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Slack, Chambers and Johnston, Operations Management 5

th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Chapter 11
Capacity
planning and
control
Source: Arup
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Objective
To provide an appropriate amount of capacity
at any point in time
The appropriateness of capacity planning in any part
of the operation can be judged by its effect on
Costs
Revenue
Working capital
Service level
Source: British Airways London Eye
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Capacity Management
0 6 12 24 18
Months
Planning Horizon
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Facility Decision

How Much capacity is needed?
When is the capacity needed?
Where should the capacity be located?
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Objectives of capacity planning and control
Forecast demand
Time
A
g
g
r
e
g
a
t
e
d

o
u
t
p
u
t

Estimate of current capacity
Measure aggregate
capacity and demand
Identify the alternative
capacity plans
Choose the most
appropriate capacity
plan
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The nature of aggregate capacity
rooms per night
ignores the numbers of guests in each room
tonnes per month
ignores types of alloy, gauge and batch
variations
Aggregate capacity of a hotel:
Aggregate capacity of an aluminium producer:
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Causes of seasonality
Construction materials
Beverages (beer, cola)
Foods (ice-cream, Christmas cake)
Clothing (swimwear, shoes)
Gardening items (seeds, fertilizer)
Fireworks
Travel services
Holidays
Tax processing
Doctors (influenza epidemic)
Sports services
Education services
Source: Alamy/Medical-on-line
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Demand fluctuations in four operations
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Ways of reconciling capacity and demand
Demand
Capacity
Capacity
Capacity
Demand
Demand
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
How do you cope with
fluctuations in demand?
Absorb
demand
Change
demand
Adjust output
to match
demand
Level capacity
Chase demand
Demand
management
Ways of reconciling capacity and demand
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Absorb
demand
Part finished
Finished goods, or
Customer inventory
Queues
Backlogs
Have
excess
capacity
Make to
stock
Keep output
level
Make
customer
wait
Source: Madam Tussauds
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Adjust output to
match demand
Hire Fire
Temporary labour Lay-off
Overtime
Subcontract
Short time
Third-party work
Source: Corbis/Photocuisine
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Change
demand
Change pattern of demand
Develop alternative products
and/or services
Source: Empics
Slack, Chambers and Johnston, Operations Management 5
th
Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Moving a peak in demand can make capacity planning easier

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