7

SUPPLEMENT
Capacity Planning

PowerPoint presentation to accompany

Heizer and Render
Operations Management, Global Edition, Eleventh Edition
Principles of Operations Management, Global Edition, Ninth Edition

PowerPoint slides by Jeff Heyl

© 2014
© 2014
Pearson
Pearson
Education
Education S7 - 1

1
 Outline
► Capacity
► Bottleneck Analysis and the Theory
of Constraints
► Break-Even Analysis
► Reducing Risk with Incremental
Changes

© 2014 Pearson Education S7 - 2

Kapasite
Darboğaz Analizi ve Kısıt Teorisi
Başabaş Analizi
Artımlı Değişikliklerle Riski Azaltma

2
 Outline - Continued
► Applying Expected Monetary Value
(EMV) to Capacity Decisions
► Applying Investment Analysis to
Strategy-Driven Investments

© 2014 Pearson Education S7 - 3

Beklenen Parasal Değerin (EMV) Kapasite Kararlarına Uygulanması

Strateji Odaklı Yatırımlara Yatırım Analizi Uygulama

3
 Learning Objectives
When you complete this supplement
you should be able to :
1. Define capacity
2. Determine design capacity, effective
capacity, and utilization
3. Perform bottleneck analysis
4. Compute break-even

© 2014 Pearson Education S7 - 4

Kapasiteyi tanımlama
Tasarım kapasitesini, etkin kapasiteyi ve kullanımı belirleme
Darboğaz analizi gerçekleştirme
Başabaş hesaplama

4
 Learning Objectives
When you complete this supplement
you should be able to :
5. Determine the expected monetary
value of a capacity decision
6. Compute net present value

© 2014 Pearson Education S7 - 5

Bir kapasite kararının beklenen parasal değerini belirleyin

Net bugünkü değeri hesaplayın

5
 Capacity
► The throughput, or the number of units
a facility can hold, receive, store, or
produce in a period of time
► Determines
fixed costs
► Determines if
demand will
be satisfied
► Three time horizons
© 2014 Pearson Education S7 - 6

Üretilen çıktı veya bir tesisin belirli bir süre içinde tutabileceği, alabileceği,
depolayabileceği veya üretebileceği birim sayısı
Sabit maliyetleri belirler
Talebin karşılanıp karşılanmayacağını belirler

6
 Planning Over a Time Horizon
Figure S7.1
Time Horizon
Options for Adjusting Capacity

Long-range Add facilities

planning
Intermediate-
Add long lead time equipment *
range Subcontract Add personnel
planning Add equipment Build or use inventory
(aggregate Add shifts
planning)
Schedule jobs
Short-range
planning
(scheduling)
* Schedule personnel
Allocate machinery

Modify capacity Use capacity

* Difficult to adjust capacity as limited options exist
© 2014 Pearson Education S7 - 7

7
 Design and Effective Capacity
► Design capacity is the maximum
theoretical output of a system
► Normally expressed as a rate
► Effective capacity is the capacity a firm
expects to achieve given current
operating constraints
► Often lower than design capacity

© 2014 Pearson Education S7 - 8

Tasarım kapasitesi, bir sistemin maksimum teorik çıktısıdır

Normalde bir oran olarak ifade edilir
Etkili kapasite, bir firmanın mevcut işletim kısıtlamalarına ulaşmayı beklediği kapasitedir.
Genellikle tasarım kapasitesinden daha düşük

8
 Utilization and Efficiency
Utilization is the percent of design
capacity actually achieved
Utilization = Actual output/Design capacity

Efficiency is the percent of effective

capacity actually achieved
Efficiency = Actual output/Effective capacity

© 2014 Pearson Education S7 - 9

Kullanım, gerçekte ulaşılan tasarım kapasitesinin yüzdesidir

Verimlilik, fiilen ulaşılan etkin kapasite yüzdesidir

9
 Bakery Example
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, 3 - 8 hour shifts

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

© 2014 Pearson Education S7 - 10

It might be useful at this point to discuss typical equipment utilization rates for different
process strategies if you have not done so before.

10
 Bakery Example
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, 3 - 8 hour shifts

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

© 2014 Pearson Education S7 - 11

It might be useful at this point to discuss typical equipment utilization rates for different
process strategies if you have not done so before.

