Chapter 4- Capacity Planning Flashcards
Strategic capacity planning
Determining the overall capacity level of capital-intensive resources that best supports the company’s long-range competitive strategy.
Capacity
The amount of output that a system is capable of achieving over a specific period of time.
Best operating level
The level of capacity for which the process was designed and the volume of output at which average unit cost is minimized.
Capacity utilization rate
Measures how close a firm is to its best operating level.
Economies of scale
The notion is that as a plant gets larger and volume increases, the average cost per unit drops.
Focused factory
A facility with a fairly limited set of production objectives. Typically the focus would relate to a specific product or product group.
Plant within a plant (PWP)
A concept that can be used to operationalize a focused factory by designating a specific area in a larger plant.
Economies of scope
Exist when multiple products can be produced at a lower cost in combination than they can separately.
Capacity cushion
Capacity in excess of expected demand.
4A) Learning curve
A line displaying the relationship between unit production time and the cumulative number of units produced.
4A) Individual learning
Improvement that results when people repeat a process and gain skill or efficiency from their own experience.
4A) Organizational learning
Improvement that comes both from experience and from changes in administration, equipment, and product design.
