Chapter 6 - Capacity Planning

Question 1

Utilization

Answer 1

The degree to which equipment, space, or the workforce is currently being used, and is measured as the ratio of average output rate to maximum capacity

Question 2

Economies of scale

Answer 2

A concept that states that the average unit cost of a service or good can be reduced by increasing its output rate

Question 3

Diseconomies of scale

Answer 3

Occurs when the average cost per unit increases as the facility’s size increases

Question 4

Capacity cushion

Answer 4

The amount of reserve capacity a process uses to handle sudden increases in demand or temporary losses of production capacity (measures amount by which average utilization is below 100%)

Question 5

Capacity requirement

Answer 5

What a process’s capacity should be for some future time period to meet the demand of customers (external or internal) given the firm’s desired capacity cushion

Question 6

Planning horizon

Answer 6

The set of consecutive time periods considered for planning purposes

Question 7

Setup time

Answer 7

The time required to change aa process or an operation from making one service or product to making another

Question 8

Capacity gap

Answer 8

Positive or negative difference between projected demand and current capacity

Question 9

Base case

Answer 9

The act of doing nothing and losing orders from any demand that exceeds current capacity, or incur costs because capacity is too large

Question 10

Capacity

Answer 10

The maximum rate of output of a process or a system