11
 Bakery Example
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, 3 - 8 hour shifts

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Utilization = 148,000/201,600 = 73.4%

© 2014 Pearson Education S7 - 12

It might be useful at this point to discuss typical equipment utilization rates for different
process strategies if you have not done so before.

12
 Bakery Example
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, 3 - 8 hour shifts

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Utilization = 148,000/201,600 = 73.4%

Efficiency = 148,000/175,000 = 84.6%

© 2014 Pearson Education S7 - 13

It might be useful at this point to discuss typical equipment utilization rates for different
process strategies if you have not done so before.

13
 Bakery Example
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, 3 - 8 hour shifts

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Utilization = 148,000/201,600 = 73.4%

Efficiency = 148,000/175,000 = 84.6%

© 2014 Pearson Education S7 - 14

It might be useful at this point to discuss typical equipment utilization rates for different
process strategies if you have not done so before.

14
 Bakery Example
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, 3 - 8 hour shifts
Efficiency = 84.6%
Efficiency of new line = 75%

Expected Output = (Effective Capacity)(Efficiency)

= (175,000)(.75) = 131,250 rolls

© 2014 Pearson Education S7 - 15

It might be useful at this point to discuss typical equipment utilization rates for different
process strategies if you have not done so before.

15
 Bakery Example
Actual production last week = 148,000 rolls
Effective capacity = 175,000 rolls
Design capacity = 1,200 rolls per hour
Bakery operates 7 days/week, 3 - 8 hour shifts
Efficiency = 84.6%
Efficiency of new line = 75%

Expected Output = (Effective Capacity)(Efficiency)

= (175,000)(.75) = 131,250 rolls

© 2014 Pearson Education S7 - 16

It might be useful at this point to discuss typical equipment utilization rates for different
process strategies if you have not done so before.

16
 Capacity and Strategy

► Capacity decisions impact all 10

decisions of operations management
as well as other functional areas of
the organization
► Capacity decisions must be integrated
into the organization’s mission and
strategy

© 2014 Pearson Education S7 - 17

Kapasite kararları, operasyon yönetiminin 10 kararının yanı sıra kuruluşun diğer işlevsel
alanlarını da etkiler
Kapasite kararları, kuruluşun misyonu ve stratejisine entegre edilmelidir

17
 Capacity Considerations

1. Forecast demand accurately

2. Match technology increments and
sales volume
3. Find the optimum operating size
(volume)
4. Build for change

© 2014 Pearson Education S7 - 18

Talebi doğru tahmin edin

Teknoloji artışlarını ve satış hacmini eşleştirin
Optimum çalışma boyutunu (hacim) bulun
Değişim için inşa edin

18
 Economies and Diseconomies
of Scale
(sales per square foot)
Figure S7.2
Average unit cost

1,300 sq ft 8,000 sq ft
store 2,600 sq ft store
store

Economies Diseconomies
of scale of scale
1,300 2,600 8,000
Number of square feet in store
© 2014
© 2014
Pearson
Pearson
Education
Education S7 - 19

Ölçek ekonomisi

19
 Managing Demand
► Demand exceeds capacity
► Curtail demand by raising prices, scheduling
longer lead time
► Long term solution is to increase capacity
► Capacity exceeds demand
► Stimulate market
► Product changes
► Adjusting to seasonal demands
► Produce products with complementary
demand patterns
© 2014 Pearson Education S7 - 20

Talep kapasiteyi aşıyor

Fiyatları artırarak talebi azaltın, daha uzun teslimat süresi planlayın
Uzun vadeli çözüm, kapasiteyi artırmaktır
Kapasite talebi aşıyor
Piyasayı canlandırın
Ürün değişiklikleri
Mevsimsel taleplere uyum sağlama
Tamamlayıcı talep modellerine sahip ürünler üretin

20
 Complementary Demand
Figure S7.3
Patterns
Combining the
two demand
patterns reduces
the variation
4,000 –
Sales in units

Snowmobile
3,000 – motor sales

2,000 –

1,000 – Jet ski

engine
sales

JF MAM JJAS ONDJ FMAMJ JASO NDJ

Time (months)

© 2014 Pearson Education S7 - 21

Complementary Demand Patterns => Tamamlayıcı Talep Modelleri

21
 Tactics for Matching Capacity
to Demand
1. Making staffing changes
2. Adjusting equipment
► Purchasing additional machinery
► Selling or leasing out existing equipment
3. Improving processes to increase throughput
4. Redesigning products to facilitate more throughput
5. Adding process flexibility to meet changing product
preferences
6. Closing facilities

