chapter 5 capacity planning Flashcards
whats capacity
upper limit on the load that an operating unit can handle
how is capacity usually measured
as maximum production rate throughout or output rate
what are the types of capacity decisions
long term
- 1-5 years in future
medium term
- next 12 months
short term
- next 12 weeks
what is outsourcing
delegating production of a product or a service to anther company
why is outsourcing used
can eliminate the need for not needing capacity in house which reduces costs, gain flexibility and take advanatge of suppliers expertise
what is strategic capacity planning
match long term supply and long term demand
what does overcapacity do
operating costs will be high
what does under capacity do
strained resources and possible loss of consumers
what are the key questions in capacity planning
- what kind of capacity is needed
- how much is needed to match demand
- when is it needed
how do we measure capacity
design capacity
effective capacity
what is design capacity
maximum output rate under ideal conditions
what is efffective capacity
maximum output rate with work breaks product mix scheudaling difficulties broken machines
what is efficiency
ratio of actual output rate to effective capacity
what is capacity utilization
ratio of actual output rate to design capacity
what are major considerations needed for developing capacity alternatives
- design flexibility into system
- take stage life cycle into account
- take big picture approach to capacity changes
- choose capacity timing and increments (leading vs lagging strategy
what is a bottleneck operation
when demand exceeds capacity causing inneficiencies
ex of a bottle neck operation ex bike factory
in a bike factory the painting station of the bikes can only handle 50 an hour but the assembly station can handle 100 per hour, the painting station is the bottle neck in this case as it slows down production
what is economies of scale
as company produces more cost per unit wil decrease because costs are spread out
buying materials in large quantities means cheaper prices
what is diseconomies of scale
when a company grows too large costs start increasing instead of decreasing
why does diseconomies of scale occur
worker fatigue employees work more leading to mistakes
equipment breakdown machines wear out faster with higher demand
harder to manage everything efficienctly in huge company
what does the break even analysis focus on
costs, revenues and volume
what is the make or buy analysis
deciding whether to buy a machine fixed costs and make the product in house variable cost or to buy the product variable cost with no fixed costs
break even problem with step fixed costs
which are costs that increase stepwise as the ranage of ouput increases
