Ch 5. Capacity Management Flashcards
What is capacity
What if capacity is too low:
1) bad service (Delays)
2) loss of sales and goowill
3) higher costs (overtime)
4) overworked employees
5) threat of new entrants
what if capacity is too high
1) customers are uncomfrotable
2) bored employees
3) idle equipment/facilities
4) higher costs (fixed costs, layoffs)
short range planning for adjusting capacity
schedule people better
What external factors affect Capacity
1) government regulations
-what is allowed and what isnt (operating hours/facility size)
2)supplier capabilities
-do you have enough of the supply you need
what internal factors affect capacity
1) product and service design
2) personnel and jobs
3) plant layour and process flow
4) equipment capabilities/maintenance
5) materials management
6) quality control systems
7) quality of amangement
What is unmanagemed capcity look like graphically
A sin curve!!!
ABOVE X=0
-There is customers turned away because there is a capacity demanded more than maximum
-customers who are seved recieve bad service because too much demand
BELOW X=0
-When customer demand is declining, there is idle capacity
X=0
This is the optimal capacity
in the sin curve, what is the goal in capacity management?
to make the curve less curvy, make it all closer to the x=0 (optimal capacit line)
in the sin curve what does the line represent itself?
the demand!!!!
How do you adjust demand
REVENUE/YIELD MANAGEMENT
what companies do revenue/yield managemnt best
companies w high fixed costs and low variable cost
How to actually adjust the demand line
-have different prices!!!
-when demand is going high set higher prices, when demand is going low set lower prices
Is it important to have capacity flexibility?
YES
what are 6 strattegies to improve capacity flexibility:
1) flexible workers (multi skilled)
2) flexible facilities (Can produce a variety of products)
3) flexible processes (more than one way to make a good)
4) using external capacity temporarily
5) sharing capacity )w other businesses)
6) subcontracting (outsource some work when you are at capacity)
3 capacity strategies
Proactive Strategy
Reactive Strategy
Combiantion
Proactive strategy
-visual
-what is it
-why
-examples of who wants this
VISUAL: plant capacity looking like steps on top of the demand line!
Def: having extra capacity to make sure all customers are served
why: high opportunity cost of missed sales, competing on service, unreliable resources
EX: car dealerships
Reactive strategy
-visual
-what is it
-why
-examples of who wants this
VISUAL: plant capacity looks like steps below the demand line
Def: having less capacity then needed , because HIGH cost of having unused capacity
why: low opportunity cost of missed sales, competing on PRICE, EXPENSIVE resources
EX: consultatnts, grocery stores
Combination strategy
-visual
-what is it
Visual: having steps that are equally spread on both sides of demand curve
DEF: having too much capacity sometimes and not enough sometimes
proactive, reactive, combination
which has high cushin levels, which low, which medium
PROACTIVE
REACTIVIE
COMBINATION
2 measures of capacity
Design Capacity
Effective Capacity
Design Capacity
MAX THEORETICALLLL output
Utilization (%)= actual/design capacity
Effective Capacity
expected capacity in real life
Efficiency (%)= actual/effective capacity
2 layout alternatives:
1) process layout: layout by process function - similar machines/tasks grouped together
2) product layout: layout by product steps- “flow shop”
example of process layout
job shop (jumbled flows)
