Capacity planning Flashcards
What is the definition of Capacity Planning?
The process of determining the production capacity needed to meet changing demands for goods and services.
What is the purpose of Capacity Planning?
Ensures that a business has the right amount of capacity (resources, workforce, and infrastructure) to handle demand efficiently.
Name key areas of application for Capacity Planning.
- Manufacturing
- Healthcare
- Transportation
- Telecommunications
Define Capacity in the context of Capacity Planning.
The ability of a system (factory, service unit, or equipment) to produce output over a specific period.
Provide an example of Capacity.
A restaurant making 500 meals per day.
What is Theoretical Capacity?
Maximum possible output under ideal conditions (no breakdowns, delays, or inefficiencies).
What is Effective Capacity?
The actual capacity that can be achieved under normal operating conditions.
What is Safety Capacity (Buffer Capacity)?
Extra capacity reserved for unexpected demand spikes or operational issues.
What is the formula for calculating Safety Capacity?
Safety Capacity = Theoretical Capacity - Effective Capacity
Provide an example of Safety Capacity.
A hospital having extra ICU beds for emergencies.
What does Capacity Utilization measure?
How much of the theoretical capacity is being used.
What is the formula for Utilization?
Utilization = (Actual Output / Theoretical Capacity) × 100%
What does Efficiency measure in Capacity Planning?
How effectively the resources are used.
What is the formula for Efficiency?
Efficiency = (Actual Output / Effective Capacity) × 100%
What are the steps in the Capacity Planning Process?
- Determine Capacity Requirements
- Identify Capacity Imbalances
- Develop Solutions to Address Imbalances
- Evaluate and Choose the Best Alternative
What are short-term capacity decisions?
- Hiring temporary staff
- Adjusting work shifts
- Increasing machine hours
What are long-term capacity decisions?
- Building new factories
- Expanding hospital facilities
- Opening new company branches
What is a Level Production Strategy?
Produce at a constant rate and use inventory to meet demand fluctuations.
What is a Chase Demand Strategy?
Adjust production to match demand.
Define Economies of Scale.
Cost per unit decreases as production increases.
What can cause Diseconomies of Scale?
- Communication breakdowns in large firms
- Overloaded machines and employees
- Inefficiencies in large operations
What is Demand Management?
Adjusting demand to align with capacity.
Name a technique used in Demand Management.
- Price Adjustments
- Advertising and Promotion
- Reservations and Booking Systems
What is Revenue Management?
Maximizing profit by dynamically adjusting prices and inventory allocation.
What is Overbooking?
Booking more seats than available, based on probability, to account for no-shows.
What is the concept of Learning Curves in Capacity Planning?
As employees gain experience, the time required to complete a task decreases.
What is the formula for the Learning Curve?
Y = ax^b
What is Peak-Load Pricing?
Adjusting prices based on demand fluctuations.
Provide an example of Peak-Load Pricing.
Higher electricity prices during daytime when demand is highest.
What is the formula for Capacity Utilization?
Utilization = (Actual Output / Theoretical Capacity) × 100%
What is the conclusion of Capacity Planning?
Capacity planning ensures businesses can meet demand efficiently.
