CAPACITY

PLANNING
GROUP 1
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 What and Why?
▪ Capacity Planning is the process of determining the types and amounts of resources that are required to implement an organization’s strategic business plan.
▪ Objective of CP: Determine the level of service capacity by specifying the proper mix of facilities, equipment, and labour needed to meet demand
Benefits for Services
Organizations
Needs for Service • Budgeting : The time frames ,staff required
Organizations to meet current demand and cover all
operational costs are determined to allocate
money for expenses. Forecasting software
• Allocating resources for specific helps with developing financial projections.
activities.
• Pricing service contracts correctly. • Scaling: If a business is considering taking
• Acquiring, training, and terminating on more staff to help meet demand based on
staff. their capacity plans, they might find that
• Accurately forecasting demand to aside from increasing employees they need
produce services. specific skills or a larger location for their
staff and any new equipment they may need.
SERVICE OPERATIONS MANAGEMENT
GROUP 1
Categories in Capacity
Planning
• Short-term capacity: Typically used for
daily or weekly time frames. It can include
quarterly time frames. Doesn’t look at
trends and cycles, but customer demand
and seasonal variations.
• Medium-term capacity: Represents a one
to three year timeframe.
• Long-term capacity: This is the maximum
time frame, which varies depending on the
type of service industry. Requires
forecasting; the forecasts are converted into
established capacity requirements. 2
 Features of Capacity Planning
Process: Skills, quantity,
and/or quality capabilities
Staffing: Job descriptions,
total labor, training,
compensation, and turnover
rates
External factors: Unions,
governmental policies, and
budget cycles
Factors affecting Capacity Planning
SERVICE OPERATIONS MANAGEMENT
GROUP 1
❖ A trade-off with capacity to serve on x-axis and cost on y-axis (similar to EOQ) can
be worked out for cost of service & cost of waiting for service.
❖ The trade-off between customer waiting & server waiting is not uniform always. In
case of ambulance, we would prefer the ambulances to wait but in case of other
services like posts, we don’t mind the customers waiting.
❖ It is important to predict degree of customer waiting with different levels of capacity.
❖ For services, the time horizon can vary from decades (e.g., the decision to build a
resort hotel) to hours (e.g., staffing a fast-food restaurant during the lunch hour).
❖ Capacity planning is a challenge for service firms because of the open system nature
of service operations and, thus, the inability to create a steady flow of activity to use
capacity fully.
❖ Because of the inability of services to control the demands placed upon them,
capacity is usually measured in terms of inputs (e.g., number of hotel rooms) rather
than outputs (e.g., guest nights).
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 Strategic Role of Capacity Decisions
❖ Key Criteria : Customer waiting time, Probability of excessive waiting, Minimising sum of customer waiting
costs and service costs, Probability of lost sales because of inadequate waiting area.
❖ Facility Requirement : Seats required to fill diners.
Little’s Law : Average customers (Ls) = Arrival Rate (λ) * Average Waiting Time (Ws)
Example : 50 customers, each staying 20 minutes, seats required = 50 * (20/60) = 16.7
❖ Equipment Requirement : Number of cookie sheets needed.
Cookie Sheets needed = (Total cookies / hour ) / (Capacity of sheet reused X times per hour)
(50 customers per hour) ∗ (6 cookies per order)
Example : Cookie sheets needed = = 4.17
(12 cookies per sheet) ∗ (6 cycles per hour)
❖ Labour Requirement : Number of servers required .
Servers required = Total server time demanded / 1 unit of service capability.
(50 customers per hour) ∗ (6 minutes each)
Example : Servers required = = 5.0
(60 minutes per hour)

SERVICE OPERATIONS MANAGEMENT

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GROUP 1
 Dilemma in Xerox Corporation
Decision : Trade off between cost of
providing a service and cost of
convenience of customer waiting
SERVICE OPERATIONS MANAGEMENT
GROUP 1
Xerox Model 9200 Duplicating System :
❖ Existing service inadequate to maintain competitive advantage.
❖ Compromise on service quality leads to revenue losses.
❖ Non operating Xerox machine leads to lost income.
❖ Queuing analysis : Constraints involving autonomy loss of
technical representatives and perception loss by customers
leading to establishment of mini teams to expedite service.
❖ Determine appropriate number of members per team.
❖ Xerox used queuing analysis to minimise customer waiting cost
and Xerox service cost
❖ Appropriate number : 3 members per team.
❖ Other examples include waiting time for patients and surgeons in
hospitals, harried postal services.
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 Thank
You
J051 – Sourish Roy
J047 – Naveen JP
J042 – Anish Nakhawa
J030 – Animesh Kumar
MM.DD.20XX
ADD A FOOTER
H018 – Donald Francis 6
G048 – Akshay Robin
E048 – Ayuesh Raj