Capacity Planning And Control

Question 1

What is capacity?

Answer 1

The maximum level of value added activity over a period of time that the process can achieve under normal operating conditions

• the static, physical sense, meaning the scale of operation
• but may not reflect the operations processing capability
• so we must incorporate a time dimension appropriate to the use of assets

Question 2

What are the objectives of capacity management?

Answer 2

To provide and appropriate amount of capacity at any point in time

Question 3

What factors can judge the appropriateness of capacity planning in any part of the organization?

Answer 3

1. Costs
2. Revenue
3. Working capital
4. Service level in terms of:
   - quality, speed, dependability, flexibility

Question 4

What are the steps to follow in capacity management?

Answer 4

1. Measure aggregate demand and capacity
2. Identify the alternative capacity plans
3. Choose the most appropriate capacity plan

Question 5

What are he three requirements for demand forecast?

Answer 5

1. It is expressed in terms which are useful for capacity management (ex; machine hours per day)
2. It is as accurate as possible
3. It gives an indication of relative uncertainty

Question 6

What are the causes of seasonality?

Answer 6

• climatic
• festive
• behavioral
• political
• financial
• social
  = construction materials, beverages, foods, clothing, gardening items, fireworks, travel services, holidays, tax processing, doctors, sports services and education services.

Question 7

Define: output, design capacity, effective capacity, utilization % and efficiency %?

Answer 7

Output: actual rate or volume of work completed

Design capacity: maximum volume or rate of output that could be achieved

Effective capacity: proportion of design capacity that is available for work

Utilization %: output divided by design capacity x 100
Efficiency%: output divided by effective capacity x 100

Question 8

What is the OEE (overall equipment effectiveness)?

Answer 8

• judging the effectiveness of operations equipment , based on three aspects of performance:
  1. The time the equipment is available to operate
  2: the quality of the product or service it produces
  3. The speed or throughout rate of the equipment

It is calculated by multiplying an availability rate by a performance rate multiplied by a quality rate (the above aspects)

Question 9

What is level capacity plan?

Answer 9

• same number of staff operate the same processes and should therefore be capable of producing the same aggregate out out in each period.
• uses anticipation inventory to supply future demand
• achieves: stable employment patterns, high process utilization, high productivity with low unit costs however can be uncertain due to changes in demands over time (trends)

Question 10

What is chase demand plan?

Answer 10

• attempts to match capacity closely to the varying levels of forecast demand.
• needs different numbers of staff, different working hours, and even different amounts of equipment (much more difficult)
• changes in capacity reflects changes in demand

Question 11

What are the adjustment methods for chase demand plan?

Answer 11

• over time and idle time: varying the number of reproductive hours worked by the staff, when demand is high workers work over time and when demand is low they might be doing other tasks such as cleaning and maintenance
• varying the size of the work force: hire extra staff during period of high demand, and laying them off as demand falls or hire and fire. (Costs and ethical implications)
• using part time staff: recruiting part time staff for less than the working day. used for service operations
• subcontracting: buying capacity from other organizations (can be very expensive)

Question 12

What is managing demand plan?

Answer 12

Changing demand through price. When companies reach periods of low demand they can lower their prices to attract and maintain a constant demand. And vice versa

Question 13

What is alternative product and services?

Answer 13

More radical approach, in order to fill periods of low demand, such as developing alternative products or services which can be produced on existing processes (universities using lecture theaters for conferences)

Question 14

What is yield management?

Answer 14

• when supplies are short, prices go up; when supply is high, prices go down
• provides a systematic method for positioning customers within the supply demand spectrum in such a way that they can obtain the highest yield for their services or products

Ex; airlines : over book capacity, price discounting, varying service types