© 2014 Pearson Education S7 - 22

Personel değişiklikleri yapmak

Ekipman ayarlaması
Ek makine satın almak
Mevcut ekipmanı satmak veya kiralamak
Verimi artırmak için süreçleri iyileştirme
Daha fazla verimi elde etmek için ürünleri yeniden tasarlama
Değişen ürün tercihlerini karşılamak için süreç esnekliği eklemek
Tesislerin kapatılması

22
 Service-Sector Demand
and Capacity Management
► Demand management
► Appointment, reservations, FCFS rule
► Capacity
management
► Full time,
temporary,
part-time
staff

© 2014 Pearson Education S7 - 23

Talep yönetimi
Randevu, rezervasyonlar, FCFS kuralı
Kapasite yönetimi
Tam zamanlı, geçici, yarı zamanlı personel

23
 Bottleneck Analysis and the
Theory of Constraints
► Each work area can have its own unique
capacity
► Capacity analysis determines the
throughput capacity of workstations in a
system
► A bottleneck is a limiting factor or constraint
► A bottleneck has the lowest effective capacity
in a system

© 2014 Pearson Education S7 - 24

Darboğaz Analizi ve Kısıtlar Teorisi

Her çalışma alanının kendine özgü kapasitesi olabilir

Kapasite analizi, bir sistemdeki iş istasyonlarının üretim kapasitesini belirler
Darboğaz, sınırlayıcı bir faktör veya kısıtlamadır
Bir darboğaz, bir sistemdeki en düşük etkin kapasiteye sahiptir

24
 Bottleneck Analysis and the
Theory of Constraints
► The bottleneck time is the time of the
slowest workstation (the one that takes
the longest) in a production system
► The throughput time is the time it takes
a unit to go through production from start
to end Figure S7.4

A B C

2 min/unit 4 min/unit 3 min/unit

© 2014 Pearson Education S7 - 25

Darboğaz süresi, bir üretim sistemindeki en yavaş iş istasyonunun (en uzun süren iş
istasyonunun) zamanıdır.
Üretim süresi, bir birimin baştan sona üretimden geçmesi için geçen süredir

25
 Capacity Analysis
► Two identical sandwich lines
► Lines have two workers and three operations
► All completed sandwiches are wrapped

Bread Fill
15 sec/sandwich 20 sec/sandwich
Wrap/
Order Toaster
Deliver
30 sec/sandwich 20 sec/sandwich
Bread Fill 37.5 sec/sandwich

15 sec/sandwich 20 sec/sandwich

© 2014 Pearson Education S7 - 26

İki özdeş sandviç hattı

Hatlarda iki işçi ve üç operasyon var
Tamamlanan tüm sandviçler paketlenir

26
 Capacity Bread
15 sec
Fill
20 sec Wrap/

Analysis
Order Toaster
Deliver
30 sec 20 sec
Bread Fill 37.5 sec
15 sec 20 sec

► The two lines each deliver a sandwich

every 20 seconds
► At 37.5 seconds, wrapping and delivery has
the longest processing time and is the
bottleneck
► Capacity per hour is 3,600 seconds/37.5
seconds/sandwich = 96 sandwiches per
hour
► Throughput time is 30 + 15 + 20 + 20 + 37.5
= 122.5 seconds
© 2014 Pearson Education S7 - 27

İki hat her 20 saniyede bir sandviç dağıtır

37,5 saniyede, paketleme ve teslimat en uzun işlem süresine sahiptir ve darboğazdır
Saatlik kapasite 3.600 saniye / 37.5 saniye / sandviç = saatte 96 sandviç
Aktarım süresi 30 + 15 + 20 + 20 + 37,5 = 122,5 saniyedir

