Week 8: Capacity and Inventory Planning Flashcards
What is capacity?
Capacity is the maximum level of value-added activity over a period of time that the manufacturing process can achieve under normal operating conditions
What is design capacity?
Design capacity is the maximum attainable output
What is effective capacity?
Effective capacity is the maximum capacity with product mix, scheduling challenges and other issues taken into account
What is actual output?
Actual output is the rate of output that is actually achieved, it can never exceed the effective capacity
What is utilisation?
Utilisation is an indicator of how close the facility is functioning with regards to its design capacity
Utilisation = Actual Capacity/Design Capacity
What is efficiency?
Efficiency indicates how close the facility is functioning to the effective capacity
Efficiency = Actual Output/Effective Capacity
What are the symbols in the equation below?
B = M/(1-d1)(1-d2)…(1-dn)
B - average number of produced parts
M - number of good products made
n - number of operations
di - the average proportion of defective units at operation i
How do you go about solving a (capacity) decision tree?
Add up all options at each branch, the branch with the highest number is the best decision
What is the volume decision?
In general the volume decision is finding the balance between order costs and storage costs
What is EOQ + diagram
The Economic Order Quantity - simple model with a constant demand rate, instantaneous stock replenishment and a constant order cost independent of order size.
What do the symbols mean in the following equation?
Tc = Toc + Tsc = CoD/Q+CsQ/2
Tc - total inventory cost Toc - total ordering cost Tsc - total storage cost Co - ordering cost for each unit D - demand Q - order quantity Cs - storage rate for each unit
What is the optimum order quantity for EOQ?
Q=sqrt(2D*Co/Cs)
What is EBQ + diagram
The Economic Batch Quantity is a more complicated model, where the deliveries are not instantaneous and are carried out at a constant rate(P), demand is also assumed to be depleting the inventory at a constant rate(D)
What is the equation for average inventory in the EBQ model?
Q(P-D)/2
What is the optimum order quantity for EBQ?
Q* = sqrt(2CoD/Cs(1-D/P))
What is ROP?
Re-order point: the point in time at which more items are ordered, usually calculated to ensure that inventory does not run out before the next batch of inventory arrives
What is ROL?
Re-order level: the level of inventory at which more items are ordered, usually calculated to ensure that inventory does not run out before the next batch of inventory arrives
What are the approaches to measuring inventory(3)?
- The total monetary value of the stored inventory
- Stock cover, usually used in push control: how long the items stored in the inventory will last for under normal operating conditions
- Stock turn: the number of times that the stock would be completely depleted over a period of time (usually a year) at the normal rate of operation
