The maximum level of value-added activity over a period of time that the process can achieve under

normal operating conditions.

Organizations find themselves with some parts of their operation operating below their capacity while other parts are at their capacity ceiling. It is the parts of the operation that are operating at their capacity ceiling which are the capacity constraint for the whole operation.

Medium term capacity planning usually involves an assessment of the demand forecasts over a period of 2±18 months. In practice, however, few forecasts are accurate and most operations also need to respond to changes in demand which occur over a shorter time scale.

A term used to indicate medium-term capacity planning that aggregates different products and services together in order to get a broad view of demand and capacity.

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Cost Revenue Working Capital Quality Speed Dependability Flexibility

Three requirements from a demand forecast 1. It is expressed in terms which are useful for capacity planning and control. 2. It is as accurate as possible 3. It gives an indication of relative uncertainty

The capacity of a process or facility as it is designed is called design capacity. The useful capacity of a process or operation after maintenance, changeover and other stoppages and loading has been accounted for, is called effective capacity.

It is based on three aspects of performance: 1. The time that equipment is available to operate 2. The quality of the product or service it produces 3. The speed, or throughput rate, of the equipment

There are three µpure¶ options available for coping with demand variation. 1. Ignore the fluctuations and keep activity levels constant (level capacity plan). 2. Adjust capacity to reflect the fluctuations in demand (chase demand plan). 3. Attempt to change demand to fit capacity availability (demand management).

The opposite of a level capacity plan is one which attempts to match capacity closely to the varying levels of forecast demand.

An approach to medium-term capacity management that attempts to change or influence demand to fit available capacity. ‡ Reduction in prices ‡ Alternative product and services

A collection of methods that can be used to ensure that an operation (usually with a fixed capacity) maximizes its potential to generate profit.
Yield management is especially useful where: o Capacity is relatively fixed. o The market can be fairly clearly segmented. o The service cannot be stored in any way. o The services are sold in advance. o The marginal cost of making a sale is relatively low.

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