27
 Capacity Analysis
► Standard process for cleaning teeth
► Cleaning and examining X-rays can happen
simultaneously

Cleaning

Takes Develops 24 min/unit Check

Check in Dentist
X-ray X-ray out

2 min/unit 2 min/unit 4 min/unit X-ray 8 min/unit 6 min/unit

exam

5 min/unit

© 2014 Pearson Education S7 - 28

Diş temizliği için standart işlem

Temizleme ve X-ışınlarının incelenmesi aynı anda gerçekleşebilir

28
 Capacity Check
in
Takes
X-ray
Develops
X-ray
Cleaning

24 min/unit
Dentist
Check
out

Analysis 2 min/unit 2 min/unit 4 min/unit X-ray

exam

5 min/unit
8 min/unit 6 min/unit

► All possible paths must be compared

► Bottleneck is the hygienist at 24 minutes
► Hourly capacity is 60/24 = 2.5 patients
► X-ray exam path is 2 + 2 + 4 + 5 + 8 + 6 = 27
minutes
► Cleaning path is 2 + 2 + 4 + 24 + 8 + 6 = 46
minutes
► Longest path involves the hygienist cleaning
the teeth, patient should complete in 46
minutes
© 2014 Pearson Education S7 - 29

Olası tüm yollar karşılaştırılmalıdır

Darboğaz 24 dakikayla hijyenisttir
Saatlik kapasite 60/24 = 2,5 hasta
Röntgen muayene yolu 2 + 2 + 4 + 5 + 8 + 6 = 27 dakikadır
Temizleme yolu 2 + 2 + 4 + 24 + 8 + 6 = 46 dakikadır
En uzun yol dişlerin hijyenist tarafından temizlenmesidir, hasta 46 dakikada bitirmelidir

29
 Theory of Constraints
► Five-step process for recognizing and
managing limitations
Step 1: Identify the constraints
Step 2: Develop a plan for overcoming the constraints
Step 3: Focus resources on accomplishing Step 2
Step 4: Reduce the effects of constraints by offloading
work or expanding capability
Step 5: Once overcome, go back to Step 1 and find
new constraints

© 2014 Pearson Education S7 - 30

Sınırlamaları tanımak ve yönetmek için beş adımlı süreç

Adım 1: Kısıtlamaları belirleyin

Adım 2: Kısıtlamaların üstesinden gelmek için bir plan geliştirin
Adım 3: Kaynakları 2. Adımı gerçekleştirmeye odaklayın
Adım 4: İş yükünü azaltarak veya kapasiteyi artırarak kısıtlamaların etkilerini azaltın
Adım 5: Üstesinden geldikten sonra, 1. Adıma geri dönün ve yeni kısıtlamalar bulun

30
 Bottleneck Management
1. Release work orders to the system at the
pace of set by the bottleneck
► Drum, Buffer, Rope
2. Lost time at the bottleneck represents lost
time for the whole system
3. Increasing the capacity of a non-bottleneck
station is a mirage
4. Increasing the capacity of a bottleneck
increases the capacity of the whole system

© 2014 Pearson Education S7 - 31

Darboğaz tarafından belirlenen hızda iş emirlerini sisteme bırakın

Tamburlu tampon halat
Darboğazda kaybedilen zaman, tüm sistem için kaybedilen zamanı temsil eder
Darboğaz olmayan bir istasyonun kapasitesini artırmak bir seraptır
Darboğazın kapasitesini artırmak, tüm sistemin kapasitesini artırır

31
 Break-Even Analysis

► Technique for evaluating process and

equipment alternatives
► Objective is to find the point in dollars
and units at which cost equals
revenue
► Requires estimation of fixed costs,
variable costs, and revenue

© 2014 Pearson Education S7 - 32

Proses ve ekipman alternatiflerini değerlendirme tekniği

Amaç dolar ve birim cinsinden maliyetin gelire eşit olduğu noktayı bulmaktır.
Sabit maliyetlerin, değişken maliyetlerin ve gelirin tahmin edilmesini gerektirir

32
 Break-Even Analysis
► Fixed costs are costs that continue even
if no units are produced
► Depreciation, taxes, debt, mortgage
payments
► Variable costs are costs that vary with
the volume of units produced
► Labor, materials, portion of utilities
► Contribution is the difference between
selling price and variable cost

© 2014 Pearson Education S7 - 33

Sabit maliyetler, birim üretilmese bile devam eden maliyetlerdir

Amortisman, vergiler, borç, ipotek ödemeleri
Değişken maliyetler, üretilen birimlerin hacmine göre değişen maliyetlerdir
İşçilik, malzemeler, kamu hizmetlerinin payı
Katkı, satış fiyatı ile değişken maliyet arasındaki farktır

