Capacity Planning Flashcards
It is the upper limit or ceiling on the load that an operating unit can handle.
Capacity
(Design/Actual) capacity is the maximum obtainable output
Design Capacity
(Design/Effective) capacity is the maximum capacity given product mix, scheduling difficulties, and other doses of reality. Design capacity minus allowances such as personal time and maintenance.
Effective Capacity
rate of output actually achieved–cannot exceed effective capacity.
Actual Output
Capacity and location are closely tied
(Need to be near consumers, Inability to store services, Degree of volatility of demand)
Need to be near consumers
Capacity must me matched with timing of demand
(Need to be near consumers, Inability to store services, Degree of volatility of demand)
Inability to store services
Peak demand periods
(Need to be near consumers, Inability to store services, Degree of volatility of demand)
Degree of volatility of demand
To achieve a match between the long-term
supply capabilities of an organization and the
predicted level of long-term demand
Goal
______capacity -> operating costs that are too high
______capacity -> strained resources and possible
loss of customers
Overcapacity, undercapacity
Capacity Strategies:
Build capacity in anticipation of future demand
increases (Leading/Following/Tracking)
Leading
Capacity Strategies:
Build capacity when demand exceeds current capacity. (Leading/Following/Tracking)
Following
Similar to the following strategy, but adds capacity in
relatively small increments to keep pace with increasing
demand. (Leading/Following/Tracking)
Tracking
Extra capacity used to offset demand
uncertainty
Capacity cushion
Organizations that have greater demand
uncertainty typically have ______ capacity cushion.
greater
Organizations that have standard products and
services generally have ______ capacity cushion
smaller
Forecasting Capacity Requirements:
Long-term considerations relate to _______
level of capacity requirements
overall
Forecasting Capacity Requirements:
Short-term considerations relate to probable
v_______ in capacity requirements
Less concerned with c_____ and t_____ than
with seasonal variations and other variations
from average
variations
cycles and trends
___________ Operation is an operation in a
sequence of operations whose capacity is lower
than that of the other operations.
Bottleneck
If output rate is less than the optimal level,
increasing the output rate results in decreasing
average per unit costs (Economies/Diseconomies of scale)
Economies of scale
If the output rate is more than the optimal
level, increasing the output rate results in
increasing average per unit costs (Economies/Diseconomies of scale)
Diseconomies of scale
Reasons for economies of scale:
(Variable/Fixed) costs are spread over a larger number of units
(Processing/Construction) costs increase at a decreasing rate as facility size increases
(Processing/Construction) costs decrease due to standardization
Fixed
Construction
Processing
Reasons for diseconomies of scale
Distribution costs (decrease/increase) due to traffic congestion and shipping from a centralized facility rather than multiple smaller facilities
Complexity (decreases/increases) costs
Inflexibility can be an issue
Additional levels of bureaucracy
increase
increases
Something that limits the performance of a process or
system in achieving its goals
Constraint
Focuses on the relationship between cost,
revenue, and volume of output
Cost-Volume Analysis
The volume of output at which total cost and
total revenue are equal
Break-even point
Cost-volume analysis is a viable tool for
comparing capacity alternatives if certain
assumptions are satisfied:
- One product is involved
- Everything produced can be sold
- The variable cost per unit is (varying/the same) regardless of volume
- Fixed costs (do/not) change with volume changes, or they are step changes
- The revenue per unit is (different/the same) regardless of volume
- Revenue per unit exceeds variable cost per unit
the same
do not
the same
The difference between cash received from
sales and other sources, and cash outflow for
labor, material, overhead, and taxes
Cash Flow
The sum, in current value, of all future cash
flow of an investment proposal
Present Value
________ management is one way by which organizations can enhance their effective capacities
Bottleneck
________ reduces the organization’s dependence on forecast accuracy and reliability.
Many organizations utilize _______ ________ to achieve flexibility
Flexibility
Capacity Cushions
