week 8: capacity and inventory planning

Question 1

capacity definition

Answer 1

maximum level of value added activity over a period of time under normal operating conditions

Question 2

design capacity definition

Answer 2

maximum attainable output

Question 3

effective capacity definition

Answer 3

maximum output with product mix, scheduling and other issues

Question 4

utilisation definition

Answer 4

indicator of how close the facility is functioning with regards to its design capacity

best operating point usually around 70% of design capacity

Question 5

long term capacity planning

Answer 5

decision affected by capital available to the company and the economies and diseconomies of scale

Question 6

medium term capacity planning

Answer 6

three major steps in planning capacity
1. measure aggregate demand and capacity
2. identify the alternative capacity plans
3. choose the most appropriate plan

Question 7

options for capacity planning with fluctuating demand

Answer 7

• level capacity; fluctuations ignored
• chase demand: attempt to match capacity of forecast demand
• manage demand: change and level demand through place manipulation

Question 8

short term capacity options

Answer 8

-` Lease extra space temporarily
- Authorise overtime
- Temp workers
- Alternate routings
- Level output by building inventory in off seasons
- Postpone preventative maintenance
- Use multiskilled workers to prevent bottlenecks
- Allow backorders to increase
- Subcontract work

Question 9

the effect of quality on capacity

Answer 9

existence of defective products in manufacturing increase the required capacity

Question 10

types of inventory

Answer 10

• buffer (compensate for fluctuation in supply and demand)
• cycle (one or more stages in the process cant supply all items simultaneously)
• de-coupling (to allow 2 processes to proceed at various speeds)
• anticipation (stored to cope with predictable fluctuations in seasonal demand)
• pipeline (delivery is not instantaneous)

Question 11

three major decisions for deciding inventory

Answer 11

• volume decision (how much to order)
• time decision ( when to order)
• control decision (how to control the system)

Question 12

economic order quantity (EOQ) - inventory control

Answer 12

demand rate assumed constant, stock replenished instantaneously after order is placed and order cost constant dependent on size

Question 13

economic batch quantity (EBQ) - inventory control

Answer 13

deliveries are not intantaneous and are cariied out at constant rate
demand is also assumed to be depleting inventory at constant rate

Question 14

two bin inventory

Answer 14

• used in continuous review inventory systems ensure smooth operations
• inventory divided into two bins, one containing items being used and the other the ROL and additional safety
• order made when first bin empty
• during the lead time the second bin is used
• good for showing when ordering strategy needs review

Question 15

measuring inventory

Answer 15

• total monetary value
• stock cover ( how long items with last under normal conditions)
  stock turn ( number of time stock will be completely depleted over a period of time)