33
 Break-Even Analysis
► Revenue function begins at the origin
and proceeds upward to the right,
increasing by the selling price of each
unit
► Where the revenue function crosses
the total cost line is the break-even
point

© 2014 Pearson Education S7 - 34

Gelir işlevi başlangıçta başlar ve her birimin satış fiyatı kadar artarak sağa doğru ilerler.
Gelir fonksiyonunun toplam maliyet çizgisini geçtiği nokta başa baş noktasıdır

34
 Break-Even Analysis
–
Total revenue line
900 –

800 –
Break-even point Total cost line
700 – Total cost = Total revenue
Cost in dollars

600 –

500 –

400 – Variable cost

300 –

200 –

100 – Fixed cost

|– | | | | | | | | | | |
0 100 200 300 400 500 600 700 800 900 1000 1100
Figure S7.5
Volume (units per period)
© 2014 Pearson Education S7 - 35

This chart introduces breakeven analysis and the breakeven or crossover chart. As you
discuss the assumptions upon which this techniques is based, it might be a good time to
introduce the more general topic of the limitations of and use of models. Certainly one
does not know all information with certainty, money does have a time value, and the
hypothesized linear relationships hold only within a range of production volumes. What
impact does this have on our use of the models?

35
 Break-Even Analysis
Assumptions
► Costs and revenue are linear
functions
► Generally not the case in the real
world
► We actually know these costs
► Very difficult to verify
► Time value of money is often
ignored
© 2014 Pearson Education S7 - 36

Varsayımlar

Maliyetler ve gelir doğrusal işlevlerdir

Genellikle gerçek dünyada durum böyle değil
Aslında bu maliyetleri biliyoruz
Doğrulaması çok zor
Paranın zaman değeri genellikle göz ardı edilir

36
 Break-Even Analysis
BEPx = break-even point x = number of units
in units produced
BEP$ = break-even point TR = total revenue = Px
in dollars F = fixed costs
P = price per unit V = variable cost per unit
(after all TC = total costs = F + Vx
discounts)
Break-even point occurs when

TR = TC F
or BEPx =
P–V
Px = F + Vx

© 2014 Pearson Education S7 - 37

This chart introduces breakeven analysis and the breakeven or crossover chart. As you
discuss the assumptions upon which this techniques is based, it might be a good time to
introduce the more general topic of the limitations of and use of models. Certainly one
does not know all information with certainty, money does have a time value, and the
hypothesized linear relationships hold only within a range of production volumes. What
impact does this have on our use of the models?

37
 Break-Even Analysis
BEPx = break-even point x = number of units
in units produced
BEP$ = break-even point TR = total revenue = Px
in dollars F = fixed costs
P = price per unit V = variable cost per unit
(after all TC = total costs = F + Vx
discounts)
F Profit = TR - TC
BEP$ = BEPx P = P
P–V = Px – (F + Vx)
F = Px – F – Vx
= (P – V)/P
= (P - V)x – F
F
=
1 – V/P
© 2014 Pearson Education S7 - 38

This chart introduces breakeven analysis and the breakeven or crossover chart. As you
discuss the assumptions upon which this techniques is based, it might be a good time to
introduce the more general topic of the limitations of and use of models. Certainly one
does not know all information with certainty, money does have a time value, and the
hypothesized linear relationships hold only within a range of production volumes. What
impact does this have on our use of the models?

38
 Break-Even Example
Fixed costs = $10,000 Material = $.75/unit
Direct labor = $1.50/unit Selling price = $4.00 per unit

F $10,000
BEP$ = =
1 – (V/P) 1 – [(1.50 + .75)/(4.00)]
$10,000
= = $22,857.14
.4375

© 2014 Pearson Education S7 - 39

39
 Break-Even Example
Fixed costs = $10,000 Material = $.75/unit
Direct labor = $1.50/unit Selling price = $4.00 per unit

F $10,000
BEP$ = =
1 – (V/P) 1 – [(1.50 + .75)/(4.00)]
$10,000
= = $22,857.14
.4375

F $10,000
BEPx = = = 5,714
P–V 4.00 – (1.50 + .75)

