost associated with an increase in order volume
Define medium term capacity planning?
Deciding the level of production in a time period at which the manufacturing firm should operate
3 major steps in medium capacity planning?
- Measure demand and capacity
- Identify alternative capacity plans
- Choose most appropriate capacity plan
What are the 3 approaches to capacity planning (fluctuating demand)?
Level capacity: ignores fluctuations, activity is kept constant. Where non-perishable items are processed but not immediately sold, they can be added to finished goods inventory for future sales.
Chase demand: attempt to closely match capacity to forecasted demand (hiring + firing, part time staff)
Manage demand: try to change and control demand through price manipulation. Sometimes resources can be used to create alternative products / services in off peak times, eg uni accom used for conferences in summer.
Options for short term capacity planning?
- Leasing extra space
- Hire temporary workers
- Authorise overtime
Effect of quality on capacity?
Defects will have to be taken into account, and this increases the required capacity as more products will have to be manufactured to make up for the defective ones which will not be sold to customers.
Capacity expansion strategy options (general)?
-Add services to an existing site
- Duplicate services at an additional site
- Relocate to a more suitable (i.e larger) site
Describe expansionist vs wait-and-see : advantages and disadvantages of each.
Expansionist:
+ve: ahead of competition, no lost sales
-ve: risky if demand changes
Wait-and-see:
+ve: no unused capacity
-ve: relies on short term options
Define inventory?
Inventory (stock) is the stored accumulation of material resources.
