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Capacity Planning Definitions

over a specific period. Business ` .What is Capacity Planning & Control? The process of determining the production capacity needed by an organization to meet changing demands for its products.” — Wikipedia Capacity planning "capacity" is the maximum amount of work that an organization is capable of completing in a given period of time Systematic determination of resource requirements for the projected output.

Forward planning to relate production needs to anticipated demand. or organization to produce output per period of time. Commerce Dictionary. (Shim and Siegel. ) Capacity is the amount of work that can be done in a specified time period. Ninth edition of the APICS dictionary . 1999. work center. plan. machine. No single measure of capacity will be applicable in every situation. Capacity is defined as “the capability of a worker.

Capacity Planning The basic questions in capacity planning are:  What type of capacity is needed?  How much is needed?  When is it needed?  How does productivity relate to capacity? .

Flexible plants Flexible processes Flexible workers .Capacity Flexibility: Having the ability to respond rapidly to demand volume changes and product mix changes.

monitoring. and taking corrective action when needed. Capacity Management Is responsible for determining the capacity needed to achieve the priority plans as well as providing. . . comparing it with capacity plans.Capacity Planning Is the process of monitoring production output. and controlling that capacity so the priority plan can be met.

This is the amount of released and planned work assigned to a facility for a particular time period.Capacity required Is the capacity of a system or resource needed to produce a desired output in a given time period. . It is the sum of all the required capacities. A term closely related to capacity required is load.

Chase demand Plan An approach to medium-term capacity management that attempts to adjust output and/or capacity to reflect fluctuations in demand. constant irrespective of demand. Level Capacity Plan An approach to medium-term capacity management that attempts to keep output from an operation or its capacity. . Demand Management An approach to medium-term capacity management that a attempts to change or influence demand to fit available capacity .Ways of Coping with demand fluctuation Three options that can be considered for coping with the demand fluctuations.

A more recent measure is that of overall equipment effectiveness (OEE). Overall equipment effectiveness (OEE) A method of judging the effectiveness of how operations equipment is used.How is Capacity measured? The usage of capacity is measured by the factors ‘utilization’ and ‘efficiency’. .

Not all productive capacity is actually used or usable. It is important for production mangers to understand what capacity is actually achievable. . Effective Capacity An important concept.assuming that it is used productivity. This is the maximum potential capacity .Immediate Capacity The amount of production capacity that can be made available in the short-term.

Technology and transferability of the process to other products also related. Issues are interrelated with location decisions. .Long –term capacity Planning  Involving the firm’s major production facilities. It may be desirable to add additional plant space or construct a new a new facility.

Goal is to handle unexpected shifts in demand in an efficient economic manner. Time for short term planning frequently few days but may run as long six months. Commonly used method to increase capacity in the short term is working overtime.Short –Term Capacity Planning Concerns with issues of scheduling. labor shifts & balancing resource capacities. .

maintenance. or facility is designed for. and scrap. 14 . Effective capacity: Design capacity minus allowances such as personal time. process.Measuring Capacity Design capacity: The maximum output rate or service capacity an operation.

Steps for Capacity Planning Estimate future capacity requirements Evaluate existing capacity Identify alternatives Conduct financial analysis Assess key qualitative issues Select one alternative Implement alternative chosen Monitor results .

Determinants of Effective Capacity Facilities Design Location Layout Environment Product/service Design Product or service mix Process Quantity capabilities Quality capabilities Human factors Job content Job design Training and experience Motivation Compensation Learning rates Absenteeism and labor turnover Policy Operational Scheduling Materials management Quality assurance Maintenance policies Equipment breakdowns Supply chain External factors Product standards Safety regulations Unions Pollution control standards .

Take a “big-picture” (i. Capacity requirements are often closely linked to the stage of the life cycle that a product or service is in. systems) approach to capacity changes. Take stage of life cycle into account. The long-term nature of many capacity decisions and the risks inherent in long-term forecasts suggest potential benefits from designing flexible systems.e..Developing Capacity Alternatives Design flexibility into systems. . When developing capacity alternatives. it is important to consider how parts of the system interrelate.

.How can operations control their capacity level? By considering the capacity decision as a dynamic decision which periodically updates the decisions and assumptions upon which decisions are based.

the rate and direction of technological innovation. the likely behavior of competitors. availability of capital and other inputs. The need to maintain balance throughout the system. the costs of building and operating facilities of various sizes. The extent of flexibility of facilities and the workforce. The timing of changes.Capacity Strategy Formulation Assumptions and Predictions the growth rate and variability of demand. Key decisions of capacity planning relate to: The amount of capacity needed. .

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