© 2014 Pearson Education S7 - 40

40
 Break-Even Example
50,000 –

Revenue
40,000 –
Break-even
point Total
30,000 –
costs
Dollars

20,000 –

Fixed costs
10,000 –

–
| | | | | |
0 2,000 4,000 6,000 8,000 10,000
Units

© 2014 Pearson Education S7 - 41

41
 Break-Even Example
Multiproduct Case

Break-even F
point in dollars =
éæ V ö ù
(BEP$) åê P
êç
è
1- i
÷
ø
´ Wi
ú
úû
( )
ë i

where V = variable cost per unit

P = price per unit
F = fixed costs
W = percent each product is of total dollar sales
expressed as a decimal
i = each product
© 2014 Pearson Education S7 - 42

42
 Multiproduct Example
Fixed costs = $3,000 per month
ITEM PRICE COST ANNUAL FORECASTED SALES UNITS
Sandwich $5.00 $3.00 9,000
Drink 1.50 .50 9,000
Baked potato 2.00 1.00 7,000

1 2 3 4 5 6 7 8
ANNUAL WEIGHTED
SELLING VARIABLE FORECASTED % OF CONTRIBUTION
ITEM (i) PRICE (P) COST (V) (V/P) 1 - (V/P) SALES $ SALES (COL 5 X COL 7)

Sandwich $5.00 $3.00 .60 .40 $45,000 .621 .248

Drinks 1.50 0.50 .33 .67 13,500 .186 .125

Baked
potato 2.00 1.00 .50 .50 14,000 .193 .097

$72,500 1.000 .470

© 2014 Pearson Education S7 - 43

43
 MultiproductBEP
Example
=
éæ
F
ö $ ù
Vi
Fixed costs = $3,000 per month åêç P ÷ i úú
ê 1- ´ W ( )
ëè i ø û
ITEM PRICE COST ANNUAL FORECASTED SALES UNITS
$3,000 x 12
Sandwich $5.00 $3.00 = 9,000 = $76,596
.47
Drink 1.50 .50 9,000
Baked potato 2.00 1.00 Daily $76,596
7,000
sales = 312 days = $245.50
1 2 3 4 5 6 7 8
.621 x $245.50
ANNUAL WEIGHTED
SELLING VARIABLE FORECASTED %=  31
OF30.5 CONTRIBUTION
ITEM (i) PRICE (P) COST (V) (V/P) 1 - (V/P) $5.00
SALES $ SALES (COL 5 X COL 7)
Sandwiches
Sandwich $5.00 $3.00 .60 .40 $45,000 .621 each day.248
Drinks 1.50 0.50 .33 .67 13,500 .186 .125
Baked
potato 2.00 1.00 .50 .50 14,000 .193 .097

$72,500 1.000 .470

© 2014 Pearson Education S7 - 44

44
 Reducing Risk with
Figure S7.6 Incremental Changes
(a) Leading demand with (b) Leading demand with a
incremental expansion one-step expansion
New
New capacity
capacity

Demand
Demand

Expected Expected
demand demand

(c) Lagging demand with (d) Attempts to have an average

incremental expansion capacity with incremental
New expansion
capacity New
Expected
Demand

capacity Expected

Demand
demand demand

© 2014 Pearson Education S7 - 45

(a) Artımlı genişlemeyle önde gelen talep

(b) Tek adımlı genişleme ile önde gelen talep
(c) Artımlı genişleme ile geciken talep
(d) Artımlı genişlemeyle ortalama bir kapasiteye sahip olma girişimleri

45
 Reducing Risk with
Incremental Changes
(a) Leading demand with incremental
expansion
Figure S7.6

New
capacity
Demand

Expected
demand

1 2 3
Time (years)
© 2014 Pearson Education S7 - 46

This slide probably requires some discussion or explanation. Perhaps the best place to
start is the left hand column where capacity either leads or lags demand incrementally.
As you continue to explain the options, ask students to suggest advantages or
disadvantages of each.

46
 Reducing Risk with
Incremental Changes
(b) Leading demand with a one-step
expansion
Figure S7.6

New
capacity
Demand

Expected
demand

1 2 3
Time (years)
© 2014 Pearson Education S7 - 47

This slide probably requires some discussion or explanation. Perhaps the best place to
start is the left hand column where capacity either leads or lags demand incrementally.
As you continue to explain the options, ask students to suggest advantages or
disadvantages of each.

