Chapter 6 Vocabulary

Question 1

The capability of a worker, a machine, a work center, a plant, or an organization to produce output in a time period; looking at output over a certain time period

Answer 1

Capacity

Question 2

Two measures of capacity

Answer 2

Theoretical

Rated

Question 3

The maximum output capability allowing for no adjustments for preventive maintenance, unplanned downtime, or the like; perfect world

Answer 3

Theoretical capacity

Question 4

The long-term, expected output capability of a resource or system; what you actually expect to see

Answer 4

Rated capacity

Question 5

The measures of capacity work for

Answer 5

Services and physical products

Ex/ law firm, textile spinning plant, automatic car wash, airline

Question 6

3 things with capacity planning in services

Answer 6

Time
Location
Volatility of Demand

Question 7

With time and capacity planning in services

Answer 7

Services cannot be stored bc service is being consumed at the same time it’s being produced
Need capacity when customers are there

Question 8

Location and capacity planning in services

Answer 8

Located near the customers

Question 9

Volatility of demand and capacity planning in services

Answer 9

Much higher than for manufacturing
Influenced by customer behavior
Smaller time periods (ex: restaurant: per day and warehouse: per week)

Question 10

Factors that affect capacity

Answer 10

Number of lines used 
Number of shifts operating 
Number of temporary workers used 
Number of public storage facilities used 
Product variations on line 
Conformance quality 
Quality improvement

Question 11

Three capacity strategies

Answer 11

Lead
Lag
Match

Question 12

Looks at the big picture (need capacity, how do you get it?)

Answer 12

Capacity strategies

Question 13

A capacity strategy in which capacity is added in anticipation of demand

Answer 13

Lead capacity strategy

Question 14

A capacity strategy in which capacity is added only after demand has materialized; waiting until you’ve realized demand to expand capacity

Answer 14

Lag capacity strategy

Question 15

A capacity strategy that strikes a balance between the lead and lag capacity strategies by avoiding periods of high under or overutilization; sometimes have excess, sometimes not enough, minimizing risk

Answer 15

Match capacity strategy

Question 16

A collection of firms that typically exists for only a short period. These supply chains are more flexible than traditional supply chains, but they are also less efficient

Answer 16

Virtual supply chain

Question 17

The expenses an organization incurs regardless of the level of business activity

Answer 17

Fixed costs

Question 18

Expenses directly tied to the level of business activity

Answer 18

Variable costs

Question 19

The output level at which two capacity alternatives generate equal costs

Answer 19

Indifference point

Question 20

6 Methods of Evaluating Capacity Alternatives

Answer 20

Total Cost 
Demand Considerations 
Expected Value 
Decision Trees
Break-Even Analysis 
Learning Curves

Question 21

Developing multiple estimates of demand that capture a range of possibilities is

Answer 21

Demand Consideration

Question 22

A calculation that summarizes the expected costs, revenues, or profits of a capacity alternative, based on several demand levels, each of which has a different probability

Answer 22

Expected Value

Question 23

A visual tool that decision makers use to evaluate capacity decisions. The main advantage of this is that it enables users to see the inter-relationships between decisions and possible outcomes

Answer 23

Decision tree

Question 24

The volume for a business at which total revenues cover total costs

Answer 24

Break-even point

Question 25

Suggests that productivity levels can improve at a predictable rate as people and even systems “learn” to do tasks more efficiently. States that for every doubling of cumulative output, there is a set percentage reduction in the amount of inputs required

Answer 25

Learning curve theory

Question 26

As a production line, you’re held back by the weakest link refers to

Answer 26

Theory of Constraints

Question 27

An approach to visualizing and managing capacity which recognizes that nearly all products and services are created through a series of linked processes, and in every case, there is at least one process step that limits throughout for the entire chain

Answer 27

Theory of Constraints

Question 28

The process step (or steps) that limits throughout got an entire process chain; determines the capacity/output for entire system

Answer 28

Constraint

Question 29

Five Steps to Manage a Constraint

Answer 29

Identify the constraint
Exploit the constraint
Subordinate everything to the constraint
Elevate the constraint
Find the new constraint and repeat the steps

Question 30

Helps managers evaluate the relationship between capacity decisions and important performance issues such as waiting times and line lengths

Answer 30

Waiting line theory

Question 31

Rules for determine which customer, job, or product is processed next in a waiting line environment

Answer 31

Priority rules

Question 32

In operations and supply chain environments that must deal with random demand and variable processing times, it is virtually impossible to

Answer 32

Achieve very high capacity utilization levels and still provide acceptable customer service

Question 33

Littles Law

Answer 33

I(inventory)=R(throughput rate)* T(throughput time)