47
 Reducing Risk with
Incremental Changes
(c) Lagging demand with incremental
expansion
Figure S7.6

New
capacity

Expected
Demand

demand

1 2 3
Time (years)
© 2014 Pearson Education S7 - 48

This slide probably requires some discussion or explanation. Perhaps the best place to
start is the left hand column where capacity either leads or lags demand incrementally.
As you continue to explain the options, ask students to suggest advantages or
disadvantages of each.

48
 Reducing Risk with
Incremental Changes
(d) Attempts to have an average capacity with
incremental expansion
Figure S7.6
New
capacity

Expected
Demand

demand

1 2 3
Time (years)
© 2014 Pearson Education S7 - 49

This slide probably requires some discussion or explanation. Perhaps the best place to
start is the left hand column where capacity either leads or lags demand incrementally.
As you continue to explain the options, ask students to suggest advantages or
disadvantages of each.

49
 Applying Expected Monetary
Value (EMV) and Capacity
Decisions
► Determine states of nature
► Future demand
► Market favorability
► Assign probability values to states
of nature to determine expected
value

© 2014 Pearson Education S7 - 50

Doğanın durumlarını belirle

Gelecek talep
Pazar tercihi
Beklenen değeri belirlemek için doğa durumlarına olasılık değerleri atayın

50
 EMV Applied to Capacity
Decision
▶ Southern Hospital Supplies capacity
expansion
EMV (large plant) = (.4)($100,000) + (.6)(–$90,000)
= –$14,000
EMV (medium plant) = (.4)($60,000) + (.6)(–$10,000)
= +$18,000
EMV (small plant) = (.4)($40,000) + (.6)(–$5,000)
= +$13,000
EMV (do nothing) = $0

© 2014 Pearson Education S7 - 51

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 Strategy-Driven Investment

► Operations managers may have to

decide among various financial
options
► Analyzing capacity alternatives
should include capital investment,
variable cost, cash flows, and net
present value

© 2014 Pearson Education S7 - 52

This slide suggests that the process selection decision should be considered in light of
the larger strategic initiative

52
 Net Present Value (NPV)
In general:
F = P(1 + i)N
where F = future value
P = present value
i = interest rate
N = number of years

Solving for P:
F
P=
(1 + i)N
© 2014 Pearson Education S7 - 53

53
 Net Present Value (NPV)
In general:
F = P(1 + i)N
where F = future value
P While
= present value this works fine,
i = interestitrate
is cumbersome for
N = number of larger
years values of N

Solving for P:
F
P=
(1 + i)N
© 2014 Pearson Education S7 - 54

54
 NPV Using Factors
F
P= = FX
(1 + i)N
where X = a factor from Table S7.1 defined
as = 1/(1 + i)N and F = future
value

TABLE S7.1 Present Value of $1

YEAR 6% 8% 10% 12% 14%
1 .943 .926 .909 .893 .877
2 .890 .857 .826 .797 .769
3 .840 .794 .751 .712 .675
4 .792 .735 .683 .636 .592
Portion of
5 .747 .681 .621 .567 .519 Table S7.1

© 2014 Pearson Education S7 - 55

55
 Present Value of an Annuity
An annuity is an investment which
generates uniform equal payments

S = RX
where X = factor from Table S7.2
S = present value of a series of uniform
annual receipts
R = receipts that are received every year
of the life of the investment

© 2014 Pearson Education S7 - 56

56
 Present Value of an Annuity

TABLE S7.2 Present Value of and Annuity of $1

YEAR 6% 8% 10% 12% 14%
1 .943 .926 .909 .893 .877
2 1.833 1.783 1.736 1.690 1.647
3 2.676 2.577 2.487 2.402 2.322
4 3.465 3.312 3.170 3.037 2.914
5 4.212 3.993 3.791 3.605 3.433

Portion of
Table S7.2

© 2014 Pearson Education S7 - 57

57
 Present Value of an Annuity
▶ River Road Medical Clinic equipment investment

$7,000 in receipts per for 5 years

Interest rate = 6%
From Table S7.2
X = 4.212

S = RX
S = $7,000(4.212) = $29,484

© 2014 Pearson Education S7 - 58

58
 Limitations
1. Investments with the same NPV may have
different projected lives and salvage
values
2. Investments with the same NPV may have
different cash flows
3. Assumes we know future interest rates
4. Payments are not always made at the end
of a period

© 2014 Pearson Education S7 - 59

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise, without the prior written permission of the publisher.
Printed in the United States of America.

© 2014 Pearson Education S7